Baidu, the tech firm often described as China’s equivalent of Google, last week posted its first-ever quarterly loss since going public in 2005, largely due to a slump in its advertising business.
The company reported a net loss of Rmb 327m ($49m) for the three months to March 2019, causing its share price to plunge almost 10% in after-hours trading, the Financial Times reported.
Online advertising accounted for 73% of Baidu's quarterly revenue of Rmb 24.1bn ($3.6bn), but this fell short of expectations and prompted analysts to warn that the situation could worsen as the trade war between China and the US escalates.
“The trade war is such a big issue, it will have an instant impact,” said Raymond Feng, senior analyst at Pacific Epoch. “With these changing dynamics, advertisers may change their spending plans accordingly, reducing their recharge frequency and amount.”
Baidu CEO Robin Li appeared to recognise this danger when he warned during an earnings call that China’s broader economic slowdown and the government’s increased scrutiny of online content could hit future advertising revenue.
“Although the Chinese government has announced many economic policies to bolster the economy … we are taking a cautious view that online marketing in the near term will face a more challenging environment,” he said in comments reported by CNN.
The company, which was once up there with Alibaba and Tencent as one of the “BAT” giants of China’s tech sector before it fell behind its rivals, also announced that Hailong Xiang, the head of its main search business, was standing down.
With Xiang Hailong’s departure, Baidu will need time to reform its sales network,” Raymond Feng told the South China Morning Post, adding that it would be hard to estimate when the company can regain its momentum.
The company reported a net loss of Rmb 327m ($49m) for the three months to March 2019, causing its share price to plunge almost 10% in after-hours trading, the Financial Times reported.
Online advertising accounted for 73% of Baidu's quarterly revenue of Rmb 24.1bn ($3.6bn), but this fell short of expectations and prompted analysts to warn that the situation could worsen as the trade war between China and the US escalates.
“The trade war is such a big issue, it will have an instant impact,” said Raymond Feng, senior analyst at Pacific Epoch. “With these changing dynamics, advertisers may change their spending plans accordingly, reducing their recharge frequency and amount.”
Baidu CEO Robin Li appeared to recognise this danger when he warned during an earnings call that China’s broader economic slowdown and the government’s increased scrutiny of online content could hit future advertising revenue.
“Although the Chinese government has announced many economic policies to bolster the economy … we are taking a cautious view that online marketing in the near term will face a more challenging environment,” he said in comments reported by CNN.
The company, which was once up there with Alibaba and Tencent as one of the “BAT” giants of China’s tech sector before it fell behind its rivals, also announced that Hailong Xiang, the head of its main search business, was standing down.
With Xiang Hailong’s departure, Baidu will need time to reform its sales network,” Raymond Feng told the South China Morning Post, adding that it would be hard to estimate when the company can regain its momentum.
Sourced from Financial Times, CNN, South China Morning Post; additional content by WARC staff
