Baidu Earnings:

3 Things to Watch

Short-Term Investors

Short-Term Investors

Revenue: $1.92 B

FY 2014: $7.82 B

EPS: $1.32

FY 2014: $5.22

Wall Street Expectations

Short-Term Investors

• It’s important to understand that while Baidu is growing revenue by leaps and bounds, earnings are expected to jump by more modest amounts.

• This is because the company is investing heavily in mobile and app platforms that should drive both revenue and profitability for years to come.

Medium-Term Investors

Medium-Term Investors

Many will closely follow the company’s total paid clicks and cost per click metrics.

Advertising Clicks

Medium-Term Investors

Generally, as more mobile ads are displayed, cost per click (CPC) goes down, as the total number of paid clicks goes up.• In 2013, paid clicks increased 33%. The company

usually only makes vague comments on paid click increases in quarterly conference calls.

• In the fourth quarter of last year, CPC on mobile devices was about 60% of what it was on desktop. Management should comment on this in the conference call, and investors should hope this number moves ever-higher.

Long-Term Investors

Long-Term Investors

The Chinese Internet is quickly changing. Baiduneeds to maintain dominance in the mobile and PC search market.

Total Search Market Share

Long-Term Investors

Baidu once had a commanding 80% market share of China’s PC search market. Qihoo has taken as much as 25% of that, and Baidu now stands at 58% among PC searches.

• However, Baidu still commands 73% of the combined mobile/PC search market.

• As this is still primarily an advertising business, sustaining market share is vital for the decades to come.

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