Baidu, China's dominant Internet search engine, has posted its slowest revenue growth rate in almost seven years in the first quarter of 2015, as customers spent less money on its core online marketing business.
The company's bid to create new avenues of income from mobile in China, the world's biggest smartphone market, also took their toll. Baidu's profit margins sank to their lowest in a decade, or 19%, as promotional costs for new businesses and research and development expenses skyrocketed.
Baidu is still grappling with the effects of a shift from personal computers to mobile, where it made half of its revenue. However, customers pay less for advertising on smartphones than computers, an issue with which US peer Google is also struggling.
The number of Baidu's active online marketing customers remained relatively steady from the previous quarter at 524 000. Despite this, those clients spent on average 9.8% less.
Larger rivals like social networking and online entertainment company Tencent and Alibaba, which rules China's e-commerce industry, also pose fierce competition.
The search company's bid to promote new mobile-centric businesses like food delivery to compete with Tencent and Alibaba saw selling, general and administrative expenses rocket 47.2% to $477 million from a year ago.
Revenue of 12.73 billion yuan ($2.05 billion) came in below forecasts of 12.9 billion yuan, according to a Thomson Reuters SmartEstimate poll of 16 analysts.
Coupled with a 3.4% decline in net profit from the previous year, this prompted shares to slide 2.6% in trading after market close in New York.
Baidu said it expected second-quarter revenue to be between 16.37 billion yuan and 16.75 billion yuan.
A hiring spree for research and development also pushed the department's expenses up 79.1% to $368.8 million.
Baidu's net income, its lowest in two years, was 2.4 billion yuan for the first three months of 2015. Profit margins of 19% were the lowest in almost a decade.
Share