Q3 2019 Earnings Call
2019.
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Ladies mens refractive market there will be a question answer session. The Beach conference is being recorded if you have any objections you may disconnect. At this time I didn't know liked it during the meeting over to your host <unk> club.
John lead by this director of Investor Relations.
Hello, everyone and welcome to buy do third quarter two week all my team are you comfortable.
Our new Jody what's distribute it earlier today, you can find a copy outlets as well I always watch credits.
On the call today, well have you already me, Oh, Chief Executive officer, funny or cheap enough to offset on the notion of senior Vice president and in charge of why do mobile ecosystem.
Assertions pieces it off our prepared remarks, we'll hold acuity session. Please note that the discussion today will contain forward looking statements made under the safe Harbor provisions in the U.S. lobby secured human nature Reform Act of Nike bite.
Forward looking statements are subject to risks and uncertainties that may cause actual results could you said security from Oakland expectation, but taking risks and that's a good. When you include but are not limited to go offline you know a public filings with the FCC, including our annual report.
Yes, I do does not undertake any obligation to update any forward looking statements.
Except.
As required under applicable law.
Tragedies unbeatable include discussions of certain unaudited non-GAAP financial measure that made minor adjustments, while non-GAAP measure on their jobs can be applied these changes will come probably been put oh.
Our press release contains.
The Asian of the unaudited non-GAAP measures to be another theyd, most directly comparable GAAP measures and is available.
And I are that's I do dot com as a reminder, these topics is being recorded in addition, a webcast of this conference call will also be available on <unk> IR website, I will now turn the call older to all the CEO .
Yes.
Hello, I when I do third quarter revenues reached RMB.
28.1 billion above the midpoint of our guidance.
Biden poor performing better than our original expectation.
Core revenues rose, 8% sequentially third quarter.
Top up to 12% sequential growth, even a second quarter.
Despite all the slowing macro involvement English as best they take.
Policy changes and self directed health care initiative.
I do course quarterly sequential gross wage compared to last year second and third quarter, all 26, and 9% respectively, excluding being all revenues.
Exactly.
Our marketing services business is improving in parts of due to less deep lobbing package as well as our efforts to strengthen our mobile ecosystem.
Our money that they should capabilities.
We have made significant progress strengthening baidu mobile ecosystem.
A wrong information and knowledge.
We continue to post.
I'd like to better match users to the vast and diversified content pool in Baidu out.
Our top one satisfying usurper is the first football.
Past reached 56% compared to 40% a year ago.
I'm hopeful leading search and comprehensive set of knowledge based products.
Mhm provides hosted the solution.
Such a wide Yahoo, Bgh accounts smart metering program and managed page two publishers App developers and HTML five like owners to offer a wide range of third party content and services inside [laughter] maybe.
Like experiments.
Our efforts to strengthen Baidu mobile ecosystem.
Due to solution.
Hi level.
Barrier to entry to Inc. upsurge, well presenting baidu newsfeed.
In short video opportunities.
Bodies cutting edge technology.
Oh, sorry the solution.
Into a better search and feed experience, which is doing.
Users to lucky.
All right well.
In the third quarter, we begin to unify our mobile pillars BG age barring any program that is page and CRM onto a hosted marketing platform to allow our customers to Butte, Brent engage with users and roll audience.
Our hosted the marketing platform Leverages, Baidu technologies and user insight to enable ssds and T.A. to perform you said.
Relationship management.
In August we made available a tool kit all over suite I know what quit 80 pounds.
Content updates.
Our hosted himself.
And now manages page owners and significantly streamlined the or upgraded process.
To acute.
We also released a tool kit to our customers to enable users to Steve your compete a lead generation form it's just one quick.
By offering a host of the marketing platform that can he continues to be upgraded its baidu technologies, our customers can focus on the marketing rather than.
T SEC healthier campaign.
Which will make by doing marketing services more competitive.
Okay.
We also made good progress even by do you eat I'd been.
And improving our operational efficiencies, which permanent lapping like though.
Oh certainty in September I do ask daily active users continue to see robust growth, reaching 189 million.
Up 25% year over year.
Well minimum for traffic remained strong.
You know search queries roll over 25% year over year feed time span up 16%.
Sure and fee plus Fourk video half time span.
Up 35%.
On top of rapid traffic growth uses logging that's been growing now accounting for more than I.
I do a daily active users.
Beat age no posted 2.4 million publisher.
Up 57% year over year.
<unk> age allow our publishers to get the optimal exposure in Baidu search.
Our efforts to improve content quality and.
Emphasize the social asset class that BG age.
Posted topic and user engagement.
In September .
Content sharing was up 29% year over year, well use each all like function role, 89% year over year.
Our knowledge based upon up including by do we keep fighting though by the experienced this and Baidu cool.
Accumulated over 1 billion content pieces, including articles video et cetera.
Hello.
Oh boy did lead to produce the.
Lets users.
Professionals and institution.
Our focus to reach Baidu knowledge content.
That's led to a significant increase in user engagement.
For example in September Baby, you, sometimes been Baidu knowledge content in Biden found meal jobs will 41% Walt baby video views bidding Baidu Ritchie and Baidu experiences increased 36% that's compared to June .
I do Smartninety program is being weak traffic momentum if I may use reaching 290 million in September but wanted to 70, 157% year over year.
And of course, all Baidu in a few so clicks from search resolved well from field by the information services.
Baidu smart maybe problem.
Inhibition.
The last three months.
Oh.
I mean, you program more than doubled well use the time spent somebody want mean caldwell.
32%.
We are excited to see I talked about for adopting I do want maybe problem. That's the key channel for user acquisition.
To deepen customer engagement.
Hi, leveraging baidu intent based the traffic.
Hosted marketing platform and smart Muni programs toll soup features our partners can continue to improve topic logs and conversion sort of youth <unk> relationship management somebody.
For example, a well known e-commerce companies in China, you decide to Smartbeam, maybe program to give a week coupon to users.
That leaching baidu user insight and Sawlogs Culberson improved twin tough times over its HTML five pages.
See adoption by do Smart metering program is also helping our customers broadens the are stuck from all marketing options.
A leading t. 12 after school tutoring provider you the or Baidu money, maybe problem to allow users would be or at all major the completion of sales lead warm.
For trial classes with one quick fought use are often right they should.
By hosting the traffic by doing so.
Hi, diffusion company improve its marketing ROI like 30% compared to HTML five sites.
By connecting to Baidu Terraform [laughter] through an SDK for hosting Baidu cloud Baidu smarten any problem partner and leverage the advanced technology and user insight provided by Baidu tool tips.
Turning to managed to page.
Better user experience and at conversant, leading to the adoption of our mentioned page.
Revenue from managed page, even the third quarter accounted for nearly once that's all I do core marketing revenue.
Well I think more benefits to <unk> attendees to move to manage stage in August we maybe used a tool Keith.
<unk> hosted the marketing platform, it's over suite <unk> content created templates.
[noise] makes it easier for us Emmys from all indices to Mike with your age five sites to Baidu managed page.
In the health care area, we're seeing our customer you more video content of the or managed page to provide health care information to users compared to the original H five sites.
Many pages are posted on back to college, which is typically more stable and provide.
Excuse me for video broadcasting than the IP infrastructure and leave you already purchase it sounds your own.
That is page can also improved conversion for example, like driving school in she on the capped off Shanxi province call and 80% left in the conversion.
Compared to its all age five product.
Using the online chat and like call consultation tool kit from Baidu hopes to the market himself for disease managed page.
According to see a Nick.
Approximately 5 million web sites in China, and most of them do not have the resources nor capabilities to leverage.
And other leading technologies to improve their marketing effective.
By joining baidu manage page and using our hosted marketing platform and he couldn't continuously improved traffic grows and marketing conversion in light of the slowing overall mobile traffic growth in China.
Turning to money Foundation, we have expanded Oh, C.P. export you speed to <unk> full thickness, our search monetization.
If one to allow us I'm used to purchase the people Pete marketing services based on a cost of protection basis, most suitable for the or industries, such as or cost per lead cost of production load or cost per purchase basis.
By knowing what the return well being bought them based on the metrics that our customers care about Oh CTX no can be improved marketing ROI for compete for search all of the backdrop current macro uncertainties.
In the third quarter after spending Oh, CPX role fourfold and average cost of production decreased over 10% year on year.
In summary, we are beauty, a comprehensive and diversified mobile ecosystem centered around information that knowledge.
If I got hall, smartmoney problem and managed page.
Horton pillars.
Our hosted solutions enable publishers, app developers and customers to share their content information and services on Baidu stuff warm native apps like spirit.
We she's translating into robust traffic growth for Baidu, App and providing a foundation for us to enable our customers and partners to grow whether you might do technologies.
Well need to do or less.
Third quarter, two or last watch this isn't continues to grow fast, it's mostly voice queries, surpassing 4.2 billion in September up over four fold year over year.
During the last it's gaining some momentum.
Hitting the Chinese market due to our.
Relentless focus on user experience.
We strive to up Wade features endure last to make Wassas system friendlier to you.
For example, do or last worked out do smart display and now respond to and gestures.
To start playing music one.
Here's a phone call for instance.
And make full duplex continuing to come or vision for multi run the conversation dissolved we work.
Through <unk> gesture detection.
Turning to do or West first party boxes.
Well our goal for do or westmark speakers, if not necessarily number to be number one you hardware itself shall do smart speakers continue to see strong sales momentum.
The market research firms.
That's it.
[laughter] strategy analogy.
Do you see rent.
Shall do series Speaker number one in Smartheat her shipments in China for the second quarter.
According to the analysis.
I do over to Google during the second quarter to become number two globally in smart speaker shipment.
I do you see reported that Shabu smart display right. The first in smart display shipments globally.
The second quarter.
We believe it is important for Saudi with smart beat her to maintain a large market share because scale will allow us to you rent increased pricing power and we do unit costs.
We are differentiating Saudi with more bigger through Baidu AI capabilities and the breath of service offering provided by do or less deal store.
We are excited by the opportunity to money thoughts do or less smarts to be good through membership advertising gilts dollar revenue share.
Yes, we tested trial different money at least options.
The next year.
I'm not <unk>, we are excited about our progress early stage commercialization, all smart transportations, especially in terms of forming strategic partnerships.
Municipal government across China, and helping bigger cities improved transportations trying to take 50 and air quality using Baidu <unk>.
In September China first at Robert Pepsi pilot program, what's made available to the public but an initial fleet, while 45, a panel powered autonomous vehicles.
Well I mean, the streets, Paul Keung shot the capital City Hunan Province.
And with the passenger seamless city, telling shop experience Apollo powered Lubbock, Texas.
The first 30 days.
Initial feedback has been quite positive.
Thanks, Sean Robot taxi pilot program leverage if I do you do X solution, which send signals on trophy lags and close proximity traffic condition to uphold powered vehicles, overcoming blind spot and improving traffic efficiency and safety.
Club.
The binding cloud HBC some interesting August you enterprise solution.
Sure.
We introduced to optimize visual speech processing and the other capabilities to help customers increased productivity and improve operational efficiency.
For example, I do cloud released an eye powered video editing solution that can automate the tedious task, while cutting feel into video clips and tagging them well the fuel is.
Broadcasted live.
The official website, all China's largest a TV station PC TV dot com used by do cloud video editing AI solution during the life Broadcasting Oh, China's Seventyth anniversary celebration, Oh August 1st and sought video editing efficiency gain.
Rafi 10 times.
Well I didn't cloud also released an extension.
Eight I call Center, NFX solution, which sounds type from doing.
It doesn't Ben for SPD bag is using shoot about the.
Virtual customer service about presented called itself.
So well up here.
The bank mobile.
Caring human Lucky expression.
As it interacts with SPD customer that's a virtual assistant.
We see such call centers to loosen extension applicable to industry beyond the financial services.
Such as telecommunication media and education.
To encourage the usage Oh, I do AI and by themselves services, we continue to improve I do see I technology and make them available on Baidu <unk> open platform.
So I'll use the growth during the third quarter. This device membership more than doubling from last year to over one minute.
In September Baidu maps enhanced its was featured if I do leading ones since that's it's technology, allowing users to customize the water heater baidu maps that users all while these five recording just 20 sentences.
Over 280 million Baidu users have used to baidu maps warrants feature as of September doubling from the previous year.
Turning to actually I T continues to see solid membership growth its subscriber reaching 105.8.
Eight beginning in September up 31% year over year.
My teeth strong membership growth.
[noise] further strengthens the foundations.
You didn't video platform in China cell producing long form video series.
And some important BD partner Baidu search plus.
Core system.
With that let me turn the call over to Herman to go through the financial highlights.
Thanks, Robin Hello, everyone welcome to by doing this for the 2019.
Oh monetary amounts using my discussion on <unk> unless stated otherwise.
Total revenues with a good reached 28.1 billion.
3.3 billion West dollars <unk>.
3% yield excluding spin off revenues up 7% quarter over quarter.
Revenue from Baidu core was 21 billion with 2.94 billing U.S. dollars.
2% year over year, excluding spin off bedrooms, and 8% quarter over quarter.
Marketing services revenue saw strength from education, <unk> services sectors, and offset by weakness in healthcare financial services franchising and auto centers as Robin mentioned, we're seeing a stabilizing market in general.
Oh, hi businesses, including doing with smart devices, and Baidu cloud compute to see fast growth, which in total <unk> hundred percent year over year.
Sure I do smart speakers Sahgal Best school, and the unit economics or improving through price increases in reduction in cost of goods. So.
I do called revenue for the third quarter was up over 70% your view it as we place more emphasis on project margin.
Going forward, where well not disclose but I do cloud revenues separately each quarter revenue scale margins and pricing are sensitive information in the highly competitive market smart speakers calls in other businesses.
Actually revenue reached 7.4 billion up 7% year over year membership revenue continued to see strong growth up 30% year over year, I cheese AD business was down 14% year over year due to slowing macro.
They have top content watchers heavy competition from Mt advertising.
Adjusted EBITDA reached 5.1 billion in adjusted EBITDA margin was 18%.
Adjusted EBITDA for Baidu, Coursage 7.5 billion was $1.05 billion and adjusted EBIT up for it.
EBITDA margins, if I do core reached 36% compared to 24% from last quarter.
On a sequential basis by do core revenue grew 1.5 billion well by do quite adjusted EBITDA increased 2.8 billion.
Our disciplined approach to spending coupled with the traction that we have made to strengthen them by dues.
Mobile ecosystem have allowed by due course sequential revenue increased to basically fall to the bottom line well cost management initiatives have contributed to the sequential decrease over 1 billion in by due course.
Costs and expenses.
We continue to invest heavily for the future and our disciplined approach puts an emphasis on investment returns.
Then or GAAP numbers that loss attributed to do with 6.4 billion, which included a non cash impairment loss at 8.9 billion in total other loss in the fourth quarter of 2015, following a transaction, where we exchanged shares of ours majority owned subsidiary Truenorth where mine.
Already investment.
Dot com would be consolidated Truenorth <unk> investment in secret Dot com at the closing date market value and recognize a noncash accounting gain.
24.4 billion.
Since then the market value a trip dot com shares has declined and the continued low market price has caused it to recognize a non cash impairment was up 8.9 billion the third quarter, which was determined other than temporary.
October 2000, and my team, we sold Dell Holden should dot com.
<unk> decreased from approximately 19% to over 12% of troops all pumps outstanding shares.
Let me quickly go over the rest of the financial highlights.
Turning to cost of sales, excluding stock compensation and intangible asset amortization cost of sales were 16.2 billion up 15% year over year.
Within depreciation costs increased primarily due to robust growth of I'd call business increased video consumption.
Well cost of goods sold increased primarily from the sales an increase in so doing smart speakers.
Tax increased 5% year over year as a result, hi tech prices expansion into connector offline screens in other areas.
<unk> expenses, excluding stock compensation was 4.3 billion down 15% year over year, primarily due to the decrease in China promotional marketing as less marketing spending met our stringent Oh I criteria.
The decrease in marketing spending has hampered the sequential growth of our apps, including whole kind of short video and trending Sosh video.
We will continue to manage our marketing dollars with the strong disappoint <unk> investment returns, while recognizing the of marketing investments may not provide returns in the same quarter that extension.
Within credit.
R&D expenses, excluding stock compensation were 2.9 billion up 18% you have your primary due to increased personnel expenses.
Particularly for development.
non-GAAP .
Operating income was 3.7 billion and non-GAAP operating margin was 13% compared to 7% last quarter.
non-GAAP operating income put I do core was 6.2 billion for 371 million U.S. dollar.
non-GAAP operating margin for Baidu core <unk>, 30% ended the quarter compared to 18% last quarter.
Income tax expense was 934 million compared to 2.1 billion.
In the same quarter last year.
Income tax expenses in the third quarter included a tax withholding for potential dividend distribution to offshore entities.
non-GAAP net income attributable to do was 4.4 billion and non-GAAP net margin was 16%.
non-GAAP net income attributable to do core it was 6.3 billion <unk> $883 million U.S.
non-GAAP net margin flip I do court with 30% compared to 24% last quarter.
As of September Thirtyth, 2000, imagine cash and short term investments.
[noise] was 137.4 billion were $19.2 billion, excluding <unk> cash and short term investments for Baidu core was 123.5 billion was 17.3 billion U.S. dollars.
Free cash flow with 7.6 billion and free cash flow what I do quote was 7.5 doing what wasn't good less dollars.
Total full time equivalents.
But I do court was approximately 30300.
Turning to fourth quarter guidance, we expect total revenue to be between 27.1 billion in 28.7 billion, representing a minus 1% to 6% increase year over year, our guidance assumes baidu core revenue will grow between zero to 6% year over year.
These four cats are current and preliminary view and are subject to change.
Before I turn the call over to the operator, let me recap I do third quarter results Baidu search and deep business is making good progress by do App traffic remains strong as we expand by these mobile ecosystem century information and knowledge improve user experience with mobile pillars, including BJ age upheld smartmoney program.
And manage page or monetization capabilities are strengthening with Baidu is hosted marketing platform and expansion of our monetization products such as CPX for search.
I do revenues for the third quarter was higher than the midpoint of our return expectation with upside coming mainly from Baidu core looking into the fourth quarter weeks. It by do core revenues to go on a year over year basis on the cost side, our disciplined approach to management resources and focus yacht and investment returns coupled with the strengthening of babies.
Mobile ecosystem allow us to deliver significant margin improvement sequentially adjusted EBITDA margin flip I do core reached 36% in the third quarter.
Hope 100 basis points sequentially.
As of October 31st 2019, we have returned approximately 1.2 billion U.S. dollars to our shareholders.
Several hundred $78 million under the 218 share repurchase program, which expired in June this year, and 397 million Adwest dollars under 2019 share repurchase program.
Operator with that let's open the call two questions.
The question and answer session of this conference call will start in a moment in order to be fair all callers to wish to ask questions she'll take one question at this time from each at from each caller. If you have more than one question. Please request to join the question gets after your first question has to be an address.
Your first question comes from the line of Alicia Yap from Citigroup. Please ask your question.
[noise]. Thank you the morning Robby.
Thanks for taking my questions.
I found a improving reads out my question is related to tie our ATM.
In the overall I've tried to initiate piece and that's what the investments.
So can management Chevy Bose I see you look out into the next one to two years on the various <unk> like led to such <unk> program manager.
To do a Alaska and the Apollo I kinda much she's tremendous cloud computing.
That's a much lean back.
You could come Chevy, but he comes off the rankings I'm wondering.
I'm in comes off the future revenue contribution.
Auto soccer banking.
Well actually on.
Oh, you pencil all our Oh.
Sandy jumped a total of side.
And rank.
So I'm also a initiative and they just last week on the skeptic pardon me.
And then Oh, Chevy, but online travel.
She the assets strategic small by <unk> or is that okay.
I do that second half two methods.
We'll be sitting in the future. Thank you.
Oh, Hi, Lisa this is Rob and I think our strategy has not changed to very much our core business, which is oh baidu eco system send to the wrong to search in the feet or it's a very much a knowledge.
Okay, and information phase to mobile ecosystem and with eating making this park in China.
Using.
The p. looks like by Downhaul, Montminy progress and Oh Man is page, we are fostering a healthier and stronger.
Core system and this well continue to be the pipe to priority. So horrible I do as our experienced a theme that so I do mobile ecosystem continue to improve we do not have to spend as much a.
Oh money to two by traffic before so that's why not the reasons you see the margin.
Improving a bundle up quarter over quarter basis.
And going forward, we think can do a lot of things too.
To do a in the mobile ecosystem area, and we will continue to innovate and provide a.
Hi, there and different user experience and the industry peers in China.
And on the AI enable you on business. If we think of all our very promising and Ah Ah do or less within a very geared either saying that the conversational <unk> space.
Yes or.
No cost a lot of money in the past, but going forward I think that they are the overall loss well.
Well continue to natural.
For the next one two years.
And the Apollo is Ah Ah walking into more like a smart transportations total solution because Ah won't help the Chinese subsidies are very keen to work with us.
And improve along with your transportation infrastructure.
Is more generic and Ah, we strive to use to leverage our <unk> capabilities.
To to grow market share.
Area that we are a good out.
And the for travel I think Oh, we are still very committed to partner with some.
Ah two dot com and Oh, we.
We'll continue to work closely with them.
All all from moving our mobile ecosystem asphalt.
With our capabilities.
<unk>.
Thank you.
Your next question comes from the line.
[laughter] Goldman Sachs. Please ask your question.
Thank you for taking my question Robin Hood and I'm, just looking at the revenue line could you take us through how you get a 25% traffic growth for an attractive growth.
Versus the revenue growth rates that you seen both on a year on a basis as well as on a sequential basis and as we look into 2020 could you take us through potentially quarter by quarter be sort of timeframe. It would take for recovery in.
The key the key verticals that of monetize very well in the past. That's my first question and second I'm looking at how well you manage costs, it's been very.
Very very strong show over the last two quarters you attack is down from 18.2% to 15.4% of core revenue bandwidth cost is down to 6.8 from 8.7 SGN as called out very nicely can we expect these trends to continue into the fourth quarter and 2020. Thank you.
Okay I answer your first question and Herman will answer the second one.
The first I think because we continue to improve the user experience.
For Baidu App and we also try to direct to users from third party a browser.
To the by do ask where we think strong traffic growth Oh heartening upsurge Oh.
Where are you just got much better experience. So the earth <unk> going to be a virtuous circle for this kind of del Sol user behavior and or the disparity between traffic growth and Oh and revenue growth. They set up we basically.
Matt claimed that with all the headwinds you know industry specific congratulations self flopping forced a disappointing.
A third ER and Ah industries, like a health care and medical Oh, or so all the things that we need to improve our self management system. So the thing I think oh, well be temporary and though we will also have a thing.
Ah the Mac will evolve into stabilizing.
So we would do think that Ah Ah eventually be revenue well catch up.
This topic.
Yeah, Hi, fusion or that the question in regards to our cost structure.
When you look into Q4, I think we said two things right. We said that from Q2 Q3 sequentially were able to.
Includes or non-GAAP operating margin in that margin.
For two reasons one is the operational inefficiencies that we have driven and Robin talk about that with the stronger mobile ecosystem users are secured anymore. They feel better technology, researchers and so forth socially that's helping us in the second factor is our cost management initiatives that we employ obviously.
These type of.
Factors would be able to carry to going forward. So when you looked at up to example, Q4 I expect we was had a similar impact.
As we did a Q3, meaning that the that the margins should be similar to Q3.
I'll bet, we continue to look at other areas, where we can all you know.
Implement cost management initiatives and we'll also continue to focus on operationally.
Thank you.
Your next question comes from the line add Helio from B O <unk> and <unk>.
Please ask your question.
Good morning, just two quick questions.
The first one is about the advertising industries I could you remind as a top advertising industries and especially on could you comment on their recent outlook.
And that's what the major safe off question, perhaps ought not to use a question about cost control one thing God I.
My husband, if it's more a target the Pos used to say I wish that marketing color scheme. The first quartile, depending on any major branding campaign.
So any color on the upcoming French caught up would be great. Thank you.
[noise].
Hi, Eddie Yeah, you know.
<unk>.
Industry, you said that we think.
Our do it.
I mentioned education is doing well.
Uh huh.
Retail E Commerce did well, but this is an area that the you know who also has a while I think.
Is the fact that we're now able.
Actions and by <unk>, what we're able to allow people come on a form to do.
Maintenance services.
Uh huh.
Experience so that soon continue or you know but.
We've been a conversion in it helps with revenue growth and overall it fits into the Sip on marketing.
No service sectors, we historically have done well.
So those are kind of a toll that that was soon.
<unk> goes to a fourth quarter I think first quarter, you know historically has been though the lowest quarter seasonality for us, but if you look at the last few years. So we expect from truthful into Q1, a down quarter.
Because of the basically seasonality like shoots what you're going to have a strong substrate public float ecommerce, we told and so forth. The double 11 celebrations Oakwood and then in the fourth in the first quarter, you're going to have a Chinese new year.
And so that that kind of change was going to expect you know Dell. Historically, you know is don't teens from Q4 two Q1.
Hello, better view this as we progress and get closer to a Q what.
[noise] Herman I guess, then the a major branding campaign try and get off called the Chinese new year, Vietnam 20 train.
Yes, so far we haven't finished planned for Q1, we've actually just started planning for 2020. So right now we don't see them that Oh, particularly a major although a.
Historically as you saw last year there was a this campaign with 60 TV and so forth I think that probably will or will probably know better probably in a month or so once we are you know maybe into 2000 2020 play, but I I think that you know typically.
Were very strong with mobile and you know doing trends here, that's where mobile traffic, it's stronger relatively to our PC and that's really an opportunity place to show that will you know that things are typically product that we have you know mobile energy soldier and so forth. So that's something we'll be considering but we'll have probably more.
Information in a month or so [laughter].
Understood. Thank you.
Your next question comes from them.
So from 80 Sixresearch recession [laughter].
Alright. Thank you for taking my question marks in question I'll be happy about where else to true Joel.
So management I think Robbie you talked about a lot of the exciting developments. So I do and it's also great to see some stabilization revenue.
Quarter over quarter.
Business so.
No.
Maybe you are skewed to or come until you see any.
Major challenges for Baidu.
Because we do feel though we feel a lot of so many opportunities that baidu.
So what are the major turning to do you see we'll probably do these days.
Second question is Oklahoma, you commented a little bit about different verticals performance right now.
Can you can you expanded a little bit more two includes verticals like auto finance or real estate.
Turbo.
Are those verticals. So we can Herbert Hoover clear idea about devoted Cooper foremost, especially when we say how secure.
Brand advertising segments have bottomed.
It was I think those are the two big drug use for the business. Thank you very much.
Yeah, I think Oh.
We had two major challenges one is on the mobile side on the mobile side or many all you know I'm a lot off to a large mobile apps are very much a closed eco system. So we it's not easy for us to indexed having.
A few felt content.
Absolutely did during the PC era. So what we're trying to do is to viewed our own mobile ecosystem, so that content and services can be more native to the baidu ecosystem. They are although.
This out of the challenges, but the also opportunities once we can viewed a.
I'll see and a strong mobile ecosystem, the user experience well be more indigenous.
Meaning that a big they do get better experience and our customers that better conversion. We are in the process. All slaw. This kind of transitioning. So that's why you see that Doug you know traffic property, a leading indicator that it's growing but but the the.
The revenue side or money by at least inside a half notch up Ah Ah picked off is that a significantly so going forward, we'll continue to push it the mobile ecosystem side because all of our.
Organically viewed content and services.
And on the <unk> side I think that's the main challenge if that's the market that's not roll out faster us Oh some.
Yes that so that's why we do you need to continue to invest in this kind of new initiative and the the weighting dump them onto the to become more mature so that well be able to a profit from that.
Okay, and let me talk little bit more about.
Revenue make up with regards to verticals there you talked about.
Auto in the financial services those are both del <unk> auto automobile as we know a number of a car unit sales. This year is now.
The industry is not doing it's healthy you look at financial services. That's another area that since Q1 to assure that has been though and this has come down pretty significantly.
Travel, we can though focusing on building a better products because we have you know good content.
No strategic relationship with a trip dot com and so forth.
Trouble has done well, it's when they bought a stronger or verticals.
With regards to hold true if you look at health care.
Introducing manage page.
Last December and at the end of March this year, we require that everyone who's advertising or using mobile from baidu to switch over the age five sites to a managed page.
That has put a damper in terms of revenue goes.
Probably portfolio content customers, just will not come to a baidu in them because we now have stronger control the Clinton bets on there and so forth.
You know.
Yeah. This is on ensuring that the content or paid or pages.
Good for users and we started.
They're building out to a PC, which is a little less than 20% or total hotel revenues.
Yes June July so Q2, Billy it's a partial quarter hit Q4, you'll see a full quarter here. So we actually had seen most people.
Customers So of course, which will help us with children. So we don't see too much of a difference from Q3 into Q4.
This is what we're halfway through the quarters. So so as you're right now we don't see too much different from Q to Q4.
But if you look at overall you know our revenue guidance for.
With Baidu core.
This quarter you know the last few quarters, but we would help.
He said, we soda with for danger that they get it a percentage and this quarter now what gliding from zero to six this as if we think that you know the.
In terms of your you will be a growth with a much better off than the Alaska.
Orders I think you know it in.
Hey, we said that you know we come back with a 100 days a plan we executed very well.
Topline and bottom line and so you're seeing or a business model are getting more solid and fit their revenue with it.
Productivity that we talked about the.
You know.
Who sit marketing platforms.
Strengthening and mobile ecosystem, so that's helping us I think a.
Right, because a softer or medical picking on the.
Right.
Your next question comes from the line of Gregory Zhao from Barclays. Please ask your question.
Hi, robbing Herman I turn the time for taking my question.
The first one they fraud.
Sure well, new kinds of yours or how do you see on your apparel summer after I make expansion.
<unk> our year over year on the counter Ukraine redress wonder I understand the trends.
Going forward and Oh sustainability off the trend and Oh sure why most senior from.
The volume off your search query off if I do it can make that I think last quarter imagine. It's 20% are you here or do you have an opportunity for these quarter and also longer I understand a high security volume growth. He's a third party hoctor mobile browser and also on PC. Thank you.
[noise] swimming well answers it's worthwhile.
<unk>.
Okay High grade yeah, so with regards to the to extend my sense would be possible a type a tax still grew 5% a year over year.
I think Oh heck a growth rate has a.
Level off a growing slower year over year, then click here this quarter I think what things number one is as we focus more on building or mobile ecosystem. So we're going to be rely more in apps searches so to grow our revenue and we've been transitioning off because I think over the last year I think the street a mystery tour.
It is our strategy to move over into a INAP services because enough services you're required to pay for channel costs upfront and then you would have a revenues over the following quarters. So look at the Wizard lifetime West Texas.
Every dollar you spend a good that revenue in that same quarter. So as our business model shift the margin shifted in the street took Oh I think several quarters to understand us. So I think that's a one.
Issue and I think.
Well, so far I think you know do you.
We are.
Having still increasing costs I didn't have prices do increasing but I think it's not hitting us this data on March as the previous quarters.
Those are marching you know as Robin mentioned, we're still spending heavily on silicon lessons, but on a.
Year over year basis.
You know what was good del.
<unk>.
So as unlikely.
Jamie.
We mentioned in her prepared remarks, or how much we spend for China and promotional marketing is a function of investment return. Although we don't expect every dollar we spend to be.
To get as it turns into same quarter, we measure over the lifetime value of the users. So as the Carlin softened and it seems that good trends are not meeting the internal.
Especially because we have set the tone it back so that's why as we turn it back you can see for example by <unk> is that true.
Quite profitable because it's a good segment of our will go a business.
So I think you know with the economy like this will be a more trouble in terms of spending or what were looking for it.
As it turned out we can get but as the economy gets better and we're seeing good returns so we might.
You know.
The increase that into future. The ultimately you know we think that whatever we spend we can get to the turned back because we have a basically ski system internally to measure these kind of returns the channel to promotion.
[noise] I.
Oh, sorry, a this is though.
For the six volume actually the us to tool moved dosage building, which do see a pretty good a lift year over year and especially for the F. search as Robin mentioned to you the prepared remarks actually a we saw 25% to yield the your let's so I'm actually a given the <unk>.
That experience in the I do ATP search.
We are by John Hall, and my many programs and the managed pages or together towards the experience is getting better I know measured by all the metrics, we or using.
Given that it will gain to see them luncheon continue a in terms for the entire search traffic into it.
[laughter].
Thanks very much.
Your next question comes down the line Grace Chang from Morgan Stanley . Please ask your question.
Thank you.
Thank you for taking my question. My question is also about the online like him basis.
Its good to hear that imagine talk about it because it a environment overall stabilizing but.
Can you also had a bit more about all the into 2020, specifically from the demand and supply side, given psyche 11, more about your observations about macro and AD budget for next year and from a supply side too specific comment about the competition environment.
Because I remember talk about the AD inventory supply increase.
Earlier, this year and how do you see that competitor in five environmental involved into the next year.
My first question and second question about Fiveg, how do you expect to Fiveg opportunities, a what changed or what kind of impact will that be TD over internet business. Thank you.
Yeah, the demand side I think as I mentioned overall, we are seeing.
Fine saw forecasted lactation, which means it's a nod to getting.
Sure.
Oh, we actually beauty, a more solid and the user friendly mobile ecosystem, we well be able to gradually you get back though.
Advertising budgets.
And along the supply side.
Yes, they're seeing a Ah you know a southern flush off new AD inventories the over the past to a year or so we Ah we see that.
That kind of fall you know feed off inquiries are slowing down.
So that is also a kind of good for us but ultimately.
We are we focus on our own spin.
Beauty and the best of a mobile ecosystem for knowledge and information. Therefore, we can provide unique value to our customer stand Adler high service the initiatives that we've talked about during the prepared remark all resolve it even better conversion.
Want to customers because the mainstream off Harvard and deal with basically a pay for performance are telling us. We can continue to improve the performance, we won't be able to get up more budgets from our customers.
And for Fiveg.
I think a that well.
Give us a more opportunities to innovate in a lot of from a on the mobile side I think Oh. The video product features well continue to evolve and it could be very different from what we see.
Today, and how long the among the <unk> to be side Smart Transportations foreign manufacturing, a education et cetera, we see opportunities to transform though saw a business model. So you've seen all kinds of different areas and industry.
Okay.
Your next question I'm trying to line Binnie Wong from HSBC. Please ask your question.
Good morning, Robin haven't and trial, Mike I'm not crushes on them. If we can pass I can can tropic broke off the 25% or how do you see that the drivers coming from search fees and be deal just sort of weekend, but understand that in terms of like how you see that will trend and also when do you see that come translate into softer revenue growth.
Because of that you see Oh look it's a salvation from your past few quarters. So just wanted to see how how we should see that may be seem to upside from fees and thedeal can translate into foster growth. There and then also on second question is also into opening up the press release <unk> I think of often mentioned that <unk>.
That's right I'm sure. He also team shares my question can you comment on that used to be hazy yet intention.
[laughter] sweet usage as we see rising competition I found a new seats Pat from launching their search function alia and also of course, a against a lot your social network cost what people, especially I would think a moment. So all I can you comment on those thank you.
Oh.
Okay for the video pestering.
So the live video question actually its right. It has been a as there has been a explosive growth in China. So shall video sectors in recent years.
And but we believe it's the first on being a game over yet actually that forests, we disagree with the short videos not only through our video apps for also sue the Baidu apps.
It's actually a in Ah Robinson and could have your book he already mentioned badge.
The short videos.
Distributions through by the U.S. and the video.
So we see the attempt spent up to flex 65% year over year actually so I'm not only for the videos itself like even in search we see the search satisfied through videos or being a increased almost 50%.
And year over year, so put that together, we see a video is actually being a very important go into.
You know by do so who are ecosystem.
Actually and especially you know with the Fiveg who'll be years. So we were going to see more applications of video seen by dues that ecosystem.
And then what's your second question.
Uh huh.
Let me answer that come to [laughter] question.
I think search has a very high barrier to entry and a wave of but.
For a long time and Ah Ah Ah that's the use or.
Behavior have being a form.
So it's.
Not that easy to change to use their behavior from a.
Browsing a habit to search happens because oh for browsing users do not need to do a much. So it's it's easier to do browsing.
If you ask them or if you ask someone to.
Transform from an easier to do things are harder to do thing that's not that easy.
Easy but.
Other.
And if you all know transformed Gulf you start school.
I used to search.
I used to talking phase or express the are.
<unk>.
The explicit to lead to a a broadening behavior that's much easier. So that's why it for baidu to do feed but it's harder for a few deeply our to do search and on top that I think a that technology barrier to search is there a high.
If you can solve the third probably you'd basic yourself. The H.T.I. problem I think this which I know intelligence because.
The youth or say you have to.
Do you understand that that and come up is relevant.
[laughter] requires a lot of research lot up investment and I've got a hard problem.
Okay.
Thank you and just a follow up here is that in terms of the Tropic smells a when do you mentioned see that can translate into potentially a SaaS revenue growth and I'll look into <unk>. Thank you.
Yeah.
I think you know.
So for the month marketing or customers may so what are the really care about is that the.
The effective traffic so a wish the men's pages. That's my many programs actually we see more and more examples you know where the customers when they use this services, they're all lie or being Ah improved so it's really hard to say, how we're going to turn that into a numbers, but we do.
I see that trend.
We are going up and you actually a as Robin mentioned in the opening remarks, right, so more and more on marketing customers or a adopting our managed to pages actually so we're seeing the improvement over our wise. So I bet that it's going to try and you know tuned into.
To a revenue, let's say it's hard to.
See the specific numbers.
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