In terms of operating profit, Baidus operating profit reached 6.75 billion yuan (non GAAP) in the quarter, far exceeding Wall Streets expectation. Previously, Wall Street analysts had estimated Baidus revenue and operating profit of rmb28.49 billion and rmb6.22 billion, respectively.
From the perspective of revenue structure, online advertising revenue is still Baidus cash cow and an important engine for Baidus overall growth. However, other revenues, including cloud services and smart devices, also account for a steady increase in revenue. Overall, Baidus revenue structure is showing a benign development trend. This is closely related to Baidus reform initiatives in 2019.
Bottom performance rebound
In the latest quarters financial report, Baidus operating profit margin increased to 16%, returning to the level of the third quarter of 2018. In terms of operating profit, Baidus operating profit in the quarter was 4.655 billion yuan, up 98% from 2.355 billion yuan in the previous quarter and 323% from 1.1 billion yuan in the same period last year.
In terms of net profit, Baidus net profit in the quarter was 6.35 billion yuan, up 205% from 2.1 billion yuan in the same period of last year. Under non GAAP, Baidus net profit in the fourth quarter was 9.2 billion yuan (about US $1.32 billion), up 95.6% year on year.
As an important support for Baidus performance, baidu cores business revenue is 21.7 billion yuan, and the net profit attributable to Baidu core is 7.43 billion yuan, up 84% year-on-year. From the first quarter to the fourth quarter of 2019, Baidus core net profit margin under non GAAP is 10%, 24%, 30% and 46% respectively.
Behind the profit growth, baidu is carrying out cost control. In the fourth quarter of 2019, Baidus costs and expenses were 24.2 billion yuan, down 6% from 25.7 billion yuan in the previous quarter and 7% from 26.08 billion yuan in the same period of last year. Among them, Baidus cost in the quarter was 15.5 billion yuan, down 1% from the same period last year, relatively flat. Baidu said that it was mainly due to the decrease of content cost and traffic acquisition cost, which was offset by the increase of sales cost of hardware and cloud products.
Yu Zhengjun, baidu CFO, talked about Baidus content cost in the conference call after the financial report was released. Yu Zhengjun said that Baidu has its own information flow system, and is also enhancing its strength in vertical fields such as Baidu health and Baidu know. The companys investment in content accounts for an increase in Baidus cost, but the absolute value is not high.
In terms of sales general and administrative expenses, Baidus sales and management expenses in the quarter were 4 billion yuan, a significant decrease of 33% over the same period last year. Baidu explained that this was mainly due to the decline in channel spending and marketing spending, as well as personnel related spending.
However, as an AI company, Baidus spending on R & D continues to grow. Baidu spent 4.8 billion yuan on R & D in the quarter, up 5% from the same period last year. Baidu said the main source of spending was related to R & D staff.
Mobile ecological closed-loop growth is gratifying
The outbreak of Baidus overall performance and Baidus core performance reflects Baidus focus on mobile ecology and AI commercialization. One of the important components is Baidus mobile ecology.
It is understood that the current online advertising revenue is still Baidus cash cow. In 2019, Baidus online advertising revenue reached 78.1 billion yuan, accounting for 72.7% of the revenue. In the fourth quarter, Baidus online advertising revenue was 20.8 billion yuan. Thanks to the unprecedented development of mobile ecology, Baidus online advertising business has fully recovered.
The data shows that Baidu app is getting more and more login users. In December, the number of active users reached 195 million, a year-on-year increase of 21%, and the number of search in the end increased nearly 30%; in December, the number of active users of Baidu smart app reached 316 million, a year-on-year increase of 114%..
The reason why baidu Mobiles growth is gratifying lies in its own ecological closed loop. Robin Li said that by strengthening the three pillars of the 100 family, smart Mini program and hosting page, Baidu App provides users with a unified account login and native App experience, allowing users to access information and services on independent App and HTML5 websites more conveniently and smoothly, thus building a closed-loop mobile ecological layout from the starting point to the end point.
In addition, the novel coronavirus pneumonia fermentation has also contributed a lot to Baidu mobile ecology. During the epidemic, in order to let users quickly get relevant information, baidu launched the fight against pneumonia channel on the app end, covering the epidemic map, epidemic rumor refutation, ask professional doctors online and other plates, reporting relevant authoritative information and data in real time and centrally. According to the data, more than 1 billion people learned about the epidemic through Baidu every day.
In addition, baidu app also launched a free medical and health consultation platform, with more than 100000 professional doctors answering questions online 24 hours a day, so that users can also get authoritative and professional medical advice during the epidemic.
In the conference call of the latest financial report, Shen Qiao, senior vice president of Baidu, said that Baidu had a very good growth of search traffic in December last year, and the epidemic highlighted Baidus unique value orientation. During this period, the number of active users of Baidu health search day increased by 35% year on year. Robin Li revealed that during the epidemic, the growth rate of search was over 30%, and search profit grew by about 100%.
Open AI money view
In addition to the layout of mobile ecology, Baidus revenue in emerging areas such as AI is also growing.
According to the data, the proportion of other revenues including cloud services and smart devices in revenue steadily increased. In 2019, other revenues amounted to 29.4 billion yuan, accounting for 27.3% of revenue, compared with 19.9% in the same period last year. On the whole, Baidus revenue structure is developing well, and diversified revenue trend helps to improve its ability to resist environmental risks.
In December 2019, the number of small assistant voice interactions exceeded 5 billion, more than three times that of the same period last year. The first party hardware voice interaction times of Xiaodu brand reached 2.3 billion times, more than 7 times of the same period last year. This data index means that the user stickiness of small smart speakers and other products is further improved.
According to the survey of strategy analytics, a well-known market research company, the sales volume of small smart speakers in 2019 ranked first in the Chinese market. The scale effect of small-scale smart speaker is fed back upward, the hardware cost is gradually reduced, and the profit margin of small-scale smart speaker is expected to improve. With the support of Baidu AI technology and dueros skill store, in the future, small speakers are expected to explore the commercial model including members, advertising, skill store revenue.
At the same time, baidu is also constantly reserving relevant technical capabilities. In 2019, Baidu ranked first in China with 5712 applications for AI patents. In November, baidu released an end-to-end far field automatic speech recognition (ASR) solution based on its own design of Honghu artificial intelligence chip. On Baidus AI open platform, developers have called Baidu brain speech recognition engine more than 10 billion times.
As the worlds leading open platform and ecology for autonomous driving, Apollos commercialization has been further accelerated. Apollo currently has 177 ecological partners and more than 36000 global developers. In December, the total test mileage of Apollo Team exceeded 3 million kilometers, covering 23 cities including Beijing, Wuhan, Cangzhou and Changchun. Beijing also issued Baidu its first batch of 40 road test licenses for self driving vehicles.
Novel coronavirus pneumonia is also a new opportunity for Baidu, technically, with a very forward-looking deployment of AI. At present, Baidu has landed AI temperature measuring equipment at many air, high-speed rail, station and other checkpoints, which can quickly measure temperature in a non-contact, reliable and efficient way. Its fever screening system can realize remote temperature measurement, with a number of people measuring up to 200 per minute.
At the same time, Baidu has also launched AI applications to help grassroots epidemic prevention, such as Baidu AI free intelligent outbound platform, which can help grassroots communities to conduct epidemic investigation and quickly find out the health and mobility of community residents.
Big data and artificial intelligence are not only able to cope with public emergencies, public security governance, improve urban operation efficiency, medical technology and other key areas. In the broader industrial field, in helping all walks of life to upgrade their intelligence, artificial intelligence will play a key engine role. Robin Li said.