BIDU » Topics » Revenue Generation

This excerpt taken from the BIDU 20-F filed Apr 9, 2009.
Revenue Generation
 
We derive revenues primarily from online marketing services, which accounted for 98.9%, 99.8% and 99.9% of our total revenues in 2006, 2007 and 2008, respectively.


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We provide online marketing services to our P4P customers and tailored solutions customers. We generated approximately 99.9% of our total revenues in 2008 from online marketing services, a substantial majority of which was derived from our P4P services.
 
Our P4P platform is an online marketplace that introduces Internet search users to customers who bid or pay a fixed fee based on click-throughs for priority placement of their links in the search results. We recognize P4P revenues when a user clicks on a customer’s link in the search results, based on the amount that the customer has agreed to pay for each click-through or, in some cases, other pre-determined performance measures.
 
We provide tailored solutions customers with marketing solutions which may include one or more forms of online advertising services such as text links and graphical advertisements, as well as P4P services. Our agreements with these customers generally have a term of no more than one year. Our tailored solutions customers generally pay us based on pre-determined performance metrics, such as number of click-throughs, duration of placement, number of converted users and number of telephone calls. Some of our large tailored solutions customers have increasingly used our auction-based P4P services as one of the means to meet their online marketing needs. We expect to continue to experience such trend in the near future.
 
The most significant factors that directly or indirectly affect our online marketing revenues are:
 
  •  the number of our users and online marketing customers;
 
  •  the number of searches initiated on our websites and our Baidu Union members’ properties;
 
  •  the rate at which users click on paid search results;
 
  •  the competitiveness of bidding for keywords by P4P customers;
 
  •  the total online marketing budgets of our customers; and
 
  •  the total number of sponsored links and advertisements displayed on our websites and the bidding price for click-through.
 
Our P4P services revenues have primarily been driven by the increase in the number of page views, the increase in the number of P4P customers, and by our success in optimizing the display of sponsored links. We believe that an increase in the number of active P4P customers generally leads to an increase in the number of sponsored links and a higher average price per click-through for selected keywords. Our P4P customer growth has primarily been driven by the adoption of our P4P services by SMEs and, to a lesser extent, large enterprises. Our online advertising services have historically been driven by the general increase in our customers’ online marketing budgets. Most of our tailored solutions customers are medium and large enterprises. We expect the number of our online marketing customers to grow and, as a result, our customer mix may change. However, we expect our online marketing customer base to remain diverse for the foreseeable future. The current economic slowdown in China may cause our customers to decrease or delay their online marketing spending, hamper our efforts to grow our customer base, or result in fewer clicks by our users on sponsored links or advertisements displayed on our or Baidu Union members’ websites. Any of these consequences could negatively affect our online marketing revenues.
 
In November 2008, we removed paid search listings of certain customers, particularly medical and pharmaceutical customers without documentations on file with us, in response to CCTV reports that we had been including websites of medical companies that did not hold proper licenses in our paid search listings for some popular medical terms. A large portion of those customers have since resumed using our services after providing their relevant documentations to us. However, the removal of certain questionable sponsored links in November 2008 may result in a loss of revenues in future periods.
 
Our online marketing customers are increasingly seeking marketing solutions with measurable results in order to maximize their ROI. To meet our customers’ needs, we will continue to evaluate the effectiveness of our various products and services and adjust the mix of our service offerings to optimize our customers’ ROI. We expect that we will continue to earn a substantial majority of our revenues from our online marketing services. As a result, we plan to continue focusing most of our resources on expanding our online marketing services.


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Prior to July 2006, we had provided enterprise search software and related services. We decided to phase out our enterprise search software business in July 2006. This phase-out was completed in 2008.
 
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