China’s Baidu beats forecasts as it sidesteps censors, boosts ad sales

BEIJING: Chinese internet search giant Baidu Inc blew past earnings estimates on Thursday, sending its U.S.-listed shares sharply higher in after-hours trading as investors cheered strong growth in its advertising business.

The firm, which has had to bounce back from a bruising medical advertising scandal in 2016, said it was now taking extra measures to clean up content on its platforms.

Baidu´s stock climbed 5.5 percent to $252 in late trading after marketing revenue grew 23 percent to 17.2 billion yuan ($3.30 billion), its second fastest quarterly rate in over two years.

Net profit rose 23.4 percent versus forecasts of 19.5 percent.

Baidu said it now expects second-quarter revenues of between 24.91 billion yuan ($3.93 billion) and 26.19 billion yuan ($4.13 billion), indicating a 19.3-25.4 percent rise versus estimates of a 15.9 percent climb according to Thomson Reuters I/B/E/S.

The search firm´s news feed received an unexpected bump in the first quarter due to a crackdown by Chinese internet regulators on low-brow content, which saw several competing apps targeted during a key client-acquisition period.

Jinri Toutiao, one of China´s most popular news feed apps and a key Baidu rival, is among the apps to have been punished by censors this year.

The news feed platform was temporarily removed from local app stores earlier this month.

"This is a one-off, but the timing is quite interesting.

Baidu in its marketing can now assure clients that at least on the feed side it has safer content," said Pacific Epoch analyst Raymond Feng, adding it made the firm "a more reliable choice".

Analysts said the early year bump boded well for the rest of 2018, as advertisers tended to sign year-long contracts.

During a conference call with analysts on Friday, Chief Executive Robin Li said the company has employed artificial intelligence technology to target click-bait and inappropriate content.

Baidu removed 20.2 billion malicious web pages in 2017.The helping hand from censors is in stark contrast to Baidu´s woes two years ago, when regulators cracked down on its advertising practices, gutting its marketing client base and bringing its revenue growth to a grinding halt.