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Baidu reports 62% YOY Q2 profit drop amid increasing competition

China's internet conglomerate Baidu Inc.'s net income attributable to the company fell 62% year over year to 2.41 billion Chinese yuan in the second quarter of 2019 ended June 30, from 6.40 billion yuan a year prior, according to an Aug. 19 earnings release.

Baidu's diluted earnings per American depositary share was 6.57 yuan, down from 18.14 yuan a year earlier. The S&P Global Market Intelligence earnings per share consensus for the second quarter was US$0.56 on a GAAP basis.

The company's CFO Herman Yu, said revenue grew despite challenges related to industry-specific policies, its self-directed health care initiative and weak macro environment.

Total revenue for Baidu edged up 1% year over year to 26.33 billion yuan in the second quarter, from 25.97 billion yuan in the June 2018 quarter. Online marketing revenue fell 9% year over year to 19.24 billion yuan, down 9% year over year, while its "others" revenue grew 44% year over year to 7.09 billion yuan due to strong growth in the membership services of Baidu's video streaming site iQIYI Inc., as well as from its smart devices and cloud services, according to the company.

Search and feed functions have provided Baidu with two "strong traffic engines," CEO Robin Li told analysts on an Aug. 20 earnings call. Li said the company is feeding its mobile app and its Smart Mini Program with content, to strengthen the content of its in-app search and vertical search results.

Daily active users of the Baidu App reached 188 million in June, up 27% year over year, while its in-app search queries grew over 20% year over year. The monthly active users of its Baidu-app-embedded Smart Mini Program reached 270 million, up 49%.

For the third quarter, the Chinese tech giant said it expects its revenues to be between 26.9 billion yuan and 28.5 billion yuan.

The company is facing increasing competition in China's search market. Earlier this month, Beijing Byte Dance Telecommunications Co. Ltd., the owner of global short video app TikTok, entered the market with its Toutiao Search function.

Baidu's senior vice president of business operations, Shen Haoyu, told analysts on the earnings call that the company is "happy to see new players," adding that its recent move to strengthen its mobile ecosystem will provide its users with a "better experience."

As of Aug. 19, US$1 was equivalent to 7.05 Chinese yuan.