Chinese language Internet search provider Baidu reported its unaudited financial results for the fourth quarter and fiscal year ended December 31, 2013.

Fourth Quarter and Fiscal Year 2013 Highlights

• Total revenues in the fourth quarter of 2013 were $1.573 billion, a 50.3% increase from the corresponding period in 2012.
• Total revenues in fiscal year 2013 were $5.277 billion, a 43.2% increase from 2012.
• Operating profit in the fourth quarter of 2013 was $452.6 million, a 3.8% decrease from the corresponding period in 2012.
• Operating profit in fiscal year 2013 was $1.849 billion, a 1.3% increase from 2012.
• Net income attributable to Baidu in the fourth quarter of 2013 was $459.9 million, a 0.4% decrease from the corresponding period in 2012.
• Net income attributable to Baidu in fiscal year 2013 was $1.738 billion, a 0.6% increase from 2012.  

Robin Li (Chairman and chief executive officer, Baidu): 2013 was marked by our entry into new areas and significant progress in mobile, as we invested aggressively to build out Baidu’s position in search, app distribution, and location-based services. Our efforts to drive mobile adoption among customers gained significant traction throughout the year. In the fourth quarter, mobile accounted for over 20% of total revenues.

Fourth Quarter 2013 Results

Baidu reported total revenues of $1.573 billion for the fourth quarter of 2013, representing a 50.3% increase from the corresponding period in 2012.

Online marketing revenues for the fourth quarter of 2013 were $1.563 billion, representing a 50.5% increase from the corresponding period in 2012. Baidu had about 451,000 active online marketing customers in the fourth quarter of 2013, representing an 11.1% increase from the corresponding period in 2012 and a 2.8% decrease from the third quarter of 2013.

Revenue per online marketing customer for the fourth quarter of 2013 was approximately $3,452, a 34.8% increase from the corresponding period in 2012 and a 9.4% increase compared to the third quarter of 2013.

Traffic acquisition cost as a component of cost of revenues was $194.3million, representing 12.3% of total revenues, as compared to 9.6% in the corresponding period in 2012 and 11.7% in the third quarter of 2013. The increase mainly reflects increased contextual ads contributions and hao123 promotions through the company’s network.

Bandwidth costs as a component of cost of revenues were $93.1 million, representing 5.9% of total revenues, compared to 5.3% in the corresponding period in 2012. Depreciation costs as a component of cost of revenues were $67.8 million, representing 4.3% of total revenues, compared to 4.9% in the corresponding period in 2012. The year-over-year increase in bandwidth costs was mainly due to an increase in network infrastructure capacity and iQiyi.

Content costs as a component of cost of revenues were $59.7 million, representing 3.8% of total revenues, compared to 1.9% in the corresponding period in 2012, and 2.5% in the third quarter of 2013. The increase was mainly due to iQiyi’s increased content costs.

Selling, general and administrative expenses were $307.7 million, representing an increase of 135.1% from the corresponding period in 2012, and an increase of 34.6% from the previous quarter, primarily due to an increase in promotional spending for mobile products.

Research and development expenses were $208.8 million, an 80.1% increase from the corresponding period in 2012，and an increase of 15.9% from the previous quarter, primarily due to an increase in the number of research and development personnel.

Share-based compensation expenses, which were allocated to related operating costs and expense line items, were $29.3 million in the fourth quarter of 2013.

Operating profit was $452.6 million, representing a 3.8% decrease from the corresponding period in 2012.

Income tax expense was $56.0 million. The effective tax rate for the fourth quarter of 2013 was 11.2% as compared to 16.2% for the corresponding period in 2012.

Net income attributable to Baidu was $459.9 million, representing a 0.4% decrease from the corresponding period in 2012.

As of December 31, 2013, Baidu had cash, cash equivalents and short-term investments of $6.348 billion.

Net operating cash inflow for the fourth quarter of 2013 was $678.5 million. Capital expenditures for the fourth quarter of 2013 were $158.7 million.

Fiscal Year 2013 Results

Total revenues in 2013 were $5.277 billion, representing a 43.2% increase from 2012.

Online marketing revenues in 2013 were $5.253 billion, representing a 43.0% increase from 2012. The growth was driven by increases in both the number of active online marketing customers and revenue per customer, says Baidu.

Baidu had about 753,000 active online marketing customers in 2013, representing a 26.3% increase from 2012. Revenue per online marketing customer for 2013 was $6,971, an increase of 13.1% from 2012.

Traffic acquisition costs in 2013 were $611.9 million, representing 11.6% of total revenues, compared to 8.7% in 2012. The increase in TAC reflects the increased contribution of contextual ads and hao123 promotions through the company’s network.

Bandwidth costs as a component of cost of revenues were $320.2 million, representing 6.1% of total revenues, compared to 4.8% in 2012. Depreciation costs as a component of cost of revenues were $242.8 million, representing 4.6% of total revenues, compared to 4.8% in 2012. The increase in bandwidth costs was mainly due to an increase in network infrastructure capacity and iQiyi.

Content costs as a component of cost of revenues were $137.2 million, representing 2.6% of total revenues, compared to 1.0% in 2012. The increase was mainly due to the consolidation of iQiyi into the company’s financial statements.

Selling, general and administrative expenses in 2013 were $854.6 million, representing an increase of 106.8% from the previous year, primarily due to an increase in promotional spend for mobile products.

Research and development expenses totaled $678.4 million in 2013, representing a 78.2% increase from 2012, primarily due to an increase in the number of research and development personnel.

Share-based compensation expenses, which were allocated to related operating cost and expense line items, were $85.0 million in 2013.

Operating profit in 2013 was $1.849 billion, a 1.3% increase from 2012. Income tax expense was $302.1 million. The effective tax rate for 2013 was 15% as compared to 13.2% in 2012.

Net income attributable to Baidu in 2013 was $1.738 billion, representing a 0.6% increase from 2012.

Net operating cash inflow in 2013 was $2.278 billion. Capital expenditures in 2013 were $455.4 million.

Outlook for First Quarter 2014

Baidu currently expects to generate total revenues in an amount ranging from $1.526 billion to $1.573 billion for the first quarter of 2014, representing a 54.8% to 59.5% year-over-year increase.