October 29, 2014 / 8:44 PM / 3 years ago

China's Baidu posts third quarter revenue below analysts' targets

People talk in front of a Baidu's company logo at Baidu's headquarters in Beijing January 16, 2014.Jason Lee/Files

(Reuters) - Baidu Inc (BIDU.O) posted a less-than-expected 52 percent surge in third-quarter revenue, even as mobile traffic for China's dominant Internet search engine continued to grow.

On Wednesday, the company referred to as "China's Google" forecast a 45.4 to 49.6 percent rise in revenue this quarter, generally in line with Wall Street projections but a marginal deceleration in its pace of expansion.

Baidu showed it has been spending more on marketing and content, and on acquiring users. Traffic acquisition costs grew to 12.9 percent of overall revenue, or 1.742 billion yuan in the third quarter. That was up from 11.7 percent a year earlier.

The company is also investing on content for iQiyi, its online video platform. Content costs grew to 3.7 percent of overall revenue, or 498.1 million yuan. That was up from 2.5 percent a year earlier.

Baidu has struggled to keep up with rivals on mobile devices such as smartphones, as all race to invest in apps and content to keep users engaged. It is also grappling with intensified competition on its own search turf from the likes of Qihoo 360 Technology Co Ltd QIHU.N and Sohu.com Inc’s (SOHU.O) Sogou search engine, which is 36.5 percent owned by Tencent Holdings (0700.HK).

But the company is making headway on growing its overall mobile traffic, now accounting for 36 percent of total traffic versus 30 percent in the second quarter.

Baidu reported sales of 13.52 billion yuan or $2.203 billion in the third quarter, lagging the 13.56 billion yuan that analysts had expected on average.

Net income jumped 27.2 percent to 3.876 billion yuan or $631.5 million.

Shares in the company were down 1.6 percent at $221.01 in extended trading, from a close of $224.55 on the Nasdaq.

Reporting by San Francisco newsroom; Editing by Chris Reese and David Gregorio

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