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Operator
Hello, and thank you for standing by for the Baidu's third quarter 2015 earnings conference call.
At this time, all participants are in listen-only mode.
After management?s prepared remarks, there will be a question-and-answer session.
(Operator Instructions).
Today's conference call is being recorded, and if you have any objections, you may disconnect at this time.
I would now like to turn the meeting over to your host for today's conference, Ms. Sharon Ng, Baidu's Director of Investor Relations.
Please go ahead.
Sharon Ng - IR Director
Hello, everyone and welcome to Baidu's third quarter 2015 earnings conference call.
Baidu's earnings release was distributed earlier today, and you can find a copy on our website, as well as on newswire services.
Today you will hear from Robin Li, Baidu's Chief Executive Officer, and Jennifer Li, Baidu's Chief Financial Officer.
After their prepared remarks, Robin and Jennifer will answer your questions.
Before we continue, please note that the discussion today will contain forward-looking statements, made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995.
Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations.
Potential risks and uncertainties include, but are not limited to those outlined in our public filings with the SEC, including our Annual Report on Form 20-F.
Baidu does not undertake any obligation to update any forward-looking statements, except as required under applicable law.
Our earnings press release and this call include discussions of certain unaudited, non-GAAP financial measures.
Our press release contains a reconciliation of the unaudited non-GAAP measures, to the unaudited most directly comparable GAAP measures, and is available on our IR website, at ir.baidu.com.
As a reminder, this conference is being recorded.
In addition, a webcast of this conference call will also be available to you, on Baidu's IR website.
I will now turn the call over to Baidu's CEO, Robin Li.
Robin Li - Chairman & CEO
Hello, everyone, and thanks for joining today's call.
In the third quarter of 2015, we made tremendous progress toward building the Next Baidu, and creating search of the future.
We see a future in which local and services take on increasing importance, and our search offering will connect directly with transactions to meet the fast-evolving needs of our users.
We will offer an ever more powerful, integrated platform to help an even broader base of merchants reach customers.
In the third quarter, Baidu showed strength in key operational metrics.
Mobile revenue comprised 54% of our total revenue, up from 37% a year ago.
Mobile search accounted for nearly two-thirds of total search traffic on Baidu.
China and its Internet users are squarely in a mobile era.
And Baidu has the platform, reach, and breadth of mobile products to serve their needs.
We continue to expand our solid mobile foundation, with mobile search monthly active users at 643m for the month of September 2015, up from 629m in June.
Mobile Maps MAUs, meanwhile, were 326m for the month of September, up from 304m in June.
And GMV for Transaction Services, formerly named O2O & Other, totaled RMB60.2b for Q3 2015, an increase of 119%, year over year.
This notable momentum reflects our strong execution capability and the powerful platform and resources that we leverage to capture a local services market still at the budding stage of online penetration.
At the end of September, we launched Local Express, an exciting initiative to further connect search and maps to transactions.
I'll later talk more about Local Express.
About the Search Services, our core search business remains very robust and continues to provide a solid profitable base of operations that enables us to move decisively and aggressively to capture the enormous opportunities in local and transaction services.
The quarter saw notable improvements in the monetization capability of both mobile and PC, with mobile showing particular strength as we implemented new initiatives, such as an improved mobile search user interface, and more personalized and image-enhanced sponsored links and search results.
The sum of these initiatives drove mobile monetization higher, as mobile CPM continued to narrow the gap with PC.
At our Baidu World conference in September, we unveiled Duer, our intelligent, voice-based assistant that can do things for users in the real world, from making dining recommendations, finding discounts, and ordering food, to buying movie tickets, to answering sophisticated questions.
Duer represents a kind of sneak-peak into the future of search, where voice activation, artificial intelligence, and services all come together.
About Transaction Services, we shared our vision of connecting people with services, with transactions as a natural extension of our lead generation search-advertising model.
I'm proud to report that we gained significant momentum in transaction services this quarter, as demonstrated by our strong growth in GMV.
Nuomi grew GMV 475% year over year, and Baidu Takeout Delivery grew GMV nearly 12-fold year over year.
Ultimately, what Baidu is building and offering is much broader than a ?daily deals?
business: we are creating an online marketing and transaction services platform, bringing to bear the power of our entire platform across search, maps, Nuomi, Takeout Delivery, and Baidu Wallet.
Our platform benefits from shared synergies, with traffic and data from search and maps enhancing the growth of our newer products.
As you know, the competitive landscape in O2O saw further consolidation this month.
Baidu's resolve and commitment to winning in the O2O market remains unshaken.
A small sliver-less than 5%-of the local, high frequency transaction services market, namely restaurants and local entertainment, is online today.
Baidu can win this market because our core value proposition to our users and merchants is differentiated from our peers.
We increasingly enable users to make decisions about local, offline consumption from our huge and powerful mobile gateways.
For example, in Q3, approximately 10% of mobile search queries and about one-third of queries in maps are related to local services.
Baidu has the platform and capability to convert these queries into transactions.
For example, in maps, as of October, over 1m points of interest already enable and have completed closed-loop transactions, with the final step of payment completed through either Baidu Wallet or another online payment provider.
Our platform approach creates a unified, seamless user experience, with the end-to-end discovery, service and payment all happening on one platform in a closed loop.
Our knowledge of our users, drawing on the power of big data, lets us made intelligent recommendations based on user behavior, their expressed preferences?and even from some unexpected statistical correlations.
For example, between the car a person drives and her propensity to eat Western food, between a user's zip code and his price preference for a meal, or between a search query and the type of food or movies she likes.
The entirety of Baidu's platform can help merchants to grow their businesses and operate with greater efficiency, with low startup costs.
Baidu not only helps merchants acquire new customers through search, maps and Nuomi, but we also help them build lasting relationships with existing consumers, through programs such as Membership Plus and stored-value cards on Nuomi.
Takeout Delivery helps bring incremental orders to merchants and helps them increase their operational efficiency.
Baidu Wallet helps merchants streamline the payment process, thus enabling them to turnaround a transaction faster.
An exciting new initiative is Local Express, which merges Baidu's online marketing with our transaction services offering for local merchants - all in one easy, turnkey solution.
Local Express - available only to Baidu Nuomi merchants-empowers local merchants by helping them attract new customers and complete transactions without high startup costs or the need for infrastructure.
With Local Express, we help Nuomi merchants get discovered by pushing rich content, related to their business, such as images, location, distance, and promotions, in a performance-based ad, in the format of a ?card?
in Mobile Baidu or Maps.
With one click on the card, the user lands directly on the Nuomi merchant page and completes the transaction with just a few more clicks.
Merchants don't need a domain name, or to rent servers, or to buy any cloud-based computing power: Baidu hosts it all.
This easy tool gives merchants not only a faster, simpler way to build their online presence, but a better means of creating a true omni-channel presence, beyond their brick-and-mortar existence.
With over 40m SMEs in China without websites, the opportunity for Local Express - and Nuomi - is immense.
Now for the progress on Nuomi and Takeout Delivery.
Nuomi's momentum has been terrific, with GMV more than doubling, quarter on quarter, growing nearly four times faster than the industry.
Nuomi is a top player in the movie ticket vertical, and accounts for 15% of all movie theater tickets sold in China, on-or offline, as of the end of September.
Nuomi has expanded its merchant base to nearly 700,000, and covers over 400 cities.
We are finding that both the numbers of transactions per user, as well as ARPU per quarter continue to trend up.
Baidu Takeout Delivery saw GMV nearly triple quarter-on-quarter, and has the highest ARPU among its peers.
Takeout Delivery targets the attractive, working-age demographic who value higher food quality and faster delivery time.
Baidu Takeout Delivery leads in 63 cities by working age demographic, according to our internal analysis.
Superior multi-point to multi-point logistics is our key sustainable advantage that will give us a lasting edge on the competition.
We?ve trained this core competence in logistics by leveraging our leading maps, data and technology.
Baidu Wallet has continued to grow impressively, reaching 45m activated accounts and adding 10m as of the end of September.
In a race to capture the opportunity, Baidu, along with the rest of the industry, has used promotional subsidies to seed the market and shape user behavior.
Baidu has approached this resource deployment strategically, always looking to build lasting core competencies and sustainable advantage.
We are confident our vast platform resources and constant leveraging of data resources will, over time, drive more efficient ROI than our peers.
We use our big data capabilities to segment and target users, and look to make full use of our data resources to target even more intelligently and make personalized recommendations to our users.
iQiyi
iQiyi has broken away from the rest of the pack through differentiated content and a unique business and distribution model.
iQiyi is a powerful content distribution platform, and in an industry first, popular shows like Shushan Wars were broadcast on iQiyi before making it to television broadcast.
Popular self-produced shows include Qipashuo and The Grave Robbers?
Chronicles have become runaway hits, and iQiyi now plans to invest 50% of its resources in creating more self-produced content to complement the acquired licensed content ? such as films from Lions Gate, with whom iQiyi recently signed a licensing deal.
iQiyi now has the largest number of paying subscribers with an explosive growth of subscription revenue.
Earlier this week, we announced a share exchange transaction with Ctrip, whereby we exchanged the majority of our stake in Qunar for a 25% voting stake in Ctrip.
We look forward to working with Ctrip on product integration with our search, maps, Nuomi and Baidu Wallet products, to give our users even wider access to online travel content and services.
We have been very happy with Qunar and its superb management team, and we expect to continue our existing business cooperation with Qunar.
We see tremendous potential ahead for the industry and remain very committed to online travel space.
We look forward to working with Ctrip and Qunar to grow the industry together, to enhance the online travel user experience in China.
At the end of Q3, as we look back on our accomplishments and look forward into coming quarters, we are even more confident and excited about the prospects for Baidu, as we carve into this massive new opportunity.
We are just beginning to link the pieces of our existing platform together to create ever-larger opportunities for this Company, as we continue to build the Next Baidu.
The levels of investment we've committed are substantial, but they are dwarfed by the market potential.
We've been here before, facing a field of strong competitors, their eyes all on an unfathomably large prize, and we've continuously proven ourselves.
Finally, we are very excited to welcome Mr. Brent Callinicos and Mr. Yuanqing Yang to Baidu's Board of Directors.
Their extensive leadership experience and industry expertise will bring significant value to Baidu, as the Company moves into its next stage of growth.
With that, I will now hand over to Jennifer, who can update you on financials.
Jennifer Li - CFO
Thank you, Robin.
Hello, everyone.
We reported a solid quarter, with growth again driven predominantly by mobile.
We're still in the very early innings of unlocking mobile's potential.
We see a long runway for growth in mobile search driven by traffic growth, upward trending monetization, and a new, incremental local and SME merchant customer base.
In addition, Transaction Services, an opportunity in its budding stages, is showing great promise and has demonstrated very strong momentum.
This strong momentum gives us the confidence to continue investing in the Next Baidu.
These investments are tracked and measured carefully and we keep a close eye on ROI.
As Robin mentioned a bit earlier, our platform, technology and data, coupled with the financial investments, will over time, drive more efficient ROI than our peers.
Our gateway products of search and maps, our infrastructure products of Baidu Wallet, Baidu Connect and Local Express, and our Transaction Services products of Nuomi and Takeout Delivery all build upon each other and elevate the strength of the Baidu platform in its entirety.
We look forward to executing on our plan and sharing the progress with the investment community.
Starting last quarter, we provided additional disclosure of our business and margin impact of major investment areas.
From this quarter onward, to more accurately define our reporting segments, we have renamed Core
Search to Search Services, and O2O & Other to Transaction Services.
The underlying products in those reporting segments remain unchanged.
Search services margins remain very robust, in the line with the 50s margin levels I shared last quarter, and we expect those margins to be in that range going forward.
On a consolidated basis, Transaction Services had a negative margin impact of 32 percentage points on our overall non-GAAP margins.
iQiyi, on a standalone basis, further impacted our overall non-GAAP measures by 5.4 percentage points.
Qunar's quarterly financials contribute 6% to 7% of Baidu's overall revenue and have a 4 point operating margin drag for Baidu's overall financials.
With the transaction announced earlier this week, we expect only one month of impact in the fourth quarter.
As we announced today, our Board has authorized us to commence a repurchase of up to $2b of our shares over the next 24 months.
This decision is consistent with our overall capital allocation framework and our primary uses of capital remain reinvestment in the business to drive long-term shareholder value.
Now moving to the financials.
All monetary amounts are in RMB unless stated otherwise.
For the third quarter, total revenues were RMB18.4b, representing a 36% increase year-over-year.
During the third quarter, Baidu had approximately 623,000 active online marketing customers, a 21% increase from the corresponding period in 2014, and a 6% increase from the previous quarter.
Revenue per online marketing customer for the third quarter was approximately RMB28,300, a 9% increase from the corresponding period in 2014, and a 3% increase from the previous quarter.
Traffic acquisition cost, as a component of cost of revenue in Q3 was RMB2.4b, or 13.1% of total revenues, compared to 12.9% in the corresponding period in 2014.
Bandwidth and depreciation costs as a percentage of revenues in Q3 were 5.3% and 3.6%, respectively, compared to 5.6% and 3.8% in the corresponding period in 2014.
Content costs, as a component of cost of revenues were RMB914.5m, representing 5% of total revenues, compared to 3.7% in the corresponding period in 2014.
This increase was mainly due to iQiyi's increased content costs.
As indicated in the earlier part of the year, we expect content costs to increase, as a percentage of total revenue, and that will exhibit in Q4.
Selling, general and administrative expenses in Q3 were RMB5.7b, an increase of 111% year-over-year.
The increase was primarily due to an increase in promotional spending for transaction services.
R&D expenses in Q3 were RMB2.7b, an increase of 47% over the corresponding period in 2014.
The increase was 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, increased in aggregate, to RMB400m in the third quarter, from RMB234m in the corresponding period in 2014.
SBC increased due to more shares being granted to Baidu employees.
Operating profit for Q3 was RMB2.5b, a decrease of 36% over Q3 2014.
Total headcount on a consolidated basis including invested entities was about 50,650 as of the end of Q3.
This is flat from the end of the second quarter.
Income tax expense was RMB590.5m for the third quarter.
The effective tax rate for the third quarter was 19.4%, compared to 15.5% in Q3 2014.
Net income attributable to Baidu for Q3 were RMB2.8b, a 27% decrease from the corresponding period in 2014.
Basic and diluted earnings attributable to Baidu per ADS for the third quarter amounted to RMB7.94 and RMB7.92, respectively.
Net income attributable to Baidu, excluding share-based compensation expenses, a non-GAAP measure, for Q3 was RMB3.2b, a 21% decrease year-over-year.
Basic and diluted earnings attributable to Baidu per ADS, excluding share-based compensation expenses, both non-GAAP measures, were RMB9.09 and RMB9.07, respectively.
As of Q3, the Company had cash, cash equivalents, and short-term investments of RMB70.1b.
Net operating cash inflow and capital expenditures for the third quarter were RMB4.8b and RMB1.9b, respectively.
Now let me provide you with our top-line guidance for the fourth quarter of 2015.
We currently expect total revenues for the fourth quarter to be between RMB18.200b and RMB18.750b, representing a 29.5% to 33.4% year-over-year increase.
Pursuant to Baidu's exchange of Qunar shares with Ctrip, as a result of which Baidu no longer retains voting control of Qunar, Baidu will no longer consolidate Qunar's financials, after October 26, 2015.
Please note, this forecast reflects Baidu's current and preliminary view and is subject to change.
I will now open the call to questions.
Operator, please go ahead.
Operator
(Operator Instructions).
Alan Hellawell, Deutsche Bank.
Alan Hellawell - Analyst
Fantastic.
Thank you very much.
It seems as though some of the impressive margin upside in the third quarter relates to R&D costs.
I'm just curious, what should we think of modeling for product development costs going forward?
I know that there was a hiring freeze.
And related to that, SG&A seems to be coming in below the trajectory, relative to the original second-half guidance of 80% to 90%.
Would a revision of that be merited, given the lower spend?
Thank you.
Jennifer Li - CFO
Hi, Alan.
Thank you for your questions.
With regards to R&D expenses, as you can see, R&D continues to represent a steady and slightly increasing percentage of the overall revenue.
It is an important component of cost for us, and we continue to put a lot of emphasis on our R&D investments and capabilities.
For the whole year, we don't expect that to change.
But going forward, after we step into next year, we will give you guidance when we're ready to do so.
For SG&A expenses, we provided guidance last quarter that the second half is going to be 80% to 90% increase compared to the first half.
The plan remains intact, and we're executing accordingly.
We're tracking our budget plans and we're executing on that, so there might be a little bit of timing differences.
Going into Q4, bear in mind that we will have consolidated results for Qunar for one month.
And for the two months that we do not consolidate Qunar, there will be margin improvement, as indicated in my prepared remarks.
The overall margin for Qunar on Baidu's margin drag for a quarter is about 4 points.
Alan Hellawell - Analyst
Thank you.
Operator
Eddie Leung, Merrill Lynch.
Eddie Leung - Analyst
Good morning.
Just a question about the transaction business.
We have seen very strong growth of GMV in Nuomi and Food Delivery.
So just wondering how much of that is driven purely by volume.
And have we seen any change in the ASP per order in Nuomi as well as Food Delivery?
Thank you.
Robin Li - Chairman & CEO
The ASP for Food Delivery has been trending up gradually.
For Nuomi, it has been stable in terms of ASP, it's pretty much volume.
But I think these two things are still at its very early stage.
We are not really driving the ASP at this point.
We're more driving the volume, the efficiency, the coverage for merchants and forming a payment habit for our users.
Eddie Leung - Analyst
Well understood.
Thank you, Robin.
Operator
Piyush Mubayi, Goldman Sachs.
Piyush Mubayi - Analyst
Thank you.
Thank you for the opportunity.
A question for you, Robin.
With the changes in the industry structure in travel, you've earned the chance of dominating a proven vertical, and you have links in place with several important partners.
What are the changes you'd like to see in this industry in the next couple of quarters or years?
And how are you thinking of approaching it?
Robin Li - Chairman & CEO
As you know, that we now have a partner relationship with Ctrip as well as Qunar.
This actually opens up a lot of more travel products and services to Baidu users.
So in the coming quarters, we will be working with this team to integrate all kinds of travel products with the Baidu platform services, namely Mobile Baidu, Baidu Maps, Baidu Nuomi.
This kind of omni-channel presence on the travel products will not only enhance Baidu user experience, but also open up a lot of opportunities for the travel companies to either attract new customers or provide existing customers better access.
So going forward I would think that this integration between the platform tools and services, such as the Baidu apps and the travel services will be a big change going forward.
Piyush Mubayi - Analyst
Thank you.
I'll get back in the queue.
Operator
Alicia Yap, Barclays.
Alicia Yap - Analyst
Hi.
Thank you.
Good morning, Robin, Jennifer and Sharon.
Thanks for taking my questions.
My question is related to the Transaction Services GMV.
So can you give us some color on what is a typical order value per transaction for your Nuomi and Takeout Delivery?
And then what is the percentage of the transaction volume now still attached with some sort of discount or rebate compared to the percentage of transactions with the rebate last quarter?
And then if you can also give some color in terms of recurring rate for the active users sequentially from the second quarter to the third quarter.
Thank you.
Robin Li - Chairman & CEO
Like I said, this is still in the very early stage.
We'd rather not to break down this kind of details, as we are still fine-tuning all kinds of parameters.
But on a qualitative basis, I would say that the users of Nuomi are quite loyal and that the users of Takeout Delivery are very loyal too.
They keep coming back to spend on our platform.
I would say a supermajority of the transactions are with subsidies right now, but that's the common practice of this industry at this point.
We do hope that going forward this will change, but ultimately we are working on to improve the operating efficiency and the ROI for our subsidies, so that we will become more competitive.
Alicia Yap - Analyst
Okay.
I'll get back to the queue.
Thanks.
Operator
Dick Wei, Credit Suisse.
Dick Wei - Analyst
Hi.
Good morning.
Thank you for taking my question.
I guess Baidu has done very well in the O2O strategy with very fast growth in GMV and Qunar is a big part of that.
I think after the share exchange how can we ensure the success continues, so all the stakeholders of Qunar continue to enjoy the success?
Maybe in particular, I think, even though Baidu is no longer a direct shareholder in Qunar, how can Baidu ensure Qunar continues to maximize the revenue potential and profitability, and Qunar shareholders and minority shareholders continue to share it without (inaudible)[L1] to other parties?
Jennifer Li - CFO
Hi, Dick.
Thank you for your question.
With the transaction, Qunar will continue to operate as an independent company.
It has a really solid management team and a great track record of execution.
I think going forward by this transaction Baidu does have more access to the content and provides a fuller user experience, as Robin indicated earlier.
I think also there will be more alliances and synergies by working across the different platforms, so all parties can really focus on driving a bigger and faster development of the overall travel vertical pie and [the deal] becomes very constructive in building that vertical.
And I think that this transaction is quite good for all shareholders related.
It helps improve efficiency, it builds synergy and it allows the effort to really focus on developing the vertical and really making an online platform a better tool for the offline traditional sector players.
So going forward, the parties can join forces and really work on building constructive forces to develop the vertical.
Dick Wei - Analyst
Great.
Thank you, Jennifer.
Operator
Wendy Huang, Macquarie.
Wendy Huang - Analyst
Thank you.
I just wanted to get some clarification on the Q3 and Q4 numbers.
So excluding that one-month impact from Qunar in the fourth quarter, what would be the Q4 revenue guidance?
And also what was revenue from the transaction-based services in Q3 and what did you actually factor in your Q4 guidance?
The reason I ask this is because I'm not quite sure if you are actually making any net revenue out of those transaction services, given that the take rate is quite low and the subsidy is quite high.
Thank you.
Jennifer Li - CFO
As I indicated earlier, Qunar's quarterly contribution for revenue is between 6% to 7% of Baidu's consolidated total revenue.
And so that will be a quarter and so we consolidate only for one month and you can just ballpark estimate what would be a two-month impact of that.
And also, as you noted, for transaction services, yes, we're in the early days of building that sector.
We do not really have meaningful revenues accounted for, as you see, for Q3 or into Q4, so that is not an element.
Wendy Huang - Analyst
Thanks, Jennifer.
I will go back to the queue.
Operator
Erica Poon Werkun, UBS.
Erica Poon Werkun - Analyst
Great.
Thank you.
Among your various businesses, I'm just wondering if Robin could just share with us how you rank them according to the long-term growth prospects for Baidu.
And also does the way you have been investing or you will be investing reflect that ranking?
Thank you.
Robin Li - Chairman & CEO
Well, right now our business basically has three different categories.
One is the Core Search business and the second is the Transaction Services and the third is the online video part, primarily iQiyi.
I would say all three of them have a great future, great growth potential, but are at different stages.
I think search, we have been working on search for many, many years.
It's the most profitable business for us and it will still enjoy many years of growth going forward.
Transaction Services is the biggest bet we are doing right now.
It does not give us much revenue.
It's losing a lot of money right now, but we think going forward, it will become more and more important and will integrate with the search business going forward.
I have been saying that in the past, search is connecting people with the information, in the future it will also connect people with services, so for the investment in services, it's really not only offensive but also a defensive play for us.
We would expect people coming to the Baidu search apps to get services and then we'll be able to take a cut of it.
So you can say that in the long run those two will become one.
And iQiyi is a bit different.
In terms of product, it's pretty much an advertising model, although the subscription service is also growing quite quickly.
It's also losing money, but growing very, very fast.
We are very happy about the progress, but it's a relatively small part of our business.
Erica Poon Werkun - Analyst
Thank you.
Operator
Thomas Chong, Citigroup.
Thomas Chong - Analyst
Hi.
Thanks management for taking my questions.
I have two questions.
The first question is about the competitive landscape for the online video sector going forward, after we have seen Alibaba propose to buy out Youku Tudou.
And the second question is about the cloud computing initiatives.
We have seen Microsoft, Google, Amazon are all working on this front.
Any color about the strategy for Baidu on cloud computing?
Thanks.
Robin Li - Chairman & CEO
On the online video, as I mentioned, it's a fast growing sector, but it's still not making money.
We've been investing in this for quite a few years - maybe five or six years, and we will continue to invest aggressively.
I think we have proven ourselves.
Although iQiyi started much, much later than its main competitors, it has been growing faster.
And if you look at all the major metrics, we have surpassed them.
And I do expect this kind of growth will continue.
For the cloud computing, right now our focus is pretty much to serve our ecosystem, namely our users and our customers, who need our cloud computing services.
We have not provided the so-called public cloud for non-related parties.
Thomas Chong - Analyst
I see.
Thanks, Robin.
Operator
Chi Tsang, HSBC.
Chi Tsang - Analyst
Good morning and thank you for taking my question.
I had a question on Nuomi.
So the market seems to think that when you subsidize, you gain users and you gain GMV.
Can you give us some examples of how tactically you're using promotion to drive campaigns and also then how you retain these users?
Thank you very much.
Robin Li - Chairman & CEO
Right now it's very common to use subsidies to attract users and generate GMV, but I think for Baidu we enjoy another unique advantage, which is our mobile platform - Mobile Baidu and Mobile Maps.
From those services, as we mentioned both in the release and prepared remarks, the MAUs are in the hundreds of millions level.
And also we have much, much broader access to potential customers, so we can use that to reach out to our customers.
And I expect once that the subsidy becomes less common, we will actually be able to attract more users on our platform.
On the other hand, we think a subsidy is necessary, because that will help us to acquire new users and help them to form a habit of spending on the mobile phone before they go out to the offline merchants.
So it's a very complicated process and it involves lots of areas that we need to make sure that the operation is efficient enough.
And there are also technologies that involve recommendations or cross-selling.
We need to make sure that people who buy certain types of services can also be recommended for services that they would also be interested.
These are the areas that I think can leverage our strength both in terms of Baidu's brand reach and technology.
Operator
Ming Zhao, 86Research.
Juan Lin - Analyst
Hi.
Good morning.
This is Juan Lin on behalf of Ming Zhao.
I have one question regarding your guidance.
If adding back Qunar to your Q4 guidance, it seems that your guidance implies a revenue growth acceleration in the fourth quarter versus Q3.
I'm wondering what the reasons for the strong guidance are.
Is it from a re-balancing online marketing business or is it because of a strong growth from iQiyi subscription revenue?
Thank you.
Jennifer Li - CFO
As we've provided, our Q4 guidance is our best view for the current outlook.
We do have a very solid search service and in Q4 we do expect that our iQiyi will have a very solid performance.
Partially it is related to the subscription business.
And I also indicated earlier, our content cost will step up and we do expect a lot of high-quality content coming online and also that drives the top-line growth for iQiyi as well.
Juan Lin - Analyst
Thank you, Jennifer.
If I could follow up, I'm just wondering what is advertisers' sentiment towards next year and have you seen any impact from the macro slowdown towards the sentiment.
Jennifer Li - CFO
So far at this point, I think we feel things are going normally and we do not see any meaningful changes in the overall horizon, bearing in mind that we serve very a diversified customer base for search.
And I think we are quite resilient in good times and bad, and overall we don't really feel anything major compared to the macro environment.
Juan Lin - Analyst
Thank you, Jennifer.
I'll go back to the queue.
Operator
Cynthia Meng, Jefferies.
Cynthia Meng - Analyst
Thank you, management, to give me this opportunity.
My question is on the Ctrip deal.
With the new stake and partnership with Ctrip and your leadership in the online travel space, how will Baidu's O2O transaction services strategy change in order to leverage this leadership position in the online travel space?
And then specifically, do you expect the O2O investment to have a higher return and efficiency as a result?
And back to you RMB20b commitment on O2O that was made before this deal substantiated.
Is there any change on that number?
Thank you.
Robin Li - Chairman & CEO
There will be no change of the RMB20b commitment.
It's pretty much about Nuomi, it does not include Qunar or those controlled companies.
Now that with the Ctrip partnership, our primary goal is to broaden our product and service offerings in travel.
We do not have a clear idea on the revenue and profitability impact yet.
But I think, as time passes by, as we further integrate this kind of travel services with the existing Baidu platform, the user experience will be better and they will come back more, so we will benefit more directly or indirectly.
Cynthia Meng - Analyst
Thank you.
Operator
Ben Lin, Morgan Stanley.
Ben Lin - Analyst
Good morning.
My question actually relates to mobile search monetization.
Based on the traffic and revenue breakdown, is it fair to say that mobile monetization now is probably around about 60% of PC and hence that reflects an improvement over the last quarter, because I remember that you gave a figure of about 50%?
If that's the case, can you just share with us in terms of what are the key drivers?
Are you seeing growth in paid clicks, CPC trend?
And also can you provide some color which categories are actually going faster in mobile versus PC?
Thank you.
Robin Li - Chairman & CEO
I think the gaps for monetization between mobile and PC continue to narrow, actually both the CPC and the number of clicks are improving.
This is a trend that will continue for quite a while, because we think mobile is the way to go and we continue to invest in the monetization capabilities in mobile.
So it will improve over time and, we believe, eventually it will be able to catch with PC or even surpass that of PC.
Ben Lin - Analyst
Thank you.
Operator
Ella Ji, China Renaissance.
Ella Ji - Analyst
Thank you.
I have a question relating to the strategy of Nuomi.
Now the two largest group-buy companies in China - Meituan and Dianping - have merged.
In the future, if we see this merged company started to take down the rebates and the coupons, would Nuomi also follow suit and take this opportunity to improve your margin or would Nuomi continue to provide the discounts and the rebates with a target to gain market share?
Thank you.
Robin Li - Chairman & CEO
I think the heavy subsidy in this industry is not sustainable.
It will gradually cool down over time.
And we hope to really compete on the basis of operating efficiency, on technology, on reach, on brand, on service quality rather than subsidies.
Operator
Jason Helfstein, Oppenheimer.
Bo Pang - Analyst
This is Bo asking a question on behalf of Jason.
Congratulations for the strong quarter.
And my first question is regarding to the other revenue.
So if my calculation is correct, I think the 700% year-over-year growth is -- I can backward-derive the ARPU around RMB100 per paid user.
So that number is a little bit high to us.
Normally it's around RMB20 per user subscription online on iQiyi's website.
So I want to have an idea how should we think about the strong monetization capability there?
And the second question is whether there is a possibility that Baidu take the advantage and the opportunity and to replicate your similar strategy on Qunar and Ctrip's partnership on other sectors, such as O2O or even online video, to consolidate the industry?
Thank you.
Jennifer Li - CFO
I will take your question on the revenue for other services.
Predominantly the biggest component is related to the subscription revenue that we collect from iQiyi.
But bear in mind in that number -- basically, those are non-online marketing related services, so included in those would also be front user-facing kind of revenue that we earn, including some of the user music service, some subscription service revenues for our cloud, for takeout food delivery fees, so a little element of that.
You are correct that it is predominantly subscription fees, but it's not all subscription-related and there's also a little bit of components related to the Transaction Services.
Robin Li - Chairman & CEO
On the consolidation opportunities in O2O and online video, we do see tremendous potential going forward in this area.
And we also see strong synergy between the Core Search business and O2O as well as online.
But we will keep an open mind and, from time to time, to evaluate opportunities that arise.
Bo Pang - Analyst
Thank you, management.
Operator
Jin Yoon, Mizuho.
Jin Yoon - Analyst
Yes.
Just a real quick follow-up.
In regards to Dianping and Meituan merger, how you see your overall growth in other revenues?
That's my first question.
And also related to the deal, I know that you mentioned that it doesn't really change the RMB20b target on the SG&A.
But does this merger necessarily change how you invest going forward in terms of driving market share and mind share?
Thanks, guys.
Jennifer Li - CFO
Jin, as I mentioned, Transaction Services revenue is really not a big, material number for us at this stage.
Obviously, the business itself has a business model and there will be a take rate that we collect, but at this point it's very early stage, so the consolidation at this point is not impacting the transaction revenue per se.
Robin Li - Chairman & CEO
On the investment strategy for Nuomi, I don't think there's going to be a big change.
We will continue to focus on operating efficiency, focus on merchant coverage, focus on user experience and using technology to acquire new customers, also using our brand, our platform to attract new customers.
We will play out with our strength to further grow the Nuomi business.
Jin Yoon - Analyst
Great.
Thanks, guys.
Operator
Tian Hou, TH Capital.
Tian Hou - Analyst
I have two quick questions.
One is related to the deal between you and Ctrip.
And in the press release I saw one item, which is Qunar employees, they can convert their shares into Ctrip shares.
And I don't see anywhere else regarding the other majority shareholders.
Are they going to also have the option to convert their shares into Ctrip shares?
So that actually is the question I have been asked by a lot of investors on the street.
So that's why I want to bring that up.
The second question is really related to your O2O.
It's kind of messy in the marketplace and we saw the users tend to really focus on rebate instead of brand.
So one question for that is how much of those RMB60b transactions are actually transacted on your wallet, Baidu Wallet?
And do you see the transaction on your Baidu Wallet to continue to grow?
And how much the frequency of each user has been increased?
Are they using more your wallet?
Are they coming back to use it?
So that's the question.
Robin Li - Chairman & CEO
On the Ctrip deal, I think going forward there are all kinds of possibilities for the rest of the Qunar shareholders.
We just don't know the outcome yet.
On the O2O I think the share for Baidu Wallet continues to grow very rapidly, although it's still not the majority of the transactions yet.
The frequency is also going up, so all kinds of metrics are trending in a healthy way.
We are very happy that we have this kind of transaction scenarios that can bring in Baidu Wallet.
And we do think that a fully integrated experience between the O2O services, the platform that attracts users and the payment part, we are probably the only company in China that fully owns this kind of user experience from query to transaction.
Tian Hou - Analyst
Thank you, Robin.
Operator
We're now approaching the end of the conference call.
Thank you for your participation in today's conference call.
This does conclude it.
You may disconnect and have a great day.
Bye.
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