Search company Baidu expects growth rate to slow

Baidu.com, which operates China's most popular Internet search engine, said its second-quarter revenue and profit more than doubled compared to the same period last year, but the company's growth rate shows signs of slowing down.

On Wednesday, Baidu said its second-quarter revenue grew 109 percent, to 401.3 million renminbi ($52.6 million as of June 30, last day of the period being reported), while net income grew 143 percent to 141.9 million renminbi. Both increases are substantially lower than previous years, reflecting the greater size of Baidu's overall business and the growing maturity of China's Internet market.

During the second quarter of 2006, Baidu's revenue and net income grew by 175 percent and 385 percent, respectively. The company saw revenue and net income grow 187 percent and 626 percent, respectively, during the second quarter of 2005.

As Baidu's business expands, executives are hard-pressed to match the big gains of previous years. But the company said its business and prospects for future growth remain strong.

"During the second quarter, we saw robust revenue growth and a healthy increase in online marketing customers," said Robin Li, Baidu's chairman and CEO, in a statement.

Baidu remains the largest Internet search provider in China, far ahead of Google. But the company can't afford to rest on its past success.

Google got off to a clumsy start in China, but top executives remain committed to the market, with Chairman and CEO Eric Schmidt promising the company will do better.

Schmidt said improvements to Google's Chinese product line will boost its fortunes. "It's a very good start and although we don't think that this will result in an immediate huge success, we think that the tenacity of Google ... will bring significant victories in China over the next few years," he told analysts during a recent conference call.