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Google AdWords has released a new keyword tool. This one lets users plug in their website and a few keywords. The tool, dubbed Search-based keyword tool, takes a look at the site and makes suggestions for keywords that may be relevant to your paid search campaign.

The idea is that you might be missing out on terms that are being searched for. I have to admit, when I’ve used keyword tools, I’ve often been wishing I knew what people were searching for instead of guessing.

But the SEO copywriter in me also knows that so many sites are already optimized for keyword terms based on traditional keyword research, which often starts with a guess.

Plus, the existing keyword tool takes keywords and phrases plugged in by the user already returns a bunch of suggestions.

The tool’s strength lies in avoiding human error. In other words, the existing AdWords keyword tool relies on human entry. This tool looks at the site and can help marketers avoid overlooking terms they may have missed.

Still, remember the tool is in beta. And Google makes it clear that it’s not responsible if you use their suggested keywords in a way that violates the law. Say, by creating an ad that includes a trademarked term.

Related Reading:
AdWords Keyword Tool Now Shows Numerical Data

During Search Engine Strategies San Jose back in August, I did a video interview with Matt Cutts, head of Google’s Webspam team. It will be uploaded to the SESConferenceExpo’s Channel on YouTube tomorrow.

Why the wait?

As Maury Sline explained to The Blues Brothers, “A gig like that, you gotta prepare the proper exploitation.”

So, here’s a taste of what you can look forward to seeing and hearing in tomorrow’s video interview: Matt talks about his job interview at Google before he joined the company as a software engineer in January 2000. He takes a look at trends in the industry, including mobile search. He praises an iPhone App developed by Barry Schwartz, President of RustyBrick. And he discusses the Cuttlets, the people who crowd around him at every search conference.

And what can you do today to ensure that you don’t miss the Matt Cutts video interview tomorrow? I’m glad you asked.

First, go to the SESConferenceExpo’s Channel and take a quick look around. You’ll find there are now 184 videos from SES London, SES New York, SES Toronto, and SES San Jose 2008.

According to YouTube Insight, these 184 videos currently have more than 45,000 combined views. That’s about three times more views than the number of people who attended these four conferences and expos this year.

And there will be more video interviews added during and after Search Engine Strategies Chicago, which will be held Dec. 8-12, 2008. That’s a lot of content — and a lot of insights from top search experts and the search engines themselves.

Now, some of these video interviews are uploaded to YouTube during each SES conference. But others are uploaded in the weeks and months following a show.

So, if you want to be alerted when the Matt Cutts video interview has been posted, all you need to do is hit the orange “Subscribe” button in the upper left hand corner of the SESConferenceExpo’s Channel, which already has 142 subscribers.

To embed one of these video interviews, just copy the code from the “Embed” box — which you can find in the “About This Video” box when you’re watching the video. Once you’ve copied the code, just paste it into your website or blog to embed it.

And if you want to embed several of these video interviews, use the Search Engine Strategies video widget. It will let you customize a SES Video Player Widget for the audience on your website or blog.

For example, in the header options, I selected the standard link and said I’m blogging at SES Chicago. For my playlist content, I selected videos of everyone, picked two thumbnails with a maximum of 25 results. And for my format option, I selected a vertical orientation. And the SES Video Player Widget generated the code for me to past into this blog post.

Now, I could have selected a customized header. And after going through an authentication process, I could have customized my playlist — and display only videos of my company. Or I could display videos of everyone, but with videos of my company first. You can see an example of this on the SEO-PR website.

Or, you can see an example of a more bi-partisan approach on the Search Engine Strategies Chicago home page — just below the fold. (By the way, if you register by Friday, Nov. 21, you can save up to $200 with the Early Bird rate.)

Now, I don’t need to explain the benefits of adding video to your blog. Search engine marketers and popular bloggers understand that already. But consider the benefits of adding relevant content from the latest SES conference and expo — quality content that can be customized for your audience. And, don’t take my word for it, check it out for yourself. It is useful content that your website’s visitors will find beneficial or your blog readers will find valuable.

What’s the catch?

Well, if you select videos of everyone, then you might end up with a Matt Cutts video interview on your website or blog. And if anyone watches it, that would give the SESConferenceExpo’s Channel on YouTube more views.

Or, as Elwood told Maury Sline, “I know all about that stuff. I have been exploited all my life.”

Walmart has sent a DMCA notice to TechCrunch and SearchAllDeals.com, a shopping search engine and deals aggregator. (Think of it as the Techmeme for deals on the web, with a Google custom search engine to boot.)

Both sites posted some information about “Black Friday” sales for discount giant Wal-mart. But Wal-mart is claiming copyright infringement. It’s also saying the info wasn’t supposed to be out before November 24th.

The problem is SearchAllDeals doesn’t host content. It simply links to it. This amounts to free advertising for Wal-mart.

And since TechCrunch also has the info, then Wal-mart has a leak problem, which is neither TechCrunch or SearchAllDeal’s problem.

If I were a competitor such as Target or K-mart, I’d be stepping up to the plate and making the most of this “controversy” by freely offering up my own deals.

h/t TechDirt

Related Reading:
Judge Throws Out Copyright Infringement Suit Against Online Video Site Veoh
Pro Intellectual Property Act Passes House
Google Talks On Its Approach To Content & Copyright

Google announced early this morning that they have updated their Site Search product to provide for on demand indexing of your site. What this means is that if you are using Google’s Site Search feature to provide visitors to your web site with a tool to search your site, you can always keep that on site search tool up to date. It is important to note that this new tool does NOT provide on demand indexing for your site in Google’s general index.

Nonetheless, this is a very cool tool, so let’s walk through a quick scenario. Imagine that you have a site where you have added a substantial amount of new content. Perhaps you have added 100 pages of new articles and data to the site. Prior to this announcement, you would have had to wait for the Googlebot to come along and find those changes, and for them to be incorporated in the index before your Site Search would be able to search on that new content.

Now, with today’s announcement, you can go into the configuration screen for your Site Search, request on demand indexing, and a fresh crawl will be done of your entire site. This data is then made available to users who use Site Search on your site, in real time.

This is a really neat enhancement, ensuring that you can always offer users a full and robust search function on your site, even immediately after you have made massive changes.

Last night I spoke with Nitin Mangtani, the lead product manager for Google Enterprise Search, and he indicated that the new functionality would not be possible without Google’s cloud computing architecture. Basically, the index for your Site Search is unique in nature.

If there was only one copy of that index (perhaps on a Google server near your web site’s hosting location), people all over the world would have to access that server (causing potentially large latencies) to get the data from that index. The cloud computing architecture used by Google results in your unique index being distributed across the globe, and eliminates those latencies.

Auto search engine Cars.com is offering a free webinar intended to help dealerships learn how online advertising can drive offline traffic.

The webinar will be held this Friday, November 14 at noon EST. Click here for more details and to register for the event.

Here are the specifics of what will be presented:

• Traffic-now vs. branding as the key advertising objective.
• Websites and online features that car buyers use before visiting a store.
• Ingredients of internet ads that drive store traffic.
• A full accounting of internet-generated store traffic.

“A significant percentage of in-market car buyers prefer to take the next step toward a purchase on the most direct path, an in-store visit,” said Dennis Galbraith, Cars.com vice president of advertising products. “These shoppers may not call or email first, so the information they find online determines the dealers they select. Dealers who fully merchandise their complete inventory with multiple pictures, descriptive sell copy and competitive pricing position themselves to win more than their fair share of the business.”

Related Reading:
Yahoo Adds Cars.com, Forbes.com and Ziff-Davis to Publishers’ Network
Cars.com Listings Hit Mobile Devices
Cars.com Drives Ad Campaign to Web

Wordtracker has launched “Keyword Questions,” a free tool that let’s webmasters and SEOs find the specific questions that
people type into search engines. The answers to these questions can provide interesting web copy and could pick up a lot of search traffic.

According to Ken McGaffin, Chief Marketing Officer of Wordtracker, “People have a ton of questions about all sorts of things and people will go straight to a search engine to find the answers. Just enter a keyword and we’ll give you up to 100 questions that people have asked.”

The tool works by pairing the keyword with one of six question words: Who, what, where, when, why and how. It then conducts a broad match from Wordtracker’s database.

For example, someone with a coffee website, could enter “coffee” and find questions like “who invented the coffee maker”, “why use cold water when brewing coffee”, “how to make iced coffee” and “how to clean a coffee pot”.

Or, a flower shop could enter “sorry” and find questions like “how to say sorry to your girlfriend” or “how to say sorry after huge argument.” Hey, this is just an example. I’m happily married.

Or, a website on UFOs might be interested to know that the most popular questions on UFOs include “how to fake UFO photographs” or “how to build a UFO.” Sorry, the tool doesn’t suggest, “Where is Area 51.”

In a press release, McGaffin said, “This is a fun tool that is a great source of inspiration for web content writers. You need never be short of creative ideas again.”

I interviewed Ken at Search Engene Strategies London 2008 in February. And he shared some of the latest trends of search term research back then. And I expect to see him again at SES London this coming February 17-19, 2009, to get an update.

Ken McGaffin, WordTracker, SES London 2008 Keyword Research

If you’ve used the Google Checkout Buy Now button, you know that it’s a bit limiting - only allowing customers to purchase one item at a time. Google Checkout’s new shopping cart allows your customers to purchase multiple items at once.

To get started, go to the Tools tab in the Google Checkout Merchant Center. Enter your product info, price and image location. An HTML script will be generated for you. Copy and paste the code onto your product pages. Test the button to make sure it’s working and you’re good to go.

For more advanced options, check out (no pun intended) the developer guide.

Related Reading:
Yahoo and PayPal Join To Challenge Google Checkout
Google Checkout: Check Out of Commercial E-Mail
Google Checkout to Integrate with AdWords

Google has reached an agreement with the Authors Guild and the Association of American Publishers (AAP), which represented a broad class of authors and publishers to expand online access to in-copyright books and other written materials in the U.S. The publications will come from the library collections participating in Google Book Search.

The agreement was reached after two years of negotiations. The deal includes Google dishing out $125 million to establish the Book Rights Registry, which would resolve an existing class action lawsuit brought by the groups.

If the court approves, the agreement allows:

• More Access to Out-of-Print Books — Generating greater
  exposure for millions of in-copyright works, including hard-to-find
  out-of-print books, by enabling readers in the U.S. to search these
  works and preview them online
• Additional Ways to Purchase Copyrighted Books — Building off publishers’ and authors’ current efforts and further expanding the
  electronic market for copyrighted books in the U.S., by offering users the ability to purchase online access to many in-copyright books
• Institutional Subscriptions to Millions of Books Online –Offering a means for U.S. colleges, universities and other organizations to obtain subscriptions for online access to collections from some of
  the world’s most renowned libraries
• Free Access From U.S. Libraries — Providing free, full-text, online viewing of millions of out-of-print books at designated computers
  in U.S. public and university libraries
• Compensation to Authors and Publishers and Control Over Access to Their Works — Distributing payments earned from online access provided by Google and, prospectively, from similar programs that may be established by other providers, through a newly created independent, not-for-profit Book Rights Registry that will also locate rightsholders, collect and maintain accurate rightsholder information, and provide a way for rightsholders to request inclusion in or exclusion from the project.

“Google’s mission is to organize the world’s information and make it universally accessible and useful. Today, together with the authors, publishers, and libraries, we have been able to make a great leap in this endeavor,” said Sergey Brin, co-founder & president of technology at Google. “While this agreement is a real win-win for all of us, the real victors are all the readers. The tremendous wealth of knowledge that lies within the books of the world will now be at their
fingertips.”

What do you think about the agreement? Let us know your thoughts in the comments.

Related Reading:
Google SERPs Promoting Google Book Links
Google Courts Book Publishers, Librarians

Chinese search engine Baidu saw a whopping 91% increase in the third quarter of 2008. The search engine had been seeing explosive growth leading up to the Beijing Olympics, which occurred during the third quarter.

Baidu expects profits in the fourth quarter to be around 80-85%. In the second quarter, Baidu’s profits increased by 87%.

Here’s the full press release:

Baidu Announces Third Quarter 2008 Results
Wednesday October 22, 5:00 pm ET

BEIJING, Oct. 22 /Xinhua-PRNewswire/ — Baidu.com, Inc. (Nasdaq: BIDU - News), the leading Chinese language Internet search provider, today announced its unaudited financial results for the third quarter ended September 30, 2008. (1)

(Logo: http://www.newscom.com/cgi-bin/prnh/20041011/BAIDULOGO )

Third Quarter 2008 Highlights
— Total revenues in the third quarter of 2008 increased to RMB919.1
million (US$135.4 million), representing an 85.1 % increase from the
corresponding period in 2007.
— Operating profit in the third quarter of 2008 increased to RMB368.3
million (US$54.2 million), representing a 119.1% increase from the
corresponding period in 2007.
— Net income in the third quarter of 2008 increased to RMB347.9 million
(US$51.2 million), representing a 91.4 % increase from the
corresponding period in 2007.
— Diluted earnings per share (”EPS”) for the third quarter of 2008 were
RMB10.00 (US$1.47); diluted EPS excluding share-based compensation
expenses (non-GAAP) for the third quarter of 2008 were RMB10.49
(US$1.54). Costs and expenses related to Baidu’s Japan operations,
incurred in both Japan and China, in the third quarter of 2008 were
RMB32.7 million (US$4.8 million), which reduced diluted EPS by RMB0.94
(US$0.14).
— The number of active online marketing customers during the third
quarter grew to over 194,000, an increase of 7.2% from the previous
quarter.

“I’m pleased to announce solid results for the third quarter,” said Robin Li, Baidu’s chairman and chief executive officer. “As China’s leader in paid search, Baidu has a large and diverse customer base covering numerous industries and sectors. Such diversity gives us great stability and positions us to capture future growth. Companies throughout China are increasingly recognizing the value of Baidu’s paid search as an effective marketing tool and we remain confident in our long-term growth potential.”

Jennifer Li, Baidu’s chief financial officer, said, “The impact of the 2008 Beijing Olympics on our business was in line with our projection for the quarter. We were also able to improve our operating margin again this quarter, highlighting the scalability of our business.”

Baidu recently launched the beta version of an online C2C platform that enables merchants to sell their products and services online via a Baidu- registered store. The new platform complements Baidu’s search business, enabling transaction fulfillment among our users. E-commerce is an emerging industry in China and there are vast opportunities for future growth in the sector. Baidu will continue to focus on providing the best quality experience for Internet users.

Third Quarter 2008 Results

Baidu reported total revenues of RMB919.1 million (US$135.4 million) for the third quarter ended September 30, 2008, representing an 85.1% increase from the corresponding period in 2007.

Online marketing revenues for the third quarter were RMB918.2 million (US$135.2 million), representing an 85.1% increase from the third quarter of 2007. Growth was mainly driven by increases in both the number of active online marketing customers and revenue per customer. Baidu had more than 194,000 active online marketing customers in the third quarter of 2008, representing a sequential increase of 7.2% and an increase of 35.7% from the corresponding period in 2007. Revenue per active online marketing customer for the third quarter increased to approximately RMB4,700 (US$692), a sequential increase of 6.8% and an increase of 34.3% from the corresponding period in 2007.

Traffic acquisition costs (TAC) as a component of cost of revenues were RMB108.8 million (US$16.0 million), representing 11.8% of total revenues, compared to 11.9% in the corresponding period in 2007.

Bandwidth costs as a component of cost of revenues were RMB48.0 million (US$7.1 million), representing 5.2% of total revenues, compared to 6.4% in the corresponding period in 2007. Depreciation costs as a component of cost of revenues were RMB56.9 million (US$8.4 million), representing 6.2% of total revenues, compared to 8.2% in the corresponding period in 2007.

Selling, general and administrative expenses were RMB163.2 million (US$24.0 million), representing an increase of 48.0% from the corresponding period in 2007, primarily due to the expansion of the direct sales force and an increase in customer service staff.

Research and development expenses were RMB78.2 million (US$11.5 million), representing a 109.0 % increase from the corresponding period in 2007, primarily due to an increase in research and development staff.

Share-based compensation expenses, which were allocated to related operating cost and expense line items, increased in aggregate by 211.1% to RMB17.0 million (US$2.5 million) in the third quarter of 2008 from RMB5.5 million in the corresponding period in 2007. The increase in share-based compensation expenses primarily reflects an increase in the number of options granted to employees.

Operating profit was RMB368.3 million (US$54.2 million), representing a 119.1% increase from the corresponding period in 2007. Operating profit excluding share-based compensation expenses (non-GAAP) was RMB385.3 million (US$56.8 million) for the third quarter of 2008, a 122.0% increase from the corresponding period in 2007.

Adjusted EBITDA (non-GAAP), which is defined in this announcement as earnings before interest, taxes, depreciation, amortization, other non-operating income and share-based compensation expenses, were RMB457.3 million (US$67.4 million) for the third quarter of 2008, representing a 104.7% increase from the corresponding period in 2007.

Income tax expense was RMB34.8 million (US$5.1 million), compared to an income tax expense of RMB2.6 million in the third quarter of 2007. The year- on-year increase in tax expenses was due to higher tax rates applicable to some of our PRC subsidiaries as their tax holidays either expired or partially elapsed.

Net income was RMB347.9 million (US$51.2 million), representing a 91.4% increase from the corresponding period in 2007. Basic and diluted EPS for the third quarter of 2008 amounted to RMB10.15 (US$1.50) and RMB10.00 (US$1.47), respectively.

Net income excluding share-based compensation expenses (non-GAAP) was RMB364.9 million (US$53.7 million), a 94.9% increase from the corresponding period in 2007. Basic and diluted EPS excluding share-based compensation expenses (non-GAAP) for the third quarter of 2008 were RMB10.65 (US$1.57) and RMB10.49 (US$1.54), respectively.

As of September 30, 2008, Baidu’s cash, cash equivalents and short-term investments amounted to RMB2.3 billion (US$338.0 million). Net operating cash inflow and capital expenditures on a cash basis for the third quarter of 2008 were RMB482.2 million (US$71.0 million) and RMB85.1 million (US$12.5 million), respectively. A portion of our capital expenditure for the quarter was related to the construction of Baidu’s new campus facility.

Outlook for Fourth Quarter 2008

Baidu currently expects to generate total revenues in an amount ranging from RMB1,025 million (US$151 million) to RMB1,055 million (US$155 million) for the fourth quarter of 2008, representing an 80% to 85% increase from the corresponding period in 2007 and a 12% to 15% increase from the third quarter of 2008. This fourth quarter forecast reflects Baidu’s current and preliminary view, which is subject to change.

(1) This announcement contains translations of certain RMB amounts into
U.S. dollars at specified rates solely for the convenience of the
reader. Unless otherwise noted, all translations from RMB to U.S.
dollars are made at a rate of RMB 6.7899 to USD 1.00, the effective
noon buying rate as of September 30, 2008 in The City of New York for
cable transfers of RMB as certified for customs purposes by the
Federal Reserve Bank of New York.

Conference Call Information

Baidu’s management will hold an earnings conference call on October 22, 2008 at 8:00 PM U.S. Eastern Time (8:00 AM, October 23, Beijing/Hong Kong time).

Dial-in details for the earnings conference call are as follows:
US: +1-617-786-2902
UK: +44-207-365-8426
Hong Kong: +852-3002-1672
Passcode for all regions: 55689997

A replay of the conference call may be accessed by phone at the following number until October 29, 2008:

International: +1-617-801-6888

Passcode: 69587650

Additionally, a live and archived webcast of this conference call will be available at http://ir.baidu.com .

About Baidu

Baidu.com, Inc. is the leading Chinese language Internet search provider. As a technology-based media company, Baidu aims to provide the best way for people to find information. In addition to serving Internet search users, Baidu provides an effective platform for businesses to reach potential customers. Baidu’s ADSs, each of which represents one Class A ordinary share, currently trade on the NASDAQ Global Select Market under the symbol “BIDU”.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “will,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates” and similar statements. Among other things, the outlook for the fourth quarter of 2008 and quotations from management in this announcement, as well as Baidu’s strategic and operational plans, contain forward-looking statements. Baidu may also make written forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about Baidu’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: our growth strategies; our future business development, results of operations and financial condition; our ability to attract and retain users and customers; competition in the Chinese language and Japanese language Internet search markets; competition for online marketing customers; changes in our revenues and certain cost or expense items as a percentage of our revenues; the outcome of ongoing, or any future, litigation or arbitration, including those relating to copyright and other intellectual property rights; the expected growth of the Chinese language and Japanese language Internet search markets and the number of Internet and broadband users in China; and Chinese governmental policies relating to the Internet and Internet content providers. Further information regarding these and other risks is included in our annual report on Form 20-F and other documents filed with the Securities and Exchange Commission. Baidu does not undertake any obligation to update any forward-looking statement, except as required under applicable law. All information provided in this press release and in the attachments is as of October 22, 2008, and Baidu undertakes no duty to update such information, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement Baidu’s consolidated financial results presented in accordance with GAAP, Baidu uses the following measures which are non-GAAP financial measures: adjusted EBITDA, operating profit excluding share-based compensation expenses, net income excluding share-based compensation expenses, and basic and diluted EPS excluding share-based compensation expenses. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned “Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures” and “Reconciliation from net cash provided by operating activities to adjusted EBITDA” set forth at the end of this release.

Baidu believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding certain expenses and expenditures that may not be indicative of its operating performance from a cash perspective. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to Baidu’s historical performance and liquidity. Baidu computes its non-GAAP financial measures using the same consistent method from quarter to quarter since April 1, 2006. We believe these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. A limitation of using non-GAAP operating profit excluding share-based compensation expenses, net income excluding share-based compensation expenses, and basic and diluted EPS excluding share-based compensation expenses is that these non-GAAP measures exclude share-based compensation charge that has been and will continue to be for the foreseeable future a significant recurring expense in our business. A limitation of using non-GAAP Adjusted EBITDA is that it does not include all items that impact our net income for the period. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

Baidu.com, Inc.
Condensed Consolidated Balance Sheets

September 30 December 31,
(in RMB thousands) 2008 2007
Unaudited Audited

ASSETS
Current assets:
Cash and cash equivalents 2,088,554 1,350,600
Short-term investments 206,360 242,037
Accounts receivable, net 100,193 64,274
Prepaid expenses and other current
assets 109,597 65,996
Deferred tax assets, net 2,587 2,587
Total current assets 2,507,291 1,725,494

Non-current assets:
Fixed assets, net 748,582 678,886
Land use right, net 95,008 96,472
Intangible assets, net 33,814 40,460
Goodwill 51,081 51,093
Investments, net 20,197 15,439
Deferred tax assets, net 17,060 15,716
Other non-current assets 84,394 32,348
Total non-current assets 1,050,136 930,414

TOTAL ASSETS 3,557,427 2,655,908

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accrued expenses and other
liabilities 371,745 359,310
Customers’ deposits 357,884 257,577
Deferred revenue 9,149 11,832
Deferred income 633 2,485
Total current liabilities 739,411 631,204

Non-current liabilities:
Long-term payable — 3,000
Deferred income — 332
Total non-current liabilities — 3,332

Total liabilities 739,411 634,536

Shareholders’ equity
Class A Ordinary Shares, Par value
US$0.00005 per share, 825,000,000
shares authorized, and 25,136,147
shares and 25,413,789 shares issued
and outstanding as at December 31,
2007 and September 30, 2008 11 10
Class B Ordinary Shares, Par value
US$0.00005 per share, 35,400,000
shares authorized, and 8,996,842
shares and 8,873,986 shares issued
and outstanding as at December 31,
2007 and September 30, 2008 4 4
Additional paid-in capital 1,254,593 1,171,575
Accumulated other comprehensive loss (127,770) (81,953)
Retained earnings 1,691,178 931,736
Total shareholders’ equity 2,818,016 2,021,372

TOTAL LIABILITIES AND SHAREHOLDERS’
EQUITY 3,557,427 2,655,908

Baidu.com, Inc.
Condensed Consolidated Statements of Income

For the Three Months Ended
September September
30, 30, June 30,
(in RMB thousands except for share, 2008 2007 2008
per share information) Unaudited Unaudited Unaudited

Revenues:
Online marketing services 918,179 496,120 802,183
Other services 946 410 428
Total revenues 919,125 496,530 802,611

Operating costs and expenses:
Cost of revenues (note 1, 2) (309,342) (180,704) (280,980)
Selling, general and administrative
(note 2) (163,247) (110,312) (174,213)
Research and development (note 2) (78,231) (37,433) (71,078)
Total operating costs and expenses (550,820) (328,449) (526,271)

Operating profit 368,305 168,081 276,340

Other income:
Interest income 11,375 12,519 10,378
Exchange loss, net (5) (331) (204)
Other income, net 3,009 4,040 7,032
Total other income 14,379 16,228 17,206

Income before income taxes 382,684 184,309 293,546

Income taxes (34,825) (2,580) (28,561)

Net income 347,859 181,729 264,985

Earnings per share for Class A and
Class B ordinary shares:
Basic 10.15 5.35 7.74
Diluted 10.00 5.23 7.62

Weighted average aggregate number of
Class A and Class B ordinary shares
outstanding:
Basic 34,257,974 33,983,137 34,217,081
Diluted 34,786,353 34,763,639 34,786,342

(1) Cost of revenues are detailed as
follows:
Business tax and surcharges (57,288) (30,702) (49,511)
Traffic acquisition costs (108,797) (59,155) (101,693)
Bandwidth costs (48,029) (31,837) (43,012)
Depreciation costs (56,907) (40,654) (57,790)
Operational costs (37,379) (17,979) (27,795)
Share-based compensation expenses (942) (377) (1,179)
Total cost of revenues (309,342) (180,704) (280,980)

(2) Includes share-based compensation
expenses as follows:
Cost of revenues (942) (377) (1,179)
Selling, general and administrative (6,933) (68) (16,484)
Research and development (9,149) (5,027) (11,618)
Total share-based compensation
expenses (17,024) (5,472) (29,281)

Reconciliations of non-GAAP results of operations measures to the nearest
comparable GAAP measures (*) (in RMB thousands, unaudited)

Three months ended September 30, 2007
GAAP Result Adjustment Non-GAAP Results
Operating profit 168,081 5,472 173,553

Three months ended September 30, 2007
GAAP Result Adjustment Non-GAAP Results
Net income 181,729 5,472 187,201

Three months ended June 30, 2008
GAAP Result Adjustment Non-GAAP Results
Operating profit 276,340 29,281 305,621

Three months ended June 30, 2008
GAAP Result Adjustment Non-GAAP Results
Net income 264,985 29,281 294,266

Three months ended September 30, 2008
GAAP Result Adjustment Non-GAAP Results
Operating profit 368,305 17,024 385,329

Three months ended September 30, 2008
GAAP Result Adjustment Non-GAAP Results
Net income 347,859 17,024 364,883

(*) The adjustment is only for share-based compensation.

Reconciliation from net cash provided by operating activities to adjusted
EBITDA(*) (in RMB thousands, unaudited)

Three As a Three As a Three As a
months % of months % of months % of
ended total ended total ended total
September revenues June 30, revenues September revenues
30, 2007 2008 30, 2008
Net cash
provided by
operating
activities 254,870 51% 403,378 50% 482,172 52%

Changes in
assets and
liabilities,
net of
effects of
acquisitions (17,800) -4% (37,893) -5% (45,293) -5%
Income taxes
expenses 2,580 1% 28,561 4% 34,825 4%
Interest income
and other, net (16,228) -3% (17,206) -2% (14,379) -1%

Adjusted EBITDA 223,422 45% 376,840 47% 457,325 50%

(*) Definition of adjusted EBITDA: earnings before interest, taxes,
depreciation, amortization, other non-operating income, and share-
based compensation expenses.

For more information, please contact:

Investor inquiries:

China
Linda Sun
Baidu.com, Inc.
Tel: +86-10-8262-1188
Email: ir@baidu.com

Helen Plummer
Ogilvy Financial, Beijing
Tel: +86-10-8520-3090
Email: helen.plummer@ogilvy.com

U.S.
Thomas Smith
Ogilvy Financial, New York
Tel: +1-212-880-5269
Email: thomas.smith@ogilvypr.com

Media inquiries:

Ceren Wende
Ogilvy Financial, Beijing
Tel: +86-10-8520-6514
Email: ceren.wende@ogilvy.com

Lawrence Lessig, a Professor of Law at Stanford Law School, will be giving the opening keynote at Search Engine Strategies Chicago on Monday, Dec. 8, 2008. The title of his keynote is “Remix: Making Art and Commerce Thrive in the Hybrid Economy.”

And, if you read the description of Professor Lessig’s keynote in the conference agenda, it says: “The content industry has convinced industry in general that extremism in copyright regulation is good for business and economic growth. That’s false. In this talk, Professor Lessig describes the creative and profitable future that culture and industry could realize, if only we gave up IP extremism.”

What is he getting at?

Well, “Remix: Making Art and Commerce Thrive in the Hybrid Economy” also happens to be the title of Professor Lessig’s new book, which just went on sale on Amazon.com.

And, according to the editorial reviews on Amazon.com, “The author of Free Culture shows how we harm our children — and almost anyone who creates, enjoys, or sells any art form — with a restrictive copyright system driven by corporate interests. Lessig reveals the solutions to this impasse offered by a collaborative yet profitable ‘hybrid economy’.”

It goes on to say that Professor Lessig, who is the reigning authority on intellectual property in the Internet age, “spotlights the newest and possibly the most harmful culture war — a war waged against our kids and others who create and consume art.” It adds, “America’s copyright laws have ceased to perform their original, beneficial role: protecting artists’ creations while allowing them to build on previous creative works. In fact, our system now criminalizes those very actions.”

How does it do that? Well, Professor Lessig argues that “biting” riffs from films, videos, or songs shouldn’t be crimes. Why? It makes felons out of some of today’s most talented artists.

Professor Lessig argues that the way to end this war is to embrace what he calls the “read-write culture,” which allows its users to create art as readily as they consume it. And he can already see glimmers of a new hybrid economy that combines the profit motives of traditional business with the “sharing economy” evident in such websites as Wikipedia and YouTube.

Wow. That’s strong stuff. And, if we play buzzword bingo at SES Chicago 2008, then there are a couple arcane business concepts that we can use on our bingo cards.

But, this short blurb may not do justice to Professor Lessig. So, I emailed him some questions about the topic of his opening keynote. And he emailed me his answers — quickly, I might add.

Here is our Q&A:

Q: Who benefits and who is harmed by extremism in copyright regulation?

A: Benefits: Lawyers (certainly). The record companies (maybe). Harmed: Artists, businesses, consumers — and a generation of (criminalized) kids.

Q: What are the “read-write culture” and the “hybrid economy”?

A: A RW culture is one where ordinary people are empowered to participate in the creation and recreation of their culture. Every culture in human history has been RW, save for a few dark years in the 20th century.

A hybrid is a commercial entity that tries to leverage value out of a sharing economy, or a sharing economy that tries to use a commercial entity to support it. Either way, two radically different cultures need to learn how to work together with each other.

Q: When will this war on our kids stop, the “read-write culture” be reborn, and the “hybrid economy” start to flourish?

A: When policy makers are woken up to the extraordinary cost this war is imposing.

Q: Where can we already see glimmers of a new “hybrid economy” that combines the profit motives of traditional business with the “sharing economy”?

A: I think everywhere around us. All of the interesting Internet businesses today are hybrid: Flickr, Second Life, Yelp!, even Amazon builds much of its business from the sharing activity of its customers.

Q: Why is IP extremism bad for business and economic growth?

A: Practice moderation. When the lawyers in the room start insisting that the licenses you create must impose perfect control over everything you have, ask them to prove it. Ask them to demonstrate that the business return from that relationship of antagonism is higher than its cost. Don’t give over your business’ future to those who don’t think like a business man or woman. Keep focused on the only undeniable truth: IP is an asset. Like any business asset, it should be deployed to maximize the value of the corporation.

Let me add that I’ve watched the 19-minute-long video of Professor Lessig speaking at last year’s TED Conference as well as the 4-minute 35 second video from OpenSourceCinema which is embedded below. So, I am confident that he will rock the house at Search Engine Strategies Chicago.

Lessig Remix

Professor Lessig was also named one of Scientific American’s Top 50 Visionaries, for arguing “against interpretations of copyright that could stifle innovation and discourse online.” He’s on the board of the Creative Commons project has served on the board of the Electronic Frontier Foundation. He was also a columnist for Wired, Red Herring, and the Industry Standard.

In other words, he’s a speaker worth coming to SES Chicago to hear. And, yes, I do think I’ll put some of his arcane business concepts on a buzzword bingo card.