Hello, and thank you for standing by for Baidu's Fourth Quarter And Full Year 2014 Earnings Conference Call. [Operator Instructions] Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to you host for today's conference, Sharon Ng, Baidu's Director of Investor Relations. Thank you.

Hello, everyone. And welcome to Baidu's fourth quarter and full year 2014 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, 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 statement, 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 unaudited non-GAAP measures, to the unaudited most directly comparable GAAP measures, and it's 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 on Baidu's IR website. I will now turn the call over to Baidu's CEO, Robin Li.

Hello everyone, and thanks for joining today's call. About two years ago, we set out to fundamentally transform Baidu, from a PC-centric company to a mobile-first company, at the forefront of innovation in the mobile internet. It took firm commitment, focused investment, keen mission, and bold and swift execution. Today, after this ambitious two-year push, we emerge as an even more competitive and innovative Company. We have unassailable dominance in mobile search. We are the clear market leader in mobile maps, and we continue to lead the market in app distribution. Baidu's dominance in the three key gateways, along with our technology focus, our broad portfolio of apps in video, travel, and more, and our extensive sales force, our competitive strengths, which position us well, to fulfill our mission of connecting people with services. 2014 was a year of many accomplishments, with Baidu truly seizing the mobile opportunity, as mobile continued its inexorable rise. In 2014, our top line reaccelerated and our full-year revenue grew 54% over the prior year. Mobile search traffic exceeded PC search traffic during the second half of the year, and continues to increase as a portion of overall search traffic. Mobile monetization continued its momentum, ramping from just over 20% of total revenue in Q4 2003, to 42% in Q4 2014. In December, for the first time, search revenue from mobile surpassed that from PC. In 2014, we also cut the ribbon on our new Silicon Valley R&D center and made notable advances in voice and digital speech technologies. And we took further steps to make Baidu a safer, more trustworthy platform for users. 2015 begins a new phase, for Baidu to execute on our plan to connect people with services. We are primed to take on this new opportunity that will drive the next…

Thank you, Robin. Hello everyone. We closed a landmark year with a very solid quarter. In 2014, we saw the successful transition of our core search business to mobile. 2014 was also a year of significant investment, as we deployed resources to secure leadership positions in key gateways and launched the cornerstone pieces of our closed-loop transaction offerings. We are now particularly well-positioned, as these investments lay the groundwork for Baidu to capture the new growth opportunity of connecting people with services. Looking into full-year 2015, Baidu will continue to execute on our plan and invest aggressively in a disciplined strategic manner. We will spend to support our mobile products, including Mobile Baidu, Mobile Maps, and app distribution, and drive adoption of our closed-loop LBS offerings, which includes Baidu Connect, Nuomi, Baidu Food Delivery, and Baidu Wallet. Key investment areas include sales and marketing, R&D, infrastructure and traffic acquisition. We will continue to support ITE, which operates in a highly attractive and competitive industry. High-quality content is key. For 2015, the key investment focus for ITE will be on content acquisition. Chinese New Year is right around the corner. As you know, because of the holidays, Q1 is a seasonally slow quarter. For this Q1, as compared to historical years, our guidance reflects the combined impact of, one, the late timing of Chinese New Year, and two, mobile's growing traffic contribution, which currently monetizes at a rate lower than that of PC. Mobile monetization is on a path of steady and healthy growth. This upward trend will continue, as we progress through the year. The fundamentals of our business are robust. We are well positioned and we're ready to apply the same dedication and execution capability that drove the success of our mobile transition to our next opportunity. We're excited…

[Operator Instructions] Our first question comes from the line of Eddie Leung from Merrill Lynch. Please go ahead.

Hi. Good morning. Thank you for taking my questions. My question is about your guidance. It's a relatively large step down, in terms of growth. So we understand the seasonality factors, as well as mobile monetization. But besides that, could you also give us some color on the macro-environment? Is it any softening of the advertising markets that may have contributed to the guidance? And if so, have we seen any big fluctuations in some of your advertiser industries, in terms of the budget allocation process? Thanks.

Hi, Eddie. Thank you for your question. As we noted for the Q1 guidance, we wanted to make clear that what is reflected in the projection for us is mainly because of the seasonal--a very strong seasonal factor. As you know, the Chinese New Year falls right in the middle of the quarter. It's kind of before -- for the first half of the quarter, people are in the holiday mood. And for the second half of the full quarter, it's not long enough for the whole business to fully recovery. So the Q1 is pronouncedly affected by the seasonal factor. And obviously, we also talked about the mobile is during this time, from a traffic perspective, would be particularly strong. However, on the monetization front, it does have a distance, versus the PC monetization capabilities. Reflected in our guidance, I would say macro is not really a consideration. We operate in an emerging market, and with -- full of opportunities. There are not only existing advertising customers that we're servicing, and we are also cultivating new service sectors and really reach out to build in local service and local businesses as well. So we, from an overall business perspective, business side of the prospectus, the overall -- the environment is full of opportunities and potential. So reflected in the guidance is primarily because of the seasonal factor, as well as the mix of mobile versus PC.

Understood. Thank you, Jennifer.

Thank you. And our next question comes from the line of Alicia Yap from Barclays. Please go ahead.

Hi. Good morning, Robin, Jennifer, and Sharon. Thanks for taking my questions. I also have a related question from the first quarter guidance. So Jennifer, we actually have a normal Chinese New Year this year, so let's say late January or early February, what will be the guidance look like? We have -- we only have the issues on the mobile being monetized lower, right, if we take out the seasonal factor on Chinese New Year? And then, in relation to that, will the second quarter this year have a much higher sequential rebound than the previous year? And then, also on the mobile for Chinese New Year, given higher percentage of traffic coming from mobile, and mobile devices is more portable, should we actually continue to see more traffic, and even more queries than previous year, when people are away from the PC? So any color you could provide would be helpful. Thank you.

Yes, Alicia. Thank you for the question. As we said, the main factor driving the Q1 guidance is the seasonal factor, as well as the mobile mix. The seasonal factor reflected on the Chinese New Year is this year the Chinese New Year is in term, in late timing. And that affects the full quarter. The mobile monetization part, it can't really, clearly separate these two components because the mobile mix part is a moving part. Over the past two years, as we set out to really transition to our mobile -- transition from the PC-centered business to mobile first business, we have seen steadily healthy growth of our mobile monetization capability. We are on that path, and we're still on that path for steady and healthy growth of the monetization rate. So this element is a moment in time. And that happens to fall in this first one quarter. So this one quarter is a combined impact of those two, and not really, clearly can separate that out. But having said that, for your second question, obviously we don't give out the Q2 guidance. But because of the Q1, the strong seasonal timing, if you expect that Q2 has a strong rebound, and I wouldn't say that would be a wrong assumption. So I do expect that. And for Q1, we have already seen mobile traffic surpassing PC. And during holiday times, mobile traffic will be particularly strong, just as you know that even people are on the go, they will have access to the internet through our mobile search box. So mobile traffic is strong, very strong, very solid. The fundamentals are robust. And we're just in that timing of having the mobile monetization rate trying to keep up with the PC's monetization capability.

I just want to reconfirm that the mobile traffic mix is also part of the seasonality because right around the Chinese New Year, probably one month before the Chinese New Year and two to three weeks after, people are on the go -- a lot of people are on the go. They will use the mobile to do searching instead of PC. So if we don’t consider the rapid growth of mobile traffic year on year, just looking at the seasonality in mobile would represent a larger percentage of total traffic during the Chinese New Year period.

I see. Can I follow up on this answer? Is that -- is there any big difference from advertiser willingness to spend and the budgets they are spending as we move more to mobile during the holiday season? Have you seen any change from the advertiser sentiment and willingness, you know, from PC to mobile shift? Thanks.

I would say in general, our larger advertiser base, their -- they really understand the value of our platform and they have been very open to take advantage both on the PC side and the mobile side. And I think you will note that mobile opens up new opportunities for example, like the local services, local services traditionally wouldn’t be a part of the PC centric advertiser base. But with mobile, that is new opportunities and for these business to get on Baidu's platform, and also for users to really look for information that relates to local service merchant -- you know, service providers. We are obviously on that path to develop these new sectors and so I would say from the existing advertiser base, there is not -- you know, a preferred unwillingness not to spend during the holiday season. Their patterns are normal but a lot of the -- I would say huge mobile traffic that generated new business opportunities, new queries, and those are elements and sectors that we are on the path to develop. And with time, that is why we are putting so much efforts in Baidu Connect, in group buy, in all the -- you know, driving high frequency service providers and make them become our advertiser base on the Baidu platform. And so I would say not really but we are in that transitional time to developing new customer base and mobile is -- the traffic basis is very robust and it is just -- you know, we are in that time to really cultivate new advertiser base and that could be monetized.

I see, thank you. And just lastly is the CPC on mobile still at 50% of PC in the fourth quarter?

That is one of the -- you know, metrics that we look at, obviously, CPC itself doesn’t represent the whole monetization capability for mobile, you know, the [obviously] they have with click-through, you know, CPM and all that. Just for a CPC per se, largely, it stayed constant.

Okay, thank you, great.

Thank you. Our next question comes from the line of Dick Wei from Credit Suisse. Please go ahead.

Hi, good morning. Thank you for taking my questions. I guess I also wanted to follow up on the mobile monetization side, I wonder how -- what kind of monetization gap do we expect to grow between mobile and PC, say towards the end of this year and any extent the management can share? And also, is it going to help to reaccelerate the full year revenue growth? I guess, Q1 is I guess the midpoint is around 35%. And so is it realistic that I guess, with mobile monetization we saw the PC pricing increases, is that more realistic to see more of that -- constitute a 40% or high 30s percentage growth for 2015? Thank you.

Yes. Hi, Dick. As I mentioned earlier, the more mobile monetization rate is on the trajectory of growing. We have seen that steadily and healthily and have been growing over the past two years, and we expect the same will occur throughout the year. And so obviously, you know, we do expect the mobile and PC traffic -- the PC monetization -- you know, the gap to narrow. In fact, you know, I think we are very optimistic about the mobile monetization capabilities given there is richer data points and enhanced capabilities that we are building to build the close-loop transaction drives better ROI for our customer and holistically provides really high ROI for our customers. And therefore, you know, mobile monetization rate, should be, you know, if not exceeding the PC monetization capability. For the Q1, I would say, somewhat, you can interpret that the Q1 year-on-year compression is somewhat depressed because of the seasonal factor and given that there is seasonality in that, and given that we do expect mobile monetization to trend up, I would say, you know, this is not truly representative of the whole year's picture.

Just a quick follow up on that. So I guess the Q1 guidance, I just wondered quickly -- whether we are being more conservative given it's like Chinese New Year because the visibility is lower than you show or is it just purely seasonality [worse than] kind of the seasonal -- historical seasonal early Chinese New Year? Thanks.

Yes, I think you are correct. You know, they are doing the Chinese New Year's time, it is you know, a slow time, and business typically resumes two weeks after the Chinese New Year. So as we provide the guidance, there is obviously you know, not as much -- we are not that deep into the quarter or we are after the holidays. So obviously there is a lack of visibility. But I would say, as we have always done consistently, we provide our best guidance given our knowledge to the business and and that's our best expectation as of now.

Great. Thank you very much.

Thank you. Our next question comes from the line of Alex Yao from JPMorgan. Please go ahead.

Hi, good morning. Thank you for taking my questions. I have a follow up question on the mobile monetization. Jennifer, as you say, you guys are very optimistic on the mobile monetization capability over time. And then, the traffic from mobile also increased rapidly. Shall we expect at some point in 2015, the mobile monetization rate increase could possible reaccelerate revenue growth? That is the first question. Secondly, given the revenue growth outlook, and your investment strategy, can you talk about how should we think about the margin outlook for this year? Thank you.

I think we commented on you know, we provide quarter's guidance and I gave you some color on how you should read this number and how you know, it may not be bad representative for the full year. So we are optimistic about our monetization capability on the mobile front. And I wouldn’t get into further comments on the annual revenue outlook. On the investment side, I think, you know, in the prepared remarks, you know, I try to give you as much way to think about investment angles as possible. The key investment areas for us is to extend our service and build the closed loop transaction and enable connecting people with services. So the main activities we will carry out for products are like Baidu Connect, Nuomi, the full delivery service, and Baidu Wallet. Areas of investment, and I think, you know, areas of significant investment would be in the sales and SG&A line. And for SG&A expenses, as I mentioned, the absolute dollar step up for 2015 over 2014 will be similar compared to the year ago step up. And that would be the key item to look at. And for other main expense line items, I think they have pretty established patterns and you could, you know, really model that pretty closely. Another line item that I have caught -- you know, put you to pay attention to is content cost. And we have -- I gave you a specific you know, ways to think about content cost as well. And so I would say those two elements are the main investment areas and other elements will continue the traction of the prior patterns in terms of investments.

Understood. Thank you.

Thank you. Our next question comes from the line of Ming Zhao from 86Research. Please go ahead.

Thank you. Thank you for taking my question. I have a similar question on the mobile monetization. The question I have is because in the first half of last year, the mobile traffic growth is actually helping the monetization, it is really accelerating the top line growth if you look at the first two quarters of last year's growth. And then towards the year end, into the first quarter this year, the higher traffic from mobile is actually causing a problem to your monetization and so my question is really -- is this because -- excuse me, is this because some low hanging fruits have been picked, you know, some of the early adopters of mobile search have been already on a platform but what is left is are those industries very hard to adopt mobile search. And then you must go to the local services for the brand new area for growth. Is that the situation the company is facing now?

Ming, I think that is not an apple to apple comparison, and you are talking about the first half of 2014. We are talking about the guidance for the first quarter of 2015. And the timing of the Chinese New Year for 2014 and 2015 is very different and as I said, those -- the mobile traffic mix and the timing of the Chinese New Year are in essence, seasonality. So I don’t think that is a fair comparison and regarding to the mobile monetization, I don’t think we have you know, we have the low-hanging fruit, there is still a lot of room for growth in terms of improving monetization capability mobile and even more exciting, the opportunities on mobile, we have the chance to really connect people with services which is in addition to the traditional -- you know, sponsorship or advertising dollars. So we do see a lot of opportunities going forward.

And to add on that, Ming, I understand your question. If you are looking at the early part of 2014, in that comparison was versus the earlier part of 2013, 2013 if you recall, the normal monetization was barely existent and so that comparison, you know, I would say on a low base and purely, you can say purely incremental and easier comparison. And as we stand in 2015 compared to 2014, obviously, the mobile is already becoming a very meaningful component of the overall picture. The mix issue, you know, is playing a significant part. And so I wouldn’t draw the conclusion that mobile monetization becomes a problem, it is not a problem, you know, we are still on the trajectory of healthy and steady growth and there is a lot of room for us to continue to improve a lot of customer base to develop. And so a lot of room and the potential opportunities. And so it is only because of the base that you are comparing is different.

Thank you very much.

Thank you. Our next question comes from the line of Ella Ji from Oppenheimer. Please go ahead.

Good morning, management. Thank you for taking my questions. I also have a question relating to the mobile monetization. How much was in mobile revenue? How much is coming from non-search related services? Since you have been saying that mobile monetization has been increasing growing healthily but mobile CPC discount to PC remain stable and so I just wonder if -- it is non-search related services that is you know, driving the mobile revenue growth.

The mobile revenue predominantly is still search, actually from an advertising product perspective, it is not as rich as PC today. You know, PC has -- you know, we have been doing that business for you know, quite some time and there are different forms of products that we can use to monetize the PC traffic. For the mobile side, I would say a majority of the mobile search -- mobile revenue is still search related and there are other revenues like display revenues that is generated out of mobile and because of ITE, for example, and so it is not because of you know, the different products that is driving the growth of the mobile. The mobile revenue is growing while CPC is relatively stable. You know, that is just saying that there are -- we will continue to improve the monetization capabilities. CPC, as I mentioned earlier, is really not the full picture for mobile monetization capability. So for the mobile monetization capabilities, you look at really the display, the relevancy, the click-through and all that. So CPC is just, you know, one element. And because the advertising, the key words -- the choices are much more, the advertisers are spending more, you know, when it comes to average CPC, it could stay constant. And so that is why I think you are just looking that the CPC won’t kind of solve these -- you know, your question.

And so is it fair to say that your mobile is still driven -- mostly driven by search-related services?

Yes.

Got it. Thank you and if I can have one more question that is related to your SG&A spending in this 4Q, the total dollar amount is up for you know, more than 30% Q-on-Q. I wonder, Jennifer, if you can help breakdown this additional spending by you know, different categories such as preinstallation or branding, or promotion, if you can provide any detailed colors, that would be very helpful.

Yes, the incremental SG&A expense is almost all because of promotional efforts and that drives products like Baidu Wallet, group buy, and the food delivery service. We launched the food delivery service in Q4.

Thank you very much.

[Operator Instructions] Our next question comes from the line of Alan Hellawell from Deutsche Bank. Please go ahead.

Thank you very much. Yes, Jennifer, very much appreciate the broad framework you offered around how to think about SG&A in 2015. I think you also suggested that we -- with regard to the other cost items, kind of extrapolate in line with past trends and if I I'm not mistaken, we did see a pretty significant jump in R&D as a percentage of revenues. Are you saying that we should probably assume maybe a similar percentage point increase as a percentage of revenues on the R&D front or can you give us a little more color as to how we should think about that operating expense? Thank you.

Well, I think if you look at the R&D expense as a percent of revenue over the years, we have steadily concentrated on investment in R&D. And so expect that you know, plan to carry on and maybe more moderate pace and not as sizable as last year.

Thank you.

Thank you. Our next question comes from the line of Wendy Huang from Macquarie. Please go ahead.

Thank you. I just want to clarify your answer to Alicia's question at the very beginning which mentioned the gap between the PC and the mobile CPC staying constant at 50% only. If I recall correctly, I think Robin mentioned in Q3 2013 that mobile CPC already accounted for like 55% of the PCs and in Q4, that ratio also went up further to 60% but how come, now, it came back to 50% in recent quarters. And also, related to that, it is interesting that you mentioned about the different seasonality of the PC and the mobile traffic and so taking a longer-term view, given that mobile traffic is stronger in Q1, should we expect the -- by the time that the gap between the PC and mobile CPC to narrow down, actually the seasonality for your overall business actually should be stronger in Q1 rather than weaker in Q1. Thank you.

I think there were some numbers, you know, going around for CPC as a percent of mobile versus PC. That number, I think I mentioned earlier on the call was 60% but I want to direct your attention to, you know, probably away from CPC. CPC is only one aspect of the monetization capability. Looking at CPM, the overall monetization capabilities will be more relevant. And for the second question, is about Q1 mobile traffic?

Yes, would Q1 be stronger going forward when mobile monetization catch up.

Yes.

Eventually, I think, well, it is going to be a gradual process. And so right now, the monetization capability for mobile traffic is lower than PC but it is gradually catching up eventually, we are confident that mobile monetization capability will be on par or even bigger than PC monetization and when that happens, then during Q1, when the seasonally mobile represent a larger traffic mix, that revenue growth, will show a stronger pattern at that time.

So mobile revenue actually will dominate the Q1 seasonality pattern?

Going forward, yes.

Okay, great. Thank you.

Thank you. Our next question comes from the line of Thomas Chong from Citigroup. Please go ahead.

Hi, good morning, Robin, Jennifer, and Sharon. Thanks for taking my questions. My first question is about the integration with Uber. Can management talk about how the integration goes on with Baidu maps and what is the potential P&L impact? And my second question is related to the PC search. Should we expect in terms of the PC search revenue growth momentum for this year, is similar to the last year? Thanks.

On the Uber integration, we are still working on it. We are providing APIs for Uber to work with and it is still work in progress. From what we have heard that is the [GMV] or the number of transactions of Uber China has been growing kind of very you know, fast paced, and so we are optimistic about the future perspective of this collaboration.

And Thomas, also for -- as you know, we look at our search business holistically but if you have to single out the PC side and I think the PC is pretty stable and there is still room for us to continue to improve on the monetization capabilities, be very innovative with experimenting different advertising products and continue to enhance user experience and also, you know, drive more relevant search ads that is good for the user as well as good for the customers. And so you know, I don’t -- we don’t really separate our overall business separately but I think, you know, we are not unhappy with the progress on the PC front.

Thanks, Jennifer.

Thank you. Our next question comes from the line of Cynthia Meng from Jefferies. Please go ahead.

Thank you, Robin, Jennifer, and Sharon, for giving us the opportunity. My question is regarding the recently announced reorganization. Can management give some color on the rationale and some of the what kind of milestone management has in mind in terms of developing new businesses that will drive this future growth of Baidu. And in addition, as a follow-up for the questions before, given the small market share of Baidu wallet, will management consider subsidized taxi hailing activities for Uber and other companies that you have affiliation with? Thank you.

Yes, on the rework, the competitive landscape is changing quickly and market dynamics are very vibrant and so we -- before, we had six business units and we kind of combined LBS into the mobile unit and combined our international business and consumer business into the new business groups that give you three big business groups, the first one focuses on the search which is our current core asset, and the second one focuses on mobile which is growing on the fastest and the third one focuses on all kinds of emerging opportunities including healthcare, education, finance, et cetera. And so that rationale behind the rework, we think that by combining some of the business units, the efficiency will be increased and some of the redundancy can be eliminated. And so overall, the company will be more agile. On Baidu Wallet, we have been subsidizing all kinds of transactions in our ecosystem. And primarily for services we operate ourselves, for example, the group buying, the food delivery, or movie tickers. We occasionally would subsidize other partnership deals that would be on the case by case basis.

Thank you. And Robin, can you talk about some off the milestones you might be able to share with regards to the new business units?

Well, the new business units actually comprised of a number of initiatives we are working on. Right now, they are at very early stages, for example, for healthcare, we are trying to connect the patients with these doctors. There are about 2 million doctors in China and there are lots and lots of patients. Right now, the resources are not allocated optimally and a lot of the patients goes to those very famous top notch doctors and those doctors only can spend a few minutes with each patient. We think that is not a good use of medical resources. We are trying to do the match making to send in the relevant patients to relevant doctors. And we look at that as a total transaction, we are connecting people with services. And we measure those number of -- you know, transactions or deals as milestones. For education, we are trying to find opportunities to fund [ph] those potential candidates or potential students with financing options and consumer credits, and so that they can have more incentive to take some of the classes offered by our partners and based on our platform, we can grow traffic to a lot of potential students and encourages them to take more classes. And that will enable a lot of people who didn’t have the money to take on courses to be engaged in this kind of new system. There are initiatives like this in our -- in the emerging business group, and the main measurement is the number of transactions we complete on those platforms.

Thank you.

[Operator Instructions] Our next question comes from the line of George Meng from Morgan Stanley. Please go ahead.

Good morning, Robin, Jennifer, and Sharon. Thank you very much for taking my questions. I wonder if you can provide more granularity on your revenue growth especially on mobile. So in terms of, for example, the advertiser categories and other type, basically if you view your business from, you know, between KA and SME, you think that SME is actually, you know, meaningfully different in terms of growth rate from KA. And also in terms of the advertising categories, do you see any impact from the healthcare from some of your competitors? Thank you.

I think, you know, in overall, the customers because of their size and their business, they do have different needs and that is -- you know, the beauty of our platform that really cater to whatever size and whatever kind of advertisers and whatever budget they may have. For SMEs, I would say, you know, it is -- you know, the population is huge and for our SME sales people, you know, there are opportunities as we penetrate into the deeper third or fourth tier cities. And to really develop new customer base, and also you know, with our technology and you know, the city level bidding that gets into more refined, the geographical accuracy, you know, that really opens up opportunity for our local businesses that really want a very targeted promotion. And for larger customers, their adoption of mobile is also progressing very well. And so their needs do vary and the drivers of those businesses could be different. You know, for large advertisers, they look for novel products, and you know, ways to help them you know, carry out campaigns and generally, you know, overall, ROI and also for branding purposes. And for SMEs, the needs will be different, will be very performance based, could be. And so I think on both fronts, the business is growing healthily albeit because of different drivers.

Okay, got it. And on the categories, like the healthcare, do you see, any -- you know, impact on your competitor launching a healthcare search?

Healthcare continues to grow very strongly, it is you know, still one of our top five sectors and what we are seeing is you know, service sectors are growing very nicely and our platform, I mentioned earlier, education services you know, like travel, even financial services, these sectors are really growing nicely and are among the top five sectors.

Great. And finally, you mentioned branding, so you also mentioned like 7% year-on-year growth of your display ad, I understand it is still very small but can you quantify what the mobile contribution within the display if you exclude, say, IT, and is there any impact expected from Weixin launching - their ads on Weixin? Thanks.

Right now, I think most of the branding budget are spent on our PC platform including Brand Zone or our Union [ph] business. On mobile, we do not allow graphical display of any content and so even though there are also Brand Zone on mobile, the overall contribution, I mean, brand advertising contribution to mobile revenue is still much smaller than that of PC. Having said that, I think that the brand advertising budget for online is still very small percentage of the total brand advertising budget and we do not see --- I think both us Weixin are very, very small in terms of our brand advertising budget, I do not see competition as an important factor right now. We do see strong potential for brand advertisers to shift their offline budget to online and to mobile.

Thank you very much.

[Operator Instructions] Our next question comes from the line of Chao Wang from Nomura. Please go ahead.

Hi, good morning. Thanks for taking the questions. I have a question regarding your PC revenue growth, it seems that 4Q results and 1Q guidance implies that PC revenue is down year-over-year. Could you comment on PC revenue cost as well as PC traffic growth? And secondly, regarding the late Chinese New Year impact, does that have a bigger impact on the brand as well? Thank you.

On your first question, related to the PC, I think there was the same question earlier. I said overall, there is still -- the PC business is pretty steady, the traffic is solid and we continue to have ways to improve on the monetization capabilities for PC. And so overall, I think PC continues to grow and we are not unhappy with that progress. Q1 is -- brand advertiser is seasonally slower quarter and I mean, that has been historically the pattern, and brand advertiser as you know, Robin mentioned, we don’t do that -- much of that on the mobile front. And because mobile's traffic is the dominant component of the overall -- of course, you know, the spending will be less. And PC because of the seasonal nature, the brand advertising spending for Q1 is that is why the reason -- the brand -- the advertising overall is a slower in Q1.

Got it. Thank you.

Thank you. Our next question comes from the line of Chi Tsang from HSBC. Please go ahead.

Hi, this is Chi Tsang from HSBC. Thanks for taking my questions. I have a question on Baidu Connect, so we are seeing a very strong adoption from the merchants, the 600,000 figure is very, very large. I'm curious to what you are seeing in terms of click-through from users you know, transaction or engagement levels. Thank you very much.

Yes, as I mentioned during the prepared remark, we rolled out a lot of verticals for Baidu Connect. We enabled those merchants to come up with their own customized Baidu Connect sites. Right now, the conversion is very good but we would like to see more transactions or GMVs happen on those platforms. There are a number of early adopters who have seen very encouraging results but it will take some time for the majority of the merchants to learn how to take advantage of the Baidu connect system and enable transactions on it.

Thank you. Our next question comes from the line of Erica Poon from UBS. Please go ahead.

Yes, hello. Thank you. About the content cost or the self-produced content that you mentioned earlier, can you just give us a bit more color what type of content you plan to produce and also the kind of cost associated with those? Thank you.

I think, you know, content cost is primarily attributable to ITE and during the last quarter, in Q4, you have already noticed that there is a step up in content cost. New high quality content has been acquired. It is important because you know, over the past year, ITE has established itself as the market leader and also created, you know, this great market perception that they have the high quality content and really having, you know, the entertainment -- you know, high quality programs that the users can look to. And unique content is the way that you differentiate yourself and we have already started producing self-produced content last quarter. So some cost component is reflected in the picture. And going into 2014, there will be -- 2015, there will be more increased emphasis on the self-produced content and you know, it is not particularly the categories that we define as of this moment, the main strategic -- you know, underpinning is really to drive, you know, high quality content that differentiates the ITE's platform versus others. And therefore, attracts users and nurtures, you know, user's reliance and you know, possibly, also grow user subscription. So that is why it is strategically important and I give you some guidance in terms of you know, how to think about the cost related to that and we think this is strategically important because as iQiyi is already the market leader and with this kind of measure -- this kind of investment, it further strengthens its market leader positions and build a solid business and as we go forward, you know, given the attractiveness of you know, this vertical, we expect a longer term shareholder returns.

Thanks, Jennifer.

Thank you. Due to time constraints, we only have time for one last question. Our next question comes from the line of Natalie Wu from CICC. Please go ahead.

Good morning, Robin, Jennifer, and Sharon. Thanks for taking my questions. Firstly, just to clarify, you mentioned that SG&A's data pattern this year will resemble last year. So wondering whether you are referring to absolute value or in terms of percentage of revenues. And secondly, I noticed that you have already started a lot of O-to-O initiative lately like Baidu food delivery, group buying, movie tickets, healthcare, etc. I'm wondering, can the management share with us your revenue target on this initiative? I mean is there any target on revenue contribution from commission based business say 40% to 50%?

Natalie, for your first question, it is the dollar amount.

And on the O2O initiative, yes, over time, this kind of initiative, be it for delivery or group buying, will bring in revenue. It is going to be a more of a you know, take rate basis, but right now, we are in the investment stage. There are a lot of subsidies in each of those categories so near-term, we do not expect any meaningful contribution to revenue from these businesses.

Thank you, Robin, is there any long-term target?

Yes, of course, I think longer term, the take rate based businesses will represent a very significant part of our overall revenue.

Thank you.