Chinese search engine giant Baidu reported slowing revenue growth in Q1, but mobile continued to gain momentum, contributing half of total revenue – up from 42 per cent in Q4.

The company’s net income dropped 3.4 per cent from a year ago to CNY2.45 billion ($395 million) as overall expenses, including traffic acquisition and content costs, increased and revenue per customer fell sequentially. Its operating profit declined 9.2 per cent to CNY2.16 billion.

Revenue expanded 34 per cent to CNY12.73 billion, which was a significant drop from 47.5 per cent growth in the previous quarter and 52 per cent in Q3.

Baidu chairman and CEO Robin Li said the company is “redefining the search box by building an ecosystem to connect people with services and drive closed-loop transactions… We plan to fully exploit the huge growth potential ahead — in mobile marketing, online to offline, and key select verticals such as healthcare, education and financial services.”

Online marketing revenue for the quarter rose 33.5 per cent to CNY12.52 billion from last year. Its active online marketing customers increased 17.5 per cent to 524,000 from a year ago but remained at the same level as Q4.

Revenue per online marketing customer rose 13.9 per cent to CNY23,800 from a year ago but fell 9.8 per cent compared to Q4.

Traffic acquisition costs accounted for 13.5 per cent of total revenues, up from 12.4 per cent a year ago. The company said the rise mainly reflects increased contribution of contextual ads. Content costs also increased to CNY608.4 million, representing 4.8 per cent of total revenue, compared to 4.1 per cent in the corresponding period in 2014 and 4.2 per cent in Q4.

Selling, general and administrative expenses jumped 47 per cent to CNY2.957 billion, which Baidu credited to increased promotional spending for mobile products and services.

Its guidance for Q2 forecasts revenue increasing 36.5 to 39.7 per cent (to CNY16.37 billion to CNY16.75 billion).