Hello. Thank you for standing by for Baidu's third quarter 2018 earnings conference call. At this time, all participants are in a listen-only mode. After management's prepared remarks, there will be a question and answer session. 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 your host for today's conference, Ms. Sharon Ng, Baidu's Director of Investor Relations. Thank you.
Hello, everyone. Welcome to Baidu's third quarter 2018 earnings conference call. Baidu's earnings release was distributed earlier today. You can find a copy on our website as well as on Newswire services. On the call today, we have Robin Li, Baidu's Chief Executive Officer, and Herman Yu, Baidu's Chief Financial Officer. After our prepared remarks, we will hold a Q&A session. Please note that the discussion today will contain forward-looking statements made under the Safe Harbor Provisions of the U.S. 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 the 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. A webcast of this conference will also be available on the Baidu IR website. I will now turn the call over to our CEO, Robin.
Hello, everybody. Thank you for joining our call today. We delivered solid revenue growth in the third quarter, driven by AI-powered search, continued robust growth from Baidu Feed, as well as strong and increasingly significant growth from new AI businesses such as ABC Cloud. Baidu has made incredible progress on strengthening our mobile foundation over the past two years with our efforts to improve the user experience for Baidu's family of apps with AI, such as Search, Maps, Mobile Keyboard, and launching Feed with AI-powered algorithms. QuestMobile, a third-party research firm, recently cited Baidu's family of apps together generate 980 million monthly active users, putting Baidu in the top 3 of MAUs in China in its autumn report on mobile internet.
Our own internal data actually indicates that the MAUs of the Baidu family apps reached 990 million in September and growing 28% year-over-year, excluding overlaps, as many users have multiple touchpoints with us. With massive reach on mobile in hand, we are well positioned for the shift in internet usage in China. App developers are placing greater reliance on super apps to direct user traffic and provide native app integration, bypassing the need for new users to download their apps. Internet connectivity on home devices is seeing accelerated growth this year, and the auto industry is beginning to experiment with connected internet via voice assistance. These trends play to Baidu's strengths and put us in a sweet spot for new internet gateways.
Our use of AI to strengthen Baidu's core business is also generating new use cases and opening Baidu up to exciting new markets, such as AI as a service. We are seeing AI extend beyond the internet into everyday life, and this presents Baidu with large new market opportunities in the To C, To B, and To G markets. Let's begin Q3 with Search and Feed. In core search, top one now comprises over 40% of our search queries, and visual search is becoming ever more popular with daily queries in the tens of millions, doubling from last year. These AI-powered features not only differentiate Baidu's search experience but also enable us to introduce features like Smart Answer for smart screens.
For example, a user of Huawei, OPPO, or Vivo smartphone with Baidu AI may take a photo of a plant or a pet, and the phone screen will return a card with information about the species in the photo. Smart Answer can also identify and provide information about celebrities, points of interest, and so forth. IDC recently reported that smartphone shipments in China declined 11% year-over-year in the first half of this year, making it more difficult for less frequented apps to continue traffic acquisition from app pre-installation. Mini programs have become a new source of traffic without requiring merchants to have native apps. We launched the invite-only phase of our Smart Mini Program in July, and monthly active users ramped up quickly, surpassing 100 million in September.
We have received favorable feedback from users, developers, and our network partners. Program registration was open to the public at the end of September. We are on track to open-source our Smart Mini Program, which enable apps to join our host union and run Smart Mini Programs. Our Smart Mini Program open approach by design makes the information in Baidu's Smart Mini Program network searchable. Moving on to Baidu App. In September, average daily active users of Baidu App reached 151 million, up 19% year-over-year, and time spent on Feed grew 68% year-over-year. In the two short years that we launched the Baidu Feed, we have added 276 MCN and over 1.5 million content publishers, up from 1 million two quarters ago.
Twin engine search plus feed offering, coupled with unmatched AI-powered recommendation technology, deep insight of our massive user base, make Baidu App a compelling offering. A twin engine app not only provides better user experience, but also generates better unit economics. Excluding iQIYI, Baidu distributes over 2 billion video views per day. The strong demand for video content on Baidu's platform places us in a good position to offer more variety of video feeds. We are replicating the Baidu App formula to develop video-only feed apps. For example, we began experimenting with Haokan this year, and in September, Haokan reached a DAU of 12 million. According to QuestMobile, Haokan was the fastest-growing app from June to September among all mobile apps in China, with a DAU of more than five million.
On monetization, the strong traffic growth of our feed as well as video traffic are contributing to Baidu's revenue growth. In addition, our industry-leading use of AI to power app monetization, such as dynamic ads, mobile action ads, and optimize the cost per click, continues to position Baidu as a compelling source of performance-based traffic. Baidu is pushing the boundary of innovation with cutting-edge technologies to better meet our customers' needs. For example, using blockchain and visual search to combat fake goods and generate more revenue for our customers. Hairy crabs from the Yangcheng Lake in Jiangsu Province are a prized four-season delicacy in China. This year, we worked with hairy crab fisheries from the Yangcheng Lake to set up a Smart Mini Program to enable consumers to verify product authenticity via the Baidu App.
Blockchain ensures a tag or a card's uniqueness, while visual search provides a matching reading to ensure that the product was not switched. The combination of the two technologies have significant commercial value for merchants of big-ticket items sold online. Baidu has made significant strides to proactively improve the quality of healthcare information, and consumers are increasingly dependent on Baidu for healthcare-related services. We are developing a search solution to organize healthcare information into a structured format so that users can more easily compare services across healthcare providers. Our solution will verify the identity of licensed medical institutions and use AI to monitor the information quality on the landing pages. Ads will link to such structured data instead of third-party websites.
Although these efforts to improve user experience may impact our revenue in the near term, as users get used to the new information structure, we believe they will ultimately lead to better traffic conversion for healthcare providers. Turning to DuerOS, Baidu's voice assistant. DuerOS continues to gain traction as we focus on user experience, such as improving natural language processing, which enables endless conversation, and building out DuerOS skills ecosystem. We are seeing people across China from tier 1 to lower tier cities, from toddlers to senior citizens, use DuerOS-powered devices to perform voice search, watch videos, listen to music, make video calls, and control IoT devices in their homes. In September, DuerOS install base reached 141 million, up from 100 million in July, and voice queries on DuerOS continued its rapid rise, surpassing 800 million times, which roughly doubled every quarter for the past seven quarters.
DuerOS skill store now has a community of over 24,000 developers and over 800 skills available, such as education, cooking, and game genres, such as VIPKid, cooking recipes, and digital pets, respectively. DuerOS partners continue to expand from TVs to smart speakers to smart watches. In addition to homes, DuerOS also expanding its partnership in the IoV environment. For example, UCAR, better known as Shenzhou Zhuanche, a car rental and ride-hailing service provider, will be installing DuerOS on its fleet of new vehicles. Turning to Apollo, we are gaining valuable experience in commercial operations with level 4 vehicles. The Xiamen King Long-produced Apollo-based fully autonomous minibus is currently running in over 10 locations throughout China. We're learning that end customers are requesting to purchase wholesale annual maintenance plans and that the passengers are willing to pay for rides on the Apollo minibus.
For example, Million Sunflower Garden charges RMB 20 a ride for adults and RMB 10 for children. Smart city utilizing AI to improve urban living presents Baidu with a great opportunity to serve the To G market and bring Baidu AI to everyday life. The municipality of Changsha has just signed with us to be the first municipality in China to test robot taxi and our connected road solution powered by Apollo. We are also in discussions with Beijing and Shanghai, whose population is almost equivalent of three New York Cities, to provide AI-powered city management solutions to help with urban safety, traffic congestion, and public parking, leveraging Baidu Brain, Baidu Cloud, and autonomous driving technologies to improve urban living. Turning to ABC Cloud.
Baidu Cloud continue to grow robustly and recently recognized by third-party market research firm Analysys Mason as the fastest-growing and among the top three most technologically advanced cloud service providers in China. At Baidu ABC Cloud Summit in Shanghai last month, we announced new enterprise solutions with advanced AI capabilities to serve the transportation, education, and financial services industries. Our AI as a service approach aims to help customers increase productivity and improve operational efficiency. For example, a top Chinese telco choose Baidu's ABC Cloud with AI as a service to power their call center. Baidu Cloud was chosen for our differentiated AI technology in speech recognition, natural language processing, and knowledge graphs, enabling endless conversation and sparing customers the tedious experience of IVR menus.
Using Baidu's enterprise AI solution, the call center saw dramatic improvement in customer service quality, with average call time falling 70% and Baidu's AI solution handling millions of calls per month. At Baidu World in Beijing tomorrow, we will share many more case studies illustrating Baidu's enterprise AI solutions now serving over one dozen industries. Turning to iQIYI. In the third quarter, iQIYI added a record 13.5 million subscribers, reaching a total of 80.7 million subscribers, driven by top-quality content and blockbuster originals like "Story of Yanxi Palace." iQIYI continues to rank number one across reach and engagement metrics in the third quarter, according to third-party market research firms. Also during the quarter, iQIYI co-launched a hybrid OTT box with Beijing Gehua CATV Network, featuring DuerOS voice assistant, video search, and children's mode.
The hybrid OTT box enables users to access both iQIYI video and cable TV from one box, an industry first. Partnerships such as this help DuerOS and iQIYI extend presence into the fast-growing OTT market and exemplify the unique value proposition that Baidu and iQIYI can offer working in tandem. With that, let me turn the call over to Herman to go through the financial highlights.
Thank you, Robin. Hello, everyone. Welcome to Baidu's third quarter 2018 call. Before I begin the third quarter view, let me make a few notes. All monetary amounts used in my discussion are in renminbi unless stated otherwise. Starting on January 1st, we adopted ASC 606, a new revenue accounting standard that nets value-added tax from revenue and cost of revenue line items. To increase comparability with 2018 numbers, 2017 numbers have been adjusted net of VAT. We completed the spin-off of Du Xiaoman, Baidu's financial services, during the third quarter, which was the last of the announced spin-offs. For today's discussion on Baidu Core, we're providing revenue and operating income numbers excluding the spin-off businesses to give more visibility on the performance of Baidu Core without the spin-offs and allow for easier comparison for future quarters. Please refer to our press release for full information on Baidu Core financials.
With that, let's turn to Q3. We had a solid quarter. Total revenues reached RMB 28.2 billion, up 27% year-over-year. Non-GAAP operating income was RMB 5.7 billion, up 2% year-over-year. Non-GAAP net income to Baidu was RMB 6.7 billion, up 47% year-over-year, and non-GAAP net margin was 24%. Revenue from Baidu Core, excluding spin-off revenues, were RMB 20.6 billion, up 27% year-over-year. Non-GAAP operating profit of Baidu Core, excluding spin-offs, was RMB 7.7 billion, up 12% year-over-year, and non-GAAP operating margin was 37% compared to 42% from the previous year. As we previously highlighted, our plan this year is to increase investment in content purchase for BJH accounts and increase marketing expenditures for the Baidu App. This helps Baidu achieve several benefits. Number one, shifting Baidu's search to our own properties improve the user experience with search and saves on TAC.
Two, Baidu Feed is a complementary business for search. The two together drives better unit economics for marketing purposes. Three, with more and more apps relying on super apps to generate traffic, strengthening the Baidu App as we roll out Baidu Smart Mini Program will increase our ad monetization potential. Although content and marketing costs are expensed as incurred, we believe we'll be able to recover more dollars from these investments to further increase the scale of Baidu App. We are already seeing time spent on Baidu Feed in the Baidu App growing 68% year-over-year in September. To ensure good budget management, we have placed a sophisticated tracking system in place to keep a close watch on our marketing investments. As Robin elaborated, we are making strong progress in our strategy to solidify our mobile foundation in IoT and AI, and we stay committed to Baidu's future.
As of September 30th, 2018, Baidu has returned CNY 487 million to our shareholders under the 2018 share repurchase program announced in June. Let me now go through the rest of the quarter financial highlights. Online marketing revenues were CNY 22.5 billion, up 18% year-over-year. We had approximately 522,000 online marketing customers, up 7% year-over-year, and revenue per customer was approximately CNY 43,100, up 12% year-over-year. Other revenues were CNY 5.7 billion, up 80% year-over-year, mainly resulting from the robust growth in iQIYI membership and other businesses. Excluding spin-off revenue of CNY 1 billion in the third quarter, revenue from Baidu Core was CNY 20.6 billion, up 27% year-over-year. Revenue from iQIYI reached CNY 6.9 billion, up 48% year-over-year. Cost of sales, excluding stock compensation, was CNY 14.2 billion, up 36% year-over-year.
Content cost was up 73% year-over-year to CNY 6.7 billion, mainly due to increased content purchases by iQIYI and to a much lesser extent from Baijiahao or BJH accounts, Baidu's fee content network. Other operating expenses excluding stock compensation was CNY 8.4 billion, up 35% year-over-year, mainly due to the increase in channel and promotional marketing of Baidu apps and other apps and the increase in R&D personnel-related costs. Other income in the third quarter was CNY 4.4 billion, down 6% year-over-year. Non-GAAP operating income was CNY 5.7 billion, up 2% year-over-year. As mentioned, excluding spin-offs, non-GAAP operating income from Baidu Core was CNY 7.7 billion, up 12% year-over-year, and non-GAAP operating margin for Baidu Core was 37%. Net income attributed to Baidu in the third quarter was CNY 12.4 billion. Diluted earnings per ADS was CNY 35.
Non-GAAP net income attributed to Baidu was CNY 6.7 billion, up 47% year-over-year, and non-GAAP diluted earnings per ADS was CNY 19. The year-over-year increase was partially due to the change in non-controlling interest as losses from iQIYI were not allocable to preferred shares prior to the IPO. Non-GAAP net income attributed Baidu Core was CNY 8.4 billion, up 57% year-over-year. Adjusted EBITDA in the third quarter reached CNY 6.8 billion, and EBITDA margin reached 24%. Adjusted EBITDA for Baidu Core reached CNY 9 billion, and adjusted EBITDA margin reached 42%. As of September 30th, 2018, cash and short-term investments was CNY 104.5 billion. Free cash flow was CNY 9.1 billion. Total headcount as of September 30th, 2018, was approximately 40,700, up 2% year-over-year. Excluding iQIYI, cash and short-term investments was CNY 94.8 billion.
Free cash flow to Baidu Core was CNY 8.3 billion, and total headcount for Baidu Core was approximately 32,300, down 3% year-over-year. Turning to fourth quarter guidance. Toward the latter half of Q3, iQIYI's brand advertising, and Baidu's brand advertising to a lesser extent, began to feel the impact of recent policy changes related to certain verticals such as gaming, financial services, and so forth, as well as general uncertainties from a potential trade war. We expect this trend to continue into the fourth quarter. In addition, our proactive effort to improve the structure of healthcare information may impact our ad revenues in the near future. Based on the above, we expect total revenues to be between CNY 25.48 billion and CNY 26.72 billion, representing a 15%-20% increase year-over-year.
Excluding spin-off revenue of CNY 1 billion for the fourth quarter of last year, this guidance assumes Baidu's fourth quarter revenues will grow between 20%-26% year-over-year. These forecasts are our current and preliminary view and are subject to change. I will now turn the call over to the operator. Thank you.
Operator, we're ready for our first question.
The question and answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, we will take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed. You may press star one to ask a question and wait for your name to be announced. The first question is from the line of Alicia Yap. Your line is now open. From Citigroup.
Hi. Good morning, Robin, Herman, and Sharon. Thanks for taking my questions. I wanted to ask if management could share with us your view when comparing the news feed ad versus the search advertising. In light of this softening advertising environment or potentially more ad budget cut, which one is actually likely to be more resilient and which one is more vulnerable to the budget cut? In addition to iQIYI, which on previous call noted it was impacted by the online game sector, wonder how big the exposure of Baidu mobile news feed ad is related to the online games. If management, obviously expecting the economic conditions indeed softening, any measure that Baidu plans to do to mitigate the downturn, or do you think Baidu will be more immune to any slowdown? Thank you.
Hi, Alicia. This is Robin. Your question regarding to the resilience on feed ad and search ad, I would say first is that both search and feed ads are primarily performance ads, which means that advertisers always find that the performance on our platform is better or at least worthwhile for them to spend money on. I think the brand ads, the display ads are impacted more due to macro conditions. Having said that, I would say that the feed is probably less resilient than search because a percentage of the feed ad could be brand related. On the other hand, as you know, that the feed is growing faster than search. The new regulations on games did have an impact on our revenue. We have a number of advertisers from the game industry. They are affected significantly.
Game is not a very large industry for Baidu's advertising base. We, to a certain extent, are affected, but it's not a top five industry for us.
To give more color, Alicia, I think going into Q4, there's been various policies in China. Game would probably be one of the industries that would be impacted, but there's several other ones we could be impacted, for example from real estate and interior design
some from lifestyles, online commerce and so forth, some on financial service. It's not any particular industry that's impacting us heavily for the Baidu core business. It's just each of these industry, while it's spread around several industry, a little bit here, a little bit there, added together caused us to probably grow not as fast as we would like in Q4.
We also need to remember that when comparing for Q4, that last year over RMB 1 billion was related to the spin-offs. We got to have a lower base to recognize that.
Sure. Can I just follow up on next year? Are we expecting further slowdown that we should probably take more into consideration for now, expecting next year will be slower?
Alicia, we don't really give forward-looking guidance for next year. It's very hard for us to predict the macro economy over the next year. What we have seen is that for the next couple of quarters, the current macro environment is like this.
Okay. Thank you, Robin. Thank you, Herman.
Thank you.
Thank you.
The next question that we have is from the line of Eddie Leung from Merrill Lynch. Your line is now open.
Hi, good morning. Just a question on traffic and competition. I think, Robin, you mentioned that it is getting less efficient to acquire traffic via the mobile channel, given your slowing down in handset growth. It seems like recently you have seen a couple of your competitors, probably since early of this year, pretty aggressively buying traffic. I mean competitors, direct competitors on the search side. Just wondering how you see the competitive landscape going. A couple of third-party sources showing it seems like they acquired a bit of MAU, although you are still much smaller than you guys. Just you are wondering how you think about this phenomenon. Thanks.
Yeah, sure, Eddie. I think there are 2 types of companies. One is platform companies like us. We own super apps. We will continue to aggressively invest in channel to do all kinds of pre-installation or marketing to further solidify our position as the super app or as the platform. For most other companies who had a native app or had a website but hoping to establish their native app as the gateway to their services, it's getting tougher because consumers just don't want to install that many apps on their phones and the number of mobile Internet users are not growing that fast. We expect most of the companies will increasingly rely on large platforms like us to get traffic through either Baijiahao or Smart Mini Programs. I think they will shift their developing resources from native apps to Smart Mini Programs and Baijiahao infrastructure.
The advantage Baidu has is that we are very strong in AI technology. We have a DNA of using technology to distribute content and services. Our core competence is really to find the most efficient way to distribute content and services and to deliver the best conversion for our advertisers and merchants. As you mentioned, we do have competition in this area. There are other Internet platforms that are trying to attract more users, more traffic, more advertisers. Again, our strength is technology. We have unmatched capability to distribute the content services more efficiently and drive conversion better than anyone else.
Got it. Thank you.
Thank you. The next question is from the line of Gregory Zhao from Barclays. Your line is now open.
Hi, Robin, Herman, Sharon. Thanks for taking my question. My first question is still about your advertising. Can you share with us the top ranking, like top 5 or top 3 advertising categories in this quarter, and how that compared to the last quarter and last year? Based on your KA account and SME advertising account, which account is seeing more an impact from the regulation on the policy impact? A quick follow-up is, in the e-commerce category, your advertising saw very strong growth last year. We still have less than 2 weeks right before this year's Singles' Day promotion. Can you share some early colors or metrics for this year's Singles' Day? Thank you.
Yeah. Greg, I'll take the first one. Because of the size of our advertising, we actually span widely among all the industries. Our top industry in advertising would include things like medical, would include retail as a general term, both e-commerce and other type of retail businesses. Would include education, especially those post-college. These are just some of the top advertising industries we have.
Yeah. I think that the regulatory environment change affects both the KA account and SME. It's more industry specific than size specific. Regarding to the e-commerce market or the upcoming Double Eleven shopping festival, we do expect solid growth again. I think both the e-commerce platforms, as well as the merchants and retailers are really active in promoting their products during this period. We stand to benefit from the advertising dollars they spend on our platform.
Thank you very much.
Thank you. The next question is from the line of Grace Chen from Morgan Stanley. Your line is now open.
Hi. Thank you. Thank you for taking my question. Could you share with us your strategy for 2019? For this year, we made it clear that we focus more on top-line growth and share gains, we invest more aggressively in content and marketing expenses. The results, we are seeing very good revenue growth, the margin are trending down in the recent quarters. How about your strategy for the next year, specifically your plan for content spending, marketing expenses, and what is the implication on margin for next year? Thank you.
I think our strategy for next year will pretty much stay the same. We will continue to invest for growth. We will continue to solidify our mobile foundation and lead in the AI. New businesses such as the DuerOS, Apollo, all requires continued investment. The fast growth of video and other apps will also require marketing dollars to continue to fulfill their momentum. Herman?
Yeah. Just as Robin said, I think with regards to margins, I think we explained it pretty well in the prepared remarks. There is really two issues here. Number one is the revenue, the guidance that we have in Q4 is growing less than the Q3 rate. That is going to impact our margin a little bit. For example, in Q4, you see our Baidu core business, it is probably down around RMB 800 million on a quarter-over-quarter basis. If you assume midpoint of Q4, then on top of that, you should expect that our cost of sales plus operating OPEX, we have been growing at over RMB 1 billion per quarter. That is going to dampen our margin. That is one reason for dampening our margin. The other to consider is the fact that we are heavily investing in the app world to create super apps.
In the past couple of quarters, we've been focusing on Baidu App. Now that we have seen a pattern of success, we are also going into different video apps, Haokan being the one that we try in Q3, and you can see how DAU have a significant growth in Q3. The fact that QuestMobile says that's the fastest growing app with DAU over 5 million. We're going to continue to invest in that, and because of that particular financial model, you're not going to be able to match expenses with revenue because expenses occurs during the quarter while the revenue is over several quarters after the investment, as users come back. That is changing. We have to factor in that as we look at 2019 margins.
All in all, we do have a tracking system that tells us over the two years how the users generate revenue. When we see positive, only when we see a positive ROI, do we double down and increase the marketing spending for that particular app. Hope that helps.
Yes, thank you.
Thank you. The next question we have is from the line of Juan Lin from 86Research. Your line is now open.
Hi, good morning, Robin, Herman, and Sharon. Thanks for taking my questions. My first question is related to our business outlook. On the outlook, you mainly referred to regulations impacting certain industries. Have you seen the early sign of macro slowdown impacting advertiser spending sentiment for the next few quarters? If I got it correctly, you also mentioned the restructure and cleanup of medical ADS. Could you elaborate the reasons and details for such changes, and whether there is risk for further adjustment of your screening process of advertisers in any other industries down the road? My second question is related to DuerOS. Given that DuerOS has already accumulated very high install base queries and partners, could you please remind us on the monetization roadmap planned for DuerOS? In particular, when shall we expect DuerOS to contribute meaningful revenue? Thank you.
On the possible macro slowdown. Right now, what we have seen is that the confidence level from the private sector, from the entrepreneurs, are not that high. The actual impact is not obvious yet. If, let's say, during the next couple of months, the confidence level changes, things will change to the positive direction. We don't know exactly what's going to happen. On the medical ADS, the cleanup is an ongoing process. It's like many other industries, and it's like fighting with fake news on the Internet. It's a battle between the platform and those merchants who want to find other ways to take advantage of our platform. This is the ongoing part.
In particular for this quarter and the next few quarters, we are basically redesigning the sponsored search system so that starting from the medical industry, we will not allow advertisers to direct the link to their own websites. We will host all the information on the Baidu servers in a more structured format so that we have better control on what they can say and what kind of information they present to the consumers. We believe this will be beneficial to the end users and eventually drive better conversion for the healthcare providers. DuerOS monetization. As I mentioned, it's been growing very rapidly. We expect the growth to continue in 2019, and meaningful for monetization should start from 2020.
Thank you, Robin. Very helpful.
Thank you. Next question is from the line of Piyush Mubayi from Goldman Sachs. Your line is now open.
Good morning, Sharon. Robin, there have been rumors recently of a potential international search engine entering China. I wonder whether you would be able to talk through the advantages that you think you have in the face of a company like that. In the same vein, we are looking at several Chinese companies exploring opportunities internationally. I know you've done those. I looked at those in the past, and I wondered if you could take us through how your experience has been and relate that to the potential entry of a search engine into the China market. That's my first question. Second, a very short question. From a macro slowdown perspective, which period in your operating history does this remind you of at this stage? Thank you.
Okay. If you look at the overall Chinese Internet landscape, you probably cannot find any single U.S.-based company that has meaningful market share here. Well, that's for a reason. First, China is a very large market, and secondly, it's a very fast-growing, fast-changing market. Things change every day, and you need to make new decisions every day. I don't think a non-China based company has that kind of competency to really compete in this market be it search or e-commerce or social or whatever you can think of. You just cannot find anything that's meaningful in this market. Secondly, on our international expansion or the international expansion for Chinese Internet companies, both us and many other Chinese companies are expanding overseas, and we are learning how to do business outside of China.
What we have learned is that it's very difficult to get into a new market where there's status quo, there's existing dominant player, and you play the same role. That's very difficult. What we have seen is that if we can come up some kind of new products, we have a chance to win over the users there and make money. Take Japan as an example. We own the largest input method engine called Simeji in Japan. Lots of Japanese consumers are familiar with this brand. Simeji is also profitable and growing. It's also related to our core technology, in terms of search and AI. We enable users to do voice input, which requires good speech recognition technology in Japanese. Going forward, we will continue to find new opportunities, new markets, new products, to try to gain traction in international markets.
On the macro, people will probably most likely think of 2008, when the financial crisis happened. This time, I think it's different. I think right now it's more about the traditional industry, more about entrepreneur confidence. That can change very quickly. I don't think the fundamental fabric of the Chinese economy is in question. I think longer term, I'm still very optimistic about the future of Baidu and the future of China.
Thank you, Robin.
Thank you. Next question is from the line of Natalie Wu from CICC. Your line is now open.
Hi, good morning. Thanks for taking my question, Robin, Herman, and Sharon. Just following up with the landing page change related with merchant account for healthcare industry. Robin, you mentioned that it will bring along some short-term pain in your prepared remarks. Just wondering if it's only related with mobile side and core search product, right? Also, how is that going to impact for your fourth quarter guidance? You've also mentioned that this kind of change is to start from medical sector. Just wondering, is there any follow-up for other top verticals for your advertisers? If yes, can you give us some color about your plan for that? Thank you.
Okay. Herman will address the Q4 impact. Let me elaborate on the landing page strategy change more. If you look at other type of services on the internet, it's actually quite natural for platforms to use structured data instead of directing consumers to a third-party website. It's just the nature of the search. Due to the legacy of the search, people naturally think that they do a search here, they find all kinds of different links, and they click one of the links, they are brought to a different website, where search engines have no control of. This is not the best user experience in the mobile age. That's why in the beginning of the prepared remarks, I said 40% of our top one results now can satisfy user needs. Many of the top one results are actually structured data.
It's not a website linked to third-party content. If you look at in the online travel industry, if you try to find information about a particular hotel, you typically do not go from an online agency like Ctrip and to the website of a hotel's official website. You actually find structured data about users' comments and their price and all sorts of things on the Ctrip app or on the Ctrip website. For restaurant, if you go to Dianping or Meituan, you also find all kinds of related information in a structured manner. You are not directed to the official website of that restaurant. Healthcare should be similar. I think in the future, we should provide structured data for healthcare providers so that consumers have an easier way to navigate around all kinds of information and make their choices. This is a transition.
Transition always affects revenue. Longer term, I think this is a win-win-win situation. The platform have better control on the content. Users have a more transparent way to find information and services they're interested in. Healthcare providers get better conversion.
Yeah. Natalie, your question is what's the impact for Q4? Let me try to answer it this way. When you look at our guidance excluding spin-off for Q4 right now is between 20%-26%. The midpoint is 23%, right? When you look at Q3, for example, our actual result was 27%. Assuming, we're trying to reach a 27%, we're 4% off, 4% slower using our midpoint, versus at Q3. When you look at last year Q4, we're talking about RMB 21 billion. You're talking about maybe a little bit, RMB 800 million light, right? I can't break out for you that RMB 800 million, how much is medical, how much is all the other industry.
What I can tell you is that RMB 800 million lighter than what we would've thought we could do for Q4, assuming it's equivalent to the growth rate of Q3, is that it would be spread out between this healthcare initiative. We think that it's probably gonna be impacted from some of the industry that we already seeing, such as games, such as real estate, interior decoration, such as lifestyle, such as financial services, and maybe a few others. You can see RMB 800 million is not significant of our overall revenues when you have so many different industries and so many different policies impacting us. It's a little bit here, a little bit there. Hard to really quantify at this point how much of each of these factors will be. We just think that overall, it should be around that range.
Got it. Thank you. Any follow-up plan for copying this kind of a change to other top verticals?
Eventually, yes. Right now we are focusing on the healthcare industry right now.
Got it. Thank you very much.
Yeah. Do recognize this is a timing issue, Natalie, because as Robin mentioned, structured data has better conversion. The risk of structured data is initially when you change the format of that information, users have to get used to it. In the front end, you might lose some revenue or have some revenue impact because users are looking at this and they are not familiar with better quality information. As they get used to it, in the back end they actually would have higher conversion rate. It's a timing issue. As we look at this medical, maybe a few other quarters down the line when we see better conversion rates and so forth, we might go into other industry. Net, it doesn't mean that whenever we go into an industry, it's gonna have a significant impact on revenues. We'll have to see.
Presenters, we have the next question from the line of Jerry Liu from UBS. Your line is now open.
Hi. Thank you. I just have two quick questions. The first one is, when we look at a macro impact, the regulatory impact in the fourth quarter, are we assuming, on a month-to-month basis, some further deterioration from August to September to October? What do we see for the next few months? The second question is on Smart Mini Programs. When should we expect some ramp in monetization? When can we see that tailwind for the search and feed business? Thank you.
Okay. Hi, Jerry. I'll answer the first one. With regards to how we do a forecast for Q4, we try to gather the information from our sales team and also from our channel. It's not so much of month-to-month, but overall, as Robin mentioned, part of it is policy that we are seeing. That would be on a historical trend. Another is really general sentiment of our customers, of our channels and so forth. The totality of that assessment goes into our Q4. I would say based on the information that we have right now, this is what we think the impact will do for Q4.
On the Smart Mini Program, you can think of it as the mobile version of websites for native apps. Itself, it's not a new biz model. It's an enhancement to the existing Baidu Mobile ecosystem. People get better experiences when they are navigating around the Smart Mini Program. Having said that, I think that this will help enhance monetization and improve conversion because the users have better experiences when they land on a Smart Mini Program. The user accounts are typically connected through the Baidu account and the Smart Mini Program's user account and things like payment are a seamless experience. Even better that because our strengthening technology, we can find the best match between the user query or the user intent and the Smart Mini Programs offerings. We have the best matching, and Smart Mini Programs ensure better user experience and better conversion.
Longer term, this will enhance our monetization capability, but itself is not a new biz model.
Just to add a little bit, Jerry. The assumption behind this is that a lot of the search links today, they're HTML5, right? Someone searching direct the traffic to the other sites, whereas what Robin just described is it allows you to have a closed loop transaction within the app. If you're in Baidu App, you search for something, you go to a Smart Mini Program, you can actually transact, do all the things you want to do with that particular Smart Mini Program, and you come back to the Baidu App. It's still within the whole Baidu App ecosystem. You're not really leaving to another site. That user experience, it's seamless. It allows you to do a transaction. It also allows the users to go back and forth, in different areas of Baidu App.
Got it. Thanks.
Thank you. The next question is from the line of Ms. Karen Chan from Jefferies. Your line is now open.
Thank you, Robin, Herman, and Sharon. My first question is, whether management can give us an update on the revenue contribution from mobile newsfeed ad in the third quarter. Given we saw a very strong quarter-over-quarter growth of 20% on average in 2018, wondering how we should think about going into 2019 given the current visibility. Also just a follow-up question on, can management size the approximate revenue contribution from healthcare currently compared to a year ago? Thank you very much.
Hi, Karen. Yeah. The question was on feed revenue. When you look at our feed revenue, what we disclosed last quarter and this quarter is a little bit more, is that historically last quarter, feed plus all the AI businesses were less than 20%. This quarter we see it up a few more percentages now making up over 20-some percent, feed plus the AI businesses. Then with regards to healthcare revenues and so forth, we have about 30% of our advertising revenue from medical, and it's been declining steadily over the last few quarters.
Thank you.
Thank you. Ladies and gentlemen, we are now approaching the end of the conference call. Thank you for your participation in today's conference. You may now disconnect.