Hello, everyone, and thank you for standing by for Baidu's third quarter 2015 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 call is being recorded, and 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. Please go ahead.
Hello everyone. Welcome to Baidu's third quarter 2015 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 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 statements 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 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. In addition, a webcast of this conference call will be available on Baidu's IR website. I will now turn the call over to Baidu's CEO, Robin Li.
Hello, everyone. Thanks for joining today's call. In the third quarter of 2015, we made tremendous progress toward building the next Baidu and creating search of the future. We see a future in which local and services take on increasing importance, and our search offering will connect directly with transactions to meet the fast evolving needs of our users. We offer an ever more powerful integrated platform to help an even broader base of merchants reach customers. In the third quarter, Baidu showed strength in key operational metrics. Mobile revenue comprised 54% of our total revenue, up from 37% a year ago. Mobile search accounted for nearly two-thirds of total search traffic on Baidu. China and its Internet users are squarely in the mobile era, and Baidu has the platform, reach, and breadth of mobile products to serve their needs.
We continue to expand our solid mobile foundation with mobile search monthly active users at 643 million for the month of September 2015, up from 629 million in June. Mobile map MAUs, meanwhile, were 326 million for the month of September, up from 304 million in June. GMV for Transaction services, formerly named O2O and Other, totaled CNY 60.2 billion for Q3 2015, an increase of 119% year-over-year. This notable momentum reflects our strong execution capability and the powerful platform and resources that we leverage to capture a local services market still at the budding stage of online penetration. At the end of September, we launched the Local Express, an exciting initiative to further connect search and maps to transactions. I'll later talk more about Local Express.
About the Search services, our core search business remains very robust and continues to provide a solid, profitable base of operations that enables us to move decisively and aggressively to capture the enormous opportunities in local and Transaction services. The quarter saw notable improvements in the monetization capability of both mobile and PC, with mobile showing particular strength as we implemented new initiatives such as improved mobile search user interface and more personalized and image-enhanced sponsored links and search results. The sum of these initiatives drove mobile monetization higher as mobile CPM continued to narrow the gap with PC. At our Baidu World Conference in September, we unveiled Duer, our intelligent voice-based assistant that can do things for users in the real world, from making dining recommendations, finding discounts, and ordering food to buying movie tickets, to answering sophisticated questions.
Duer represents a kind of sneak peek into the future of search, where voice activation, artificial intelligence, and services all come together. About Transaction services, we shared our vision of connecting people with services. This transaction is a natural extension of our lead generation search advertising model. I'm proud to report that we gained significant momentum in Transaction services this quarter, as demonstrated by our strong growth in GMV. Nuomi grew GMV 475% year-over-year, and Baidu Takeout Delivery grew GMV nearly twelvefold year-over-year. Ultimately, what Baidu is building and offering is much broader than a daily deal spin. We are creating an online marketing and Transaction services platform bringing to bear the power of our entire platform across search, maps, Nuomi, Baidu Takeout Delivery, and Baidu Wallet. Our platform benefits from shared synergies. With traffic and data from search and maps enhancing the growth of our newer products.
As you know, the competitive landscape in O2O saw further consolidation this month. Baidu's resolve and commitment to winning the O2O market remains unshaken. A small sliver, less than 5% of the local high-frequency Transaction services market, namely restaurant and local entertainment, is online today. Baidu can win this market because our core value proposition to our users and merchants is differentiated from our peers. We increasingly enable users to make decisions about local offline consumption from our huge and powerful mobile gateways. For example, in Q3, approximately 10% of mobile search queries and about one-third of queries in maps are related to local services. Baidu has the platform and capability to convert these queries into transactions. For example, in maps, as of October, over 1 million point of interests are already enabled and have completed closed-loop transactions.
With the final step of payment completed through either Baidu Wallet or another online payment provider. Our platform approach creates a unified, seamless user experience with the end-to-end discovery, service, and payment all happening on one platform in a closed loop. Our knowledge of our users, drawing on the power of big data, let us make intelligent recommendations based on user behavior, their expressed preferences, and even from some unexpected statistical correlations. For example, between the car a person drives and her propensity to eat Western food, between a user's ZIP code and his price preference for a meal, or between the search queries and the type of food or movies she likes. The entirety of Baidu's platform can help merchants to grow their business and operate with greater efficiency with low startup costs.
Baidu not only helps merchants acquire new customers through search, maps, and Nuomi, but we also help them build lasting relationships with existing consumers through programs such as Membership Plus and store value cards on Nuomi. Takeout Delivery helps bring incremental orders to merchants and helps them increase their operational efficiency. Baidu Wallet helps merchants streamline the payment process, thus enabling them to turn around a transaction faster. An exciting new initiative is Local Express, which merges Baidu's online marketing with our Transaction services offering for local merchants, all in one easy turnkey solution. Local Express, available only to Baidu Nuomi merchants, empowers local merchants by helping them attract new customers and complete transactions without high startup costs or the need for infrastructure.
With Local Express, we help Nuomi merchants get discovered by pushing rich content related to their business, such as image, location, distance, and promotions in a performance-based ad in the format of a card in mobile Baidu or maps. With one click on the card, the user lands directly on the Nuomi merchant page and completes the transaction with just a few more clicks. Merchants don't need a domain name or rent servers or buy any cloud-based computing power. Baidu hosts it all. This easy tool gives merchants not only a faster, simpler way to build their online presence, but a better means of creating a true omni-channel presence beyond their brick-and-mortar existence. With over 40 million SMEs in China without websites, the opportunity for Local Express and Nuomi is immense.
Now for the progress on Nuomi and Takeout Delivery. Nuomi's momentum has been terrific, with GMV more than doubling quarter-on-quarter, growing nearly four times faster than the industry. Nuomi is a top player in the movie ticket vertical and accounts for 15% of all movie theater tickets sold in China on or offline as of the end of September. Nuomi has expanded its merchant base to nearly 700,000 and covers over 400 cities. We are finding that both the numbers of transactions per user, as well as ARPU per quarter, continue to trend up. Baidu Takeout Delivery saw GMV nearly triple quarter-on-quarter and has the highest ARPU among its peers. Takeout Delivery targets the attractive working-age demographic, who value higher food quality and faster delivery time. Baidu Takeout Delivery leads in 63 cities by working-age demographic, according to our internal analysis.
Superior multi-point to multi-point logistics is our key sustainable advantage that will give us a lasting edge on the competition. We will train this core competence in logistics by leveraging our leading maps, data, and technology. Baidu Wallet has continued to grow impressively, reaching 45 million activated accounts and adding 10 million as of the end of September in Q3. In a race to capture the opportunity, Baidu, along with the rest of the industry, has used promotional subsidies to seed the market and shape user behavior. Baidu has approached this resource deployment strategically, always looking to build lasting core competencies and sustainable advantage. We are confident our vast platform resources and constant leveraging of data resources will, over time, drive more efficient ROI than our peers.
We use our big data capabilities to segment and target users and look to make full use of our data resources to target even more intelligently and make personalized recommendations to our users. iQIYI has broken away from the rest of the pack through differentiated content and a unique binge and distribution model. iQIYI is a powerful content distribution platform, and in an industry first, popular shows like "Shu Shan Zhan Ji" were broadcast on iQIYI before making it to television broadcast. Popular self-produced shows include "Qipa Shuo" and "Grave Robbers' Chronicles" have become runaway hits, and iQIYI now plans to invest 50% of its resources in creating more self-produced content to contemplate the acquired licensed content, such as films from Lionsgate, with whom iQIYI recently signed a licensing deal. iQIYI now has the largest number of paying subscribers, with an explosive growth of subscription revenue.
Earlier this week, we announced a share exchange transaction with Ctrip, whereby we exchanged the majority of our stake in Qunar for a 25% voting stake in Ctrip. We look forward to working with Ctrip on product integration with our search, Baidu Maps, Nuomi, and Baidu Wallet products to give our users even wider access to online travel content and services. We have been very happy with Qunar and its superb management team, and we expect to continue our existing business cooperation with Qunar. We see tremendous potential ahead for the industry and remain very committed to online travel space. We look forward to working with Ctrip and Qunar to grow the industry together to enhance the online travel user experience in China. At the end of Q3, we look back on our accomplishments and look forward into coming quarters.
We are even more confident and excited about the prospects for Baidu as we carve into this massive new opportunity. We are just beginning to link the pieces of our existing platform together to create ever larger opportunities for this company as we continue to build the next Baidu. The levels of investment we've committed are substantial, but they aren't daunted by the market place. We've been here before, facing a field of strong competitors, their eyes all on an unfathomably large prize. We've continuously proven ourselves. Finally, we are very excited to welcome Mr. Brent Callinicos and Mr. Yuanqing Yang to Baidu's board of directors. Their extensive leadership experience and industry expertise will bring significant value to Baidu as the company moves into its next stage of growth. With that, I'll now hand over to Jennifer, who can update you on the financials.
Thank you, Robin. Hello, everyone. We reported a solid quarter with growth again driven predominantly by mobile. We're still in the very early innings of unlocking mobile's potential. We see a long runway for growth in mobile search driven by traffic growth, upward trending monetization, and a new incremental local SME merchant customer base. In addition, transaction services, an opportunity in its budding stages, is showing great promise and has demonstrated very strong momentum. This strong momentum gives us the confidence to continue investing in the next Baidu. These investments are tracked and measured carefully, and we keep a close eye on ROI. As Robin mentioned a bit earlier, our platform, technology, and data, coupled with the financial investments, will over time drive more efficient ROI than our peers.
Our gateway products of Search and Maps, our infrastructure products of Baidu Wallet, Baidu Connect, and Local Express, and our transaction services products of Nuomi and Takeout Delivery will all build upon each other and elevate the strength of the Baidu platform in its entirety. We look forward to executing our plan and sharing the progress with the investment community. Starting last quarter, we provided additional disclosure of our business and margin impact of major investment areas. From this quarter onward, to more accurately define our reporting segments, we have renamed Core Search to Search Services and O2O Other to Transaction Services. The underlying products in those reporting segments remain unchanged. Search Services margins remain very robust, in line with the 50s margin levels I shared last quarter, and we expect those margins to be in that range going forward.
On a consolidated basis, Transaction Services had a negative margin impact of 32 percentage points on our overall non-GAAP margins. iQIYI, on a standalone basis, further impacted our overall non-GAAP measures by 5.4 percentage points. Qunar's quarterly financials contribute 6%-7% of Baidu's overall revenue and have a four-point operating margin drag for Baidu's overall financials. With the transaction announced earlier this week, we expect only one month of impact in the fourth quarter. As we announced today, our board has authorized us to commence a repurchase of up to $2 billion of our shares over the next 24 months. This decision is consistent with our overall capital allocation framework and our primary use of capital remain reinvestments in the business to drive long-term shareholder value. Now, moving to the financials, all monetary amounts in RMB unless stated otherwise.
For the third quarter, total revenues were CNY 18.4 billion, representing a 36% increase year-over-year. During the third quarter, Baidu had approximately 623,000 active online marketing customers, a 21% increase from the corresponding period in 2014, and a 6% increase from the previous quarter. Revenue per online marketing customers for the third quarter was approximately 28,300, a 9% increase from the corresponding period in 2014 and a 3% increase from the previous quarter. Traffic Acquisition Cost as a component of cost of revenue in Q3 was CNY 2.4 billion, or 13.1% of total revenues, compared to 12.9% in the corresponding period in 2014. Bandwidth and Depreciation Cost as a % of revenues in Q3 were 5.3% and 3.6%, respectively, comparing to 5.6% and 3.8% in the corresponding period in 2014.
Content cost as a component of cost revenues were CNY 914.5 million, representing 5% of total revenues, compared to 3.7% in the corresponding period in 2014. This increase was mainly due to iQIYI's increased content cost. As indicated in the earlier part of the year, we expect content costs to increase as a % of total revenue, and that will exhibit in Q4. Selling general administrative expenses in Q3 were CNY 5.7 billion, an increase of 111% year-over-year. The increase was primarily due to an increase in promotional spending for Transaction services. R&D expenses in Q3 were CNY 2.7 billion, an increase of 47% over the corresponding period in 2014. The increase was primarily due to an increase in the number of research and development personnel.
Share-based compensation expenses, which were allocated to related operating costs and expense line items, increased in aggregate to CNY 400 million in the third quarter from CNY 234 million in the corresponding period in 2014. SBC increased due to more shares being granted to Baidu employees. Operating profit for Q3 was CNY 2.5 billion, a decrease of 36% over Q3 2014. Total headcount on a consolidated basis, including invested entities, was about 50,650 as of the end of Q3. This is flat from the end of the second quarter. Income tax expenses were CNY 590.5 million for the third quarter. The effective tax rate for the third quarter was 19.4% compared to 15.5% in Q3 2014. Net income attributable to Baidu for Q3 was CNY 2.8 billion, a 27% decrease from the corresponding period in 2014. Basic and diluted earnings attributable to Baidu per ADS for the third quarter amounted to CNY 7.94 and CNY 7.92 respectively.
Net income attributable to Baidu excluding share-based compensation expenses, a non-GAAP measure, for Q3 was CNY 3.2 billion, a 21% decrease year-over-year. Basic and diluted earnings attributable to Baidu per ADS excluding share-based compensation expenses, both non-GAAP measures, were CNY 9.09 and CNY 9.07 respectively. As of Q3, the company had cash equivalents, and short-term investments of CNY 7.1 billion. Net operating cash inflow and capital expenditures for the third quarter were CNY 4.8 billion and CNY 1.9 billion respectively. Now let me provide you with our top-line guidance for the fourth quarter of 2015. We currently expect total revenue for the fourth quarter to be between CNY 18.2 billion and CNY 18.75 billion, representing a 29.5%-33.4% year-over-year increase.
Pursuant to Baidu's exchange of Qunar shares with Ctrip, as a result of which Baidu no longer retains voting control of Qunar, Baidu will no longer consolidate Qunar's financials after October 26th, 2015. Please note this forecast reflects Baidu's current and preliminary view and is subject to change. I will now open the call to questions. Operator, please go ahead.
Thank you. The question and answer session of this conference call will start in a moment. In order to be fair to all the callers who wish to ask a question, we will take one question at a time for each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed. Thank you. We will now take the first question from Mr. Alan Hellawell from Deutsche Bank. Please ask your question, Alan.
Fantastic. Thank you very much. It seems as though some of the impressive margin upside in the third quarter relates to R&D costs. I'm just curious, what should we think of modeling for product development costs going forward? I know that there was a hiring freeze. Related to that, SG&A seems to be coming in below trajectory relative to the original second half guide of 80%-90%. Would a revision of that be merited given the lower spend? Thank you.
Hi, Alan. Thank you for your questions. With regards to R&D expenses, as you can see, R&D continues to represent a steady and a slightly increasing % of the overall revenue. It is an important component of cost for us, and we continue to put a lot of emphasis on R&D investments and capabilities. For the whole year, we don't expect that to change, going forward, as we step into next year, we will give you guidance when the data and we're ready to do so. For SG&A expenses, we provided guidance last quarter that the second half is going to be 80%-90% increase compared to the first half. The plan remains intact, and we're executing accordingly. We're tracking our budget plans, and we're executing on that. There might be a little bit of timing differences.
Going into Q4, bear in mind that we will have consolidated results for Qunar for one month. For the two months that we do not consolidate Qunar, there will be margin improvements as indicated in my prepared remarks. The overall margin for Qunar on Baidu's margin drag for a quarter is about four points.
Thank you.
Thank you. Your next question comes from Mr. Eddie Leung from Merrill Lynch. Please ask your question, Eddie.
Good morning. Just a question about the transactions business. We have seen very strong growth of GMV in Nuomi and food delivery. Just wondering how much of that is driven purely by volume, and have we seen any change in the ASP per order in Nuomi as well as our food delivery? Thank you.
Yeah. The ASP for food delivery has been trending up gradually. For Nuomi, I think Nuomi has been stable in terms of ASP. It's pretty much volume. I think this, too, is still at its very early stage. We are not really driving the ASP at this point. We're more driving the volume, the efficiency, the coverage for merchants and forming a payment habit for our users.
Well understood. Thank you, Robin.
Thank you. Your next question comes from Mr. Piyush Mubayi from Goldman Sachs. Please ask your question, Mr. Piyush.
Thank you. Thank you for the opportunity. A question for you, Robin. With the changes in the industry structure and travel, you've earned a chance of dominating a proven vertical, and you have links in place with several important partners. What are the changes you'd like to see in this industry, in the next couple of quarters or years, and how are you thinking of approaching it?
As you know that we now have a partnership relation with Ctrip as well as Qunar. This actually opens up a lot more travel product and services to Baidu users. In the coming quarters, we will be working with these teams to integrate all kinds of travel products with the Baidu platform services, namely Baidu App, Baidu Maps, Baidu Nuomi. This kind of omni-channel presence on the travel products will not only enhance Baidu user experience, but also open up a lot of opportunities for the travel companies to either attract new customers or provide existing customers better access. Going forward, I would think that the integration between the platform tools and services, such as the Baidu apps and the travel services will be a big change going forward.
Thank you. I'll get back in the queue.
Thank you. The next question comes from Miss Alicia Yap from Barclays. Please ask your question, Alicia.
Hi. Thank you. Good morning, Robin, Jennifer, and Sharon. Thanks for taking my questions. My questions is related to the Transaction services GMV. Can you give us some color that, what is the typical order value per transaction for your Nuomi and Takeout Delivery? What is the percentage of the transaction volume now still attached with some sort of discount or rebate compared to the percentage of transaction with the rebate last quarter? If you can also give some color in terms of recurring rate for the active user sequentially from the second quarter to the third quarter. Thank you.
Like I said, this is still at the very early stage. We'd rather not to break down this kind of details as we are still fine-tuning all kinds of parameters. On a qualitative basis, I would say that the users of Nuomi are quite loyal, and the users of Takeout Delivery are very loyal, too. They keep coming back to spend on our platform. I would say a super majority of the transactions are with subsidies right now. That's the common practice of this industry at this point. We do hope that going forward, this will change. Ultimately, we are working on to improve the operating efficiency and the ROI for our subsidies, so that we will become more competitive.
Mm-hmm. Okay, I'll get back to the queue. Thanks.
Thank you. The next question comes from Mr. Dick Wei from Credit Suisse. Please ask your question, Dick.
Hi. Good morning. Thank you for taking my question. I guess Baidu has done very well in the O2O strategy with very fast growth in GMV. Qunar is a big part of that. I think after the share exchange, how can we ensure the success continue so all the stakeholder of Qunar continue to enjoy the success? Maybe in particular, I think even though Baidu is no longer a direct shareholder in Qunar, how can Baidu ensure Qunar continues to maximize the revenue potential and profitability, and Qunar shareholders and minority shareholders continue to share it without any leakage to other parties?
Hi, Dick. Thank you for your question. With the transaction, Qunar will continue to operate as an independent company. It has really a solid management team and a great track record of execution. I think going forward, by this transaction, Baidu does have more access to the content and provide fuller user experience, as Robin indicated earlier. I think also there will be more alliance and synergies by working across the different platforms. All parties can really focus on driving a bigger development and faster development of the overall travel vertical pie and be very constructive in building that vertical. I think this transaction is quite good for all shareholders related. It help improve efficiency, it builds synergy, and it allows the efforts to really focus on developing the vertical and really making an online platform a better tool for the offline traditional sector players.
going forward, I think, the parties can join forces and really work on building constructive forces to develop the vertical.
Great. Thank you, Jennifer.
Thank you. Your next question comes from Ms. Wendy Huang from Macquarie. Ms. Wendy, ask your question.
Thank you. I just want to get some clarification on the Q3 and Q4 numbers. Excluding that one month impact from Qunar in the fourth quarter, what would be the Q4 revenue guidance? Also, what was the revenue from the transaction-based service in Q3, and what did you actually factor in your Q4 guidance? The reason I ask this is because I'm not quite sure if you are actually making any net revenue out of those transaction services, given that the take rate is quite low and the subsidy is quite high. Thank you.
As I indicated earlier, Qunar's quarterly contribution for revenue is between 6%-7% of Baidu's consolidated total revenue. That will be a quarter. We consolidate only for one month, and you can just ballpark estimate what would be a two-month impact of that. Also, as you noted, for Transaction services, yes, we're in the early days of building that sector. We do not really have meaningful revenues accounted for, as you see for Q3 or into Q4. That is not an element.
Thanks, Jennifer. I will go back to the queue.
Thank you. Your next question comes from Ms. Erica Poon Werkun from UBS. Ms. Erica Poon, just please ask your question.
Great. Thank you. Among your various businesses, I'm just wondering if Robin could just share with us how you rank them according to the long-term growth prospects for Baidu. Also, does the way you have been investing or you will be investing reflect that ranking? Thank you.
Right now, our business basically has 3 different categories. 1 is the core search business. The second is the Transaction services. The third is the online video part, primarily iQIYI. I would say all three of them have great future, great growth potential, but at different stages. I think search, we have been working on search for many, many years. It's the most profitable business for us, and it will still enjoy many years of growth going forward. Transaction services is the biggest bet we are doing right now. It does not give us much revenue. It's losing a lot of money right now, but we think going forward, it will become more and more important and will become part of our search business. It will integrate with the search business going forward. I have been saying that in the past, search is connecting people with information.
In the future, it will also connect people with services. For the investment in services, it's really not only offensive but also a defensive play for us. We would expect people coming to the Baidu search apps to get services, and then we'll be able to take a cut of it. You can say that in the long run, these two will become one. iQIYI is a bit different in terms of product. It's pretty much advertising model. Although the subscription service is also growing quite quickly. It's also losing money, but growing very fast. We're very happy about the progress, but it's a relatively small part of our business.
Thank you.
Your next question comes from Mr. Thomas Chong from Citigroup. Mr. Thomas Chong, please ask your question.
Hi. Thanks management for taking my questions. I have two questions. The first question is about the competitive landscape for the online video sector going forward after we are seeing Alibaba propose to buy out Youku Tudou. The second question is about the cloud computing initiatives. We have seen Microsoft, Google, Amazon are all working on this front. Any color about the strategy for Baidu on cloud computing? Thanks.
Yeah. On the online video, as I mentioned, it's a fast-growing sector, but it's still not making money. We've been investing in this for quite a few years, maybe five or six years, and we will continue to invest aggressively. I think we have proven ourselves. Although iQIYI started much later than its main competitors, it has been growing faster and if you look at all the major metrics, we have surpassed them. I do expect that this kind of growth will continue. For the cloud computing, right now our focus is pretty much to serve our ecosystem, namely our users and our customers who need our cloud computing services. We have not provided the so-called public cloud for non-related parties.
I see. Thanks, Robin.
Thank you. Your next question comes from Mr. Chi Tsang from HSBC. Please ask your question, Mr. Tsang.
Good morning. Thank you for taking my question. I had a question on Nuomi. The market seems to think that when you subsidize, you gain users and you gain GMV. Can you give us some examples of how tactically you're using promotion to drive campaigns and also then how you retain these users? Thank you very much.
Yeah. Right now, it's very common to use subsidies to attract users and generate GMV. I think for Baidu, we enjoy another unique advantage, which is our platform, mobile platform, Baidu App and Mobile Maps. From those services that we mentioned, both in the release and prepared remarks, the MAU are in the hundreds of millions level. We have much broader access to potential customers. We can use that to reach out to our customers. I expect once the subsidies becomes less common, we will actually be able to attract more users on our platform. On the other hand, we think subsidy is necessary because that will help to acquire new users and help them to form a habit of spending on the mobile phone before they go out to the offline merchants.
It's a very complicated process and involves lots of areas that we need to make sure that the operation is efficient enough. There are also technologies that involve recommendations or cross-selling. We need to make sure that people who buy certain type of services can also be recommended for services that they would also be interested. These are the areas that I think can leverage our strengths, both in terms of Baidu's brand reach and technology.
Operator, we're ready for the next question.
Thank you. Your next question comes from Mr. Ming Zhao from 86Research. Ming Zhao, please ask your question.
Hi, good morning. This is Juan Lin on behalf of Ming Zhao. I have one question regarding your guidance. If adding back Qunar to your Q4 guidance, it seems that your guidance implies a revenue growth acceleration in the fourth quarter versus Q3. I'm wondering, what are the reasons for the strong guidance? Is it from a rebounding online marketing business, or is it because of a strong growth from iQIYI subscription revenue? Thank you.
Yeah. I think as we provided our Q4 guidance, it's our best view for the current outlook. We do have very solid Search services, in Q4, we do expect that our iQIYI will have very solid performance. Partially, it is related to subscription business. I also indicated earlier, our content cost will step up and we do expect a lot of high-quality content coming online and also that drives the top-line growth for iQIYI as well.
Thank you, Jennifer. If I could follow up, I'm just wondering, what is advertisers' ad sentiment towards next year? Have you seen any impact from the macro slowdown towards the sentiment?
So far at this point, I think we feel things are going normally. We do not see any meaningful changes in the overall horizon. Bear in mind, Search is very diversified. We serve very diversified customer base. I think we are quite resilient in good times and bad. I think overall, the business is we don't really feel anything major compared to the macro environment.
Thank you, Jennifer. I'll get back to the queue.
Thank you. Your next question comes from Miss Cynthia Meng from Jefferies. Miss Cynthia Meng, please ask your question.
Thank you, management, to give me this opportunity. My question is on the Ctrip deal. With the new stake and partnership with Ctrip, your leadership in the online travel space, how will Baidu's O2O transaction services strategy change in order to leverage this leadership position in the online travel space? Specifically, do you expect the O2O investment to have a higher return and efficiency as a result? Back to your CNY 20 billion commitment on O2O, that was made before this deal substantiated. Is there any change on that number? Thank you.
There will be no change on the CNY 20 billion commitment. It's pretty much about Nuomi. It does not include Qunar or those controlled companies. With the Ctrip partnership, our primary goal is to broaden the product and service offerings in travel. We do not have a clear idea on the revenue and profitability impact yet. I think as time passes by, as we further integrate this kind of travel services with the existing Baidu platform, the user experience will be better, and they will come back more, we will benefit more directly or indirectly.
Thank you.
Thank you. The next question comes from Mr. Ben Lin from Morgan Stanley. Please ask your question.
Good morning. My question actually relates to mobile search monetization. Based on the traffic and revenue breakdown, is it fair to say that mobile monetization now is probably at about 60% of PC, hence that reflects an improvement over the last quarter? I remember that you gave a figure of about 50%. If that's the case, can you just share with us in terms of what are the key drivers? Are you seeing growth in pay clicks, CPC trend? Also, can you provide some color, which category is actually growing faster in mobile versus PC? Thank you.
Yeah, I think the gap for monetization between mobile and PC continue to narrow. It's actually both the CPC and number of clicks are improving. This is the trend that will continue for quite a while because we think mobile is the way to go, and we continue to invest in the monetization capabilities in mobile. It will improve over time, and we believe eventually it will be able to catch up with PC or even surpass that of PC.
Thank you.
Thank you. Your next question comes from Ella Ji from China Renaissance. Please ask your question.
Thank you. I have a question relating to the strategy of Nuomi. The two largest group buy companies in China, Meituan and Dianping, have merged. In future, if we see this merged company started to take down the rebates and coupons, would Nuomi also follow suit and take this opportunity to improve your margin? Would Nuomi continue to provide deep discounts and rebates with a target to gain market share? Thank you.
I think the heavy subsidy in this industry is not sustainable. It will gradually cool down over time, we hope to really compete on the basis of operating efficiency, on technology, on reach, on brand, on service quality, rather than subsidies.
Operator, we'll take the last two questions now.
Thank you. The next question comes from Mr. Jason Helfstein from Oppenheimer. Please ask your question, Jason.
Hey, this is Bo, asking question on behalf of Jason. Congratulations for the strong quarter. My first question is regarding to the other revenue. If my calculation is correct, I think the 700 year-over-year growth can backward derive the ARPU around CNY 100 per paid user. That number is a little bit high to us. Normally, it's around CNY 20 per user subscription online on iQIYI's website. I just want to have an idea, how should we think about a strong monetization capability there? The second question is, how should we think of, is that a possibility that Baidu will take the advantage and the opportunity and to replicate the similar strategy on Qunar and Ctrip's partnership on other sectors such as O2O or even online video to consolidate industry? Thank you.
I will take your question on the revenue for other services. Predominantly, the biggest component is related to the subscription revenue that we collect from iQIYI. Bear in mind, in that number, basically, those are non-online marketing related service. Included in those would also be front user-facing kind of revenue that we earn, including some of the user music service, and some subscription service revenues for cloud, for takeout food delivery fees. A little element of that. You are correct that it is predominantly subscription fee, but it's not all subscription related. There's also a little bit of component related to the Transaction services.
On the consolidation opportunity being O2O and online video, we do see tremendous potential going forward in these areas, and we also see strong synergy between the core search business and O2O as well as online. We will keep an open mind and from time to time to evaluate opportunities that arises.
Thank you, management.
Thank you. The next question comes from Mr. Jin Yoon from Mizuho Securities. Please ask your question, Jin.
Yeah, just a real quick follow-up. On regards to Dianping and Meituan merger, how does that impact how you see your overall growth in other revenues? That's my first question. Also related to the deal, I know that you mentioned that it doesn't really change the CNY 20 billion target on the SG&A, but does this merger necessarily change how you invest going forward in terms of driving market share and mind share? Thanks, guys.
That's for Annie.
Jin, as I mentioned, transaction service revenue is really not a big material number for us at this stage. Obviously, the business itself has a business model, and there will be a take rate that we collect. At this point, it's very early stage. The consolidation at this point is not impacting the transaction revenue, per se.
Yeah, on the investment strategy for Nuomi, I don't think there's going to be a big change. We are continuing to focus on operating efficiency, focus on merchant coverage, focus on user experience, and using technology to acquire new customers. Also using our brand, our platform to attract new customers. We will play out with our strengths to further grow the Nuomi business.
Great. Thanks, guys.
Thank you. The final question today comes from Tian Hou from TH Capital. Please ask your question. Ms. Tian Hou, your line is open. Please ask your question.
Can you hear me? Hello?
Yes, we can hear you.
Can you hear me? Hello? Hello?
Please go ahead.
Yeah. Robin, I'm Tian Hou. Can you hear me?
We can definitely hear you.
Okay, good. My question is really two quick questions. One is related to the deal between you and Ctrip. In the press release, I saw one item, which is Qunar employee, they can convert their shares into Ctrip shares, and I don't see anywhere else regarding the other majority shareholders. Are they going to also have the options to convert their shares into Ctrip shares? That actually is the question I've been asked by a lot of the investors on the street. That's why I want to bring that up. The second question is really related to your O2O. It's kind of messy in the marketplace, and we felt like the users tend to really focus on rebates instead of brands. One question for that is, how much of those CNY 60 billion transactions are actually transacted on your wallet, Baidu Wallet?
Do you see the transaction on Baidu Wallet to continue to grow? How much the frequency of each user has been increased? Are they using your wallet more? Are they coming back to use it? That's the question.
On the Ctrip deal, I think going forward, there are all kinds of possibilities for the-
rest of the Qunar shareholders. We just don't know the outcome yet.
On the O2O, I think the share for Baidu Wallet continue to grow very rapidly, although it's still not the majority of the transactions yet. The frequency is also going up. All kinds of metrics are trending in a healthy way. We are very happy that we have this kind of transaction scenario that can bring in Baidu Wallet, we do think that a fully integrated experience between the O2O services, the platform that attracts users and the payment part. We are probably the only company in China that fully owns this kind of user experience from query to transaction.
Mm-hmm. Thank you, Robin.
We are now approaching the end of the conference call. Thank you for your participation in today's conference call. This does conclude. You may disconnect, have a great day.