Investors, analysts, and the markets seem to agree that Daily Active Users (DAU) are an important metric for evaluating online and mobile businesses. Baidu (NASDAQ:BIDU) clearly agreed with that, when in response to an SEC inquiry last year, Baidu told the SEC that "the number of average daily active users is the primary metric that the company uses to analyze and manage its mobile search offerings" (July 2nd 2013).
In the same letter to the SEC, Baidu said it would provide DAU statistics, including the average number and growth rate, in their future annual reports.
Yet when the 2013 annual report was filed, there was no mention of mobile DAUs.
The SEC can be credited for keeping on top of the situation, and it renewed the inquiry (just made public on July 29th 2014) asking, in effect, what happened to the promised disclosure?
Baidu replied on May 8th 2014, DAUs are no longer relevant because mobile revenues as a percent of total revenues is now how they measure the business. That was misleading, because not even two weeks earlier, on April 25th, Baidu was trumpeting its mobile DAU growth on the Q1 2014 earnings conference call. At the same time, there was no mention of the supposedly important metric of mobile revenue as a percentage of total revenues.
The Q1 2014 DAU statistics appeared solid, growing from 130m to 160m in just six months (Q1 2014 conference call). But on the Q2 2014 conference call, Baidu did not disclose total mobile DAUs, instead switching to another new metric, "Mobile Baidu" DAUs, which came in at 70m, with no comparable period numbers or growth rates.
Investors and analysts may be wondering what the company is trying to hide. Baidu's continuously changing mobile user disclosures and lack of comparability is troubling. By keeping DAUs out of the annual report, the numbers are not reviewed by auditors and would not require a restatement if they were faulty. Baidu's failure to provide reliable information makes it difficult to appreciate growth rates and trajectory for the mobile business, and investors should demand consistent, comparable quarterly mobile user metrics.
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