BAIDU, INC. filed this Form 20-F on 03/31/2017
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Table of Contents

Operating Costs and Expenses

Our operating costs and expenses consist of cost of revenues, selling, general and administrative expenses, and research and development expenses. Share-based compensation expenses are allocated among the above three categories of operating costs and expenses, based on the nature of the work of the employees who have received share-based compensation. Our total operating costs and expenses increased significantly from 2014 to 2016 due to the growth of our business.

Cost of Revenues

The following table sets forth the components of our cost of revenues both in absolute amount and as a percentage of total revenues for the periods indicated.


     For the Years Ended December 31,  
     2014     2015     2016  
     RMB     %     RMB     %     RMB     US$     %  
     (In thousands, except percentages)  

Total revenues

     49,052,318       100.0       66,381,729       100.0       70,549,364       10,161,222       100.0  






















Cost of revenues:


Sales tax and surcharges

     (3,597,763     (7.3     (4,644,357     (7.0     (4,718,468     (679,601     (6.7

Traffic acquisition costs

     (6,328,155     (12.9     (8,860,861     (13.3     (10,372,516     (1,493,953     (14.7

Bandwidth costs

     (2,847,770     (5.8     (3,716,747     (5.6     (4,716,416     (679,305     (6.7

Depreciation of servers and other equipment

     (1,987,690     (4.1     (2,559,623     (3.9     (3,074,893     (442,877     (4.4

Operational costs

     (2,217,555     (4.5     (3,881,609     (5.9     (4,429,713     (638,011     (6.3

Content costs

     (1,871,906     (3.8     (3,745,063     (5.6     (7,863,585     (1,132,592     (11.1

Share-based compensation expenses

     (34,611     (0.1     (49,770     (0.1     (103,354     (14,886     (0.1






















Total cost of revenues

     (18,885,450     (38.5     (27,458,030     (41.4     (35,278,945     (5,081,225     (50.0






















Traffic Acquisition Costs. Traffic acquisition costs typically represent the portion of our online marketing revenues that we share with our Baidu Union members. We typically pay a Baidu Union member, based on a pre-agreed arrangement, a portion of the online marketing revenues generated from valid click-throughs by users of that member’s properties.

Bandwidth Costs. Bandwidth costs are the fees we pay to telecommunications carriers such as China Telecom and China Unicom for telecommunications services and for hosting our servers at their internet data centers. We expect our bandwidth costs, as variable costs, to increase with the increasing number of racks of servers and the increasing traffic on our websites and mobile platform. Our bandwidth costs could also increase if the telecommunications carriers increase their service charges.

Depreciation of Servers and Other Equipment. We include in our cost of revenues depreciation expenses of servers and other computer hardware that are directly related to our business operations and technical support.

Operational Costs. Operational costs include primarily salary and benefit expenses, intangible assets amortization, payment platform charges, delivery cost of Baidu Deliveries and Baidu Nuomi, and other expenses incurred by our operating and technical support personnel. Salary and benefit expenses include wages, bonuses, medical insurance, unemployment insurance, pension benefits, employee housing fund and other welfare benefits.

Content Costs. Content costs consist primarily of the fees we paid for the licensed content from copyright owners or content distributors, and the amortization of the licensed copyrights for video content.