Baidu Profit Dips 34% In Q2 After Ads Scandal

Baidu’s second-quarter profits has plunged 34 percent mainly because of its scandal over its policies for displaying paid ads cut into customer growth.
In May, Baidu was summoned by regulators and lashed by Chinese media over the death of a student whose family used the search engine to seek a cancer cure that did not work.
Following the public outcry, the government announced stricter controls over internet advertising, while Baidu itself stepped up checks on customers.
Baidu chairman and chief executive Robin Li said that the company faced a challenging second quarter with heightened regulation in the healthcare sector and on internet advertising impacting our business and operations.
Revenue rose 10.2 percent to 18.3 billion yuan for the period.
Chinese regulators have ordered Baidu to change how it displays search results following the death of Wei Zexi, 21.
Wei had been diagnosed as having a terminal soft tissue disease when his family found an experimental immunotherapy treatment at a Beijing hospital run by the armed police force via a Baidu search.
When it did not work, Wei accused the hospital of exaggerating the treatment’s efficacy and accused Baidu of ranking medical information search results by the amount paid by advertisers.
Chinese regulators found Baidu’s system for ranking results depended on prices paid and that the company did not clearly state which ads were paid for by a sponsor.
The government will implement a new law on internet advertising on September 1, while Baidu has increased requirements for online healthcare advertisers and is expanding them to other business sectors, company officials said.

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