Baidu Revenue Forecast Drops 10% Amid Overhaul of its Paid-Search Advertising Service
Yicai Global
/SOURCE : Yicai
Baidu Revenue Forecast Drops 10% Amid Overhaul of its Paid-Search Advertising Service

(Yicai Global) June 14 -- Baidu Inc. [NASDAQ: BIDU] revised its second quarter revenue forecast today from between CNY20.11 billion (USD3.05 billion) and CNY20.58 billion to between CNY18.1 billion and CNY18.2 billion, a decrease of 10 percent.

The drop in the Internet giant's fortunes is closely related to an investigation led by the Cyberspace Administration of China into its online advertising services. The probe was triggered by the scandal surrounding the death of college student Mr. Wei Zexi who died in April after receiving an ineffective cancer treatment advertised on Baidu.

The investigation revealed that Baidu's practice of placing unverified business's information at the top of Internet searches in exchange for huge profits did affect Mr. Wei's choice. Many online users believe that the ranking of online search results is derived from the volume of searches, not the amount paid.

Baidu was ordered to rectify the situation immediately and since May it has been overhauling its paid-search advertising service and customer credit-based ranking mechanism. A total of 126 million pieces of medical data of 2,518 unqualified medical establishments have been removed, and paid-per-click ads will not exceed 30 percent of all search results.

Previously, China's largest search engine used a bidding method that ranked ads according to the price paid. The company could collect as much as CNY999 (USD152) per click in pay-per-click fees from the advertiser.

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