Baidu questioned over online ads after student death

Baidu, China's largest online search engine operator and one of the country's largest entertainment giants, is being investigated by Chinese internet authorities after the death of a computer-science student sparked outrage. The student had cancer and sought treatment after reading about questionable medical treatment that was advertised at the top of Baidu's online search results. The student's death caused outrage and Baidu was blamed for not doing more to check its advertising clients. This incident is likely to affect the search engine's reputation for social responsibility as well as its earnings, especially as 30% of Baidu's ad revenue comes from medical advertising. China's president, Xi Jinping, said that search results should not be based on who pays the most money.     

Regulators from two departments have launched a probe into Baidu, China’s largest online search engine operator and one of the country’s largest entertainment giants.

The investigations follow the death of a 21 year old student who had cancer and sought treatment with an experimental medical procedure that he found at the top of his search rankings on Baidu.

The man’s death has sparked online outrage and suggestions that Baidu should have done more to check out the claims of its advertising clients.

That online storm has since been matched by the thundering of the People’s Daily newspaper which accused Baidu of putting profits ahead of morals.

“Baidu serves as the entrance for the majority of Chinese internet users to search for information, but it is a seemingly open and wide entrance to knowledge that has become choked at the throat by capital,” the state-owned paper said.

With criticism of that sort from the organ of the Communist Party, it was largely inevitable that the regulators stepped in too. It emerged on Monday that the company is to be investigated by both the Cyberspace Administration and by the State Administration for Industry and Commerce.

Baidu, which among other things also owns iQIYI, one of the leading online video platforms in China, last week reported first quarter revenue that was up by 24% at US$2.43 million (RMB15.8 billion.) Net profits were down by 19% at US$291 million (RMB1.89 billion.)

Baidu’s NASDAQ-traded ADRs were down by 7.5% in early trading on Monday, wiping some $4 billion off the company’s value.