Baidu reputation at risk over promotion of misleading medical data

Baidu's stock fell 7.9% when Chinese officials ordered it to clean up its search results after an investigation into the death of a student who relied on its service to look for cancer treatments. However, its reputation also took a hit. In the future, its management team will need to be cognizant of its reputational damage and of how trust plays a major role.

Baidu, a major Chinese internet firm, is under scrutiny after being accused of promoting misleading medical information—how will markets and politicians respond?

From automobile emissions scandal to the Panama Papers, reputation management is becoming an ever more challenging business. That is why businesses spent $10.7bn on top PR firms last year–to “optimize” target audiences and rapidly rebuke those conspiring against them.

But what if your crisis comes from beyond the grave? What if your audience is a billion-plus angry netizens, and one of the most powerful governments in history?

That is the hot water Baidu, China’s internet giant, landed itself in earlier this year. Wei Zexi, 21, spent his last breath complaining about the search engine’s advertising policy, which allegedly led (or misled) him to ineffective cancer treatment and subsequently death. Writing on an internet forum, Wei said his family received false information on the failed impact of the RMB 200,000 (approx. £20,800) treatment, and asked aguishly: “What do you think is the greatest evil of human nature?”

The episode prompted angry responses from netizens and the Government which has turned its fire on the company. Officials in Beijing now find that Baidu, touted as China’s answer to Google has put profit before people, and ordered the company to clean its search results. As the controversy raged and news of the investigations broke, Baidu’s stock fell 7.9%.

It has been a shock for Baidu whose fortunes up until now had been very different. Together with the likes of Alibaba, Tencent, Suning, Baidu was supposed to be a role model business in what President Xi Jinping called the Chinese dream. While State Owned Enterprises (SOEs) like Sinopec are still important abroad, it is private sector internet entrepreneurs who project internationally China’s soft power, which remains disproportionately small compared to the size of its economy and military might.

Perhaps the penny has finally dropped and consumers and officials are beginning to realise that Chinese capitalism is no less profit-driven, with all its benefits and flaws, than American or any other market economy. In fact, with such high pace of growth, morality is often missing in this “seriously ill” society. where a child victim of hit-and-run would be ignored by passers-by.

But at the same time, the “China model” has also lifted many millions of people out of poverty and provided new opportunities including the chance of higher education abroad which would have been unthinkable just a decade ago.

In this age of contradiction between profit and people, state control and free enterprise, it is difficult to position a business so it can ride the waves as Baidu has found to its cost. It sought to be the best in the business of connection, yet saw trust in the way it operated damaged.

It’s far too early to see whether any permanent damage has been caused. Attention spans are shorter than ever. Coverage of Baidu has since turned positive with headlines focusing on its big data and artificial intelligence innovations, both with huge potential to be a force for good in the world. Baidu’s bosses will be vigilant, however, for they recognise their hard-earned reputation has taken a blow. Next time, they know the trust in which they are held will be weaker and the damage will be more severe.