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Baidu's shares fell by 5 percent in pre-market trading in New
York following the move, as healthcare provides 20 to 30 percent
of the company's search revenue, analysts at Nomura and Daiwa
said. Search revenues represented some 84 percent of the firm's
total sales in 2015.
Baidu shares have fallen since the controversy over the death of
student Wei Zexi erupted at the start of the month and had lost
10.5 percent of their value by last week's close.
The restrictions mean the company must clean up in-search
healthcare adverts and paid-for search adverts of any kind
cannot only be based on the highest bidder, a statement from the
internet, industry and health regulators which was posted on the
website of the Cyberspace Administration of China said.
Such adverts must be restricted to no more than 30 percent of a
page of search results, the statement said.
"If they do enforce that, it would likely significantly cut into
revenues," said Mark Natkin, managing director of Beijing-based
Marbridge Consulting.
A spokeswoman for Baidu said it accepted the regulator's
decision and will firmly implement the requirements on it
following the in-search adverts investigation.
Baidu has come in for fierce online criticism for how it handles
adverts within its search results.
Before his death, 21-year-old student Wei Zexi not only
criticized the military-run hospital that provided the failed
treatment for misleading claims about its effectiveness but also
alleged that Baidu, which controls 80 percent of the Chinese
search market, had promoted false medical information.
Baidu said when the inquiry started it was also conducting an
investigation and would fully cooperate with the regulator.
The company said it applied particular vigilance to healthcare
customers, with screening for misleading adverts and a
verification program with additional scrutiny for medical
advertisers and had cleaned up its customer base.
(Editing by Alexander Smith)
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