Daily Management Review

Searching Questions for Baidu Raised by Reliance on China Health Sector


Searching Questions for Baidu Raised by Reliance on China Health Sector
The faultlines in the company's business model, which relies heavily on income from the country's lightly regulated health sector was exposed by the death of a student following experimental cancer treatment he found through China's biggest search engine, Baidu Inc.
Baidu, which controls 80 percent of the Chinese search market, was accused y the student - Wei Zexi, 21, before his death of promoting false medical information while the military-run hospital was accused of providing the failed treatment for misleading claims about its effectiveness.
While the internet regulator began an investigation into Baidu, this week the health ministry began an investigation into the hospital.
What, if any, offences or regulations might have been broken and did not respond to requests for comment have not been made clear by the regulators.  
Regulators could be checking for compliance with China's Advertisements Law, which says medical sector advertising should not contain assertions about effectiveness, analysts at Daiwa said.
It was also conducting an investigation and would fully cooperate with the regulator, Baidu said.
Wei suffered from a rare synovial sarcoma and it is not clear that conventional treatment - typically surgery to remove the tumor - would have cured him.
How Baidu handles adverts within its search results, especially from an industry as sensitive as healthcare is has come in for fierce online criticism. These adverts  provides 20 to 30 percent of its search revenues, say analysts at Nomura and Daiwa.
In 2015 search revenues were 55.7 billion yuan ($8.6 billion), or 84 percent of Baidu's total sales.
"Whatever page you're looking at on Baidu is a mess of adverts. They're profiting from loads of people who don't know Baidu auctions (its search results)," said username FreedLiu on China's Weibo microblog, discussing Wei.
With screening for misleading adverts and a verification program with additional scrutiny for medical advertisers, Baidu said it applied particular vigilance to healthcare customers.
"Over the years, we have proactively cleaned up the customer base," a company spokeswoman said by email to Reuters.
Though it has not suffered substantive sanctions for its handling of healthcare ads and blogs, this is not the first time the company has fallen foul of regulators and public opinion.
After state media said it let unlicensed medical service providers buy high search rankings in 2008 the company said it would overhaul its operations. The hospital that treated Wei, however, is licensed by the Beijing municipal government.
When the internet regulator found illegal content in its search results and online forums, including ads for unlicensed clinics, in January Baidu apologized for management failures.  Forum users said that Baidu also sold the rights to manage a disease discussion site to a company selling treatment for that illness.
"Baidu has had issues come up about the types of medical ads they accept since 2008," said Mark Natkin, managing director of Marbridge Consulting in Beijing.