Baidu revises revenue on search ad monitoring
Shares of Chinese Internet giant Baidu became volatile Tuesday after the nation's largest search engine cut its revenue forecast for the second quarter by as much as $400 million.
The company issued the revised guidance in the wake of new advertising regulations put into place after a Chinese college student died in April from cancer. The student, Zexi Wei, had received unsuccessful experimental treatment that he learned about on a Baidu search paid listing.
Shares of Baidu (BIDU) were down 11% in premarket trading Tuesday and fell to $159 upon the market's opening. But shares rebounded to $169.51, up 3.5% after a half hour of trading, then fell again closing at $160.84, down about 1.7%.
Chinese regulators found that Baidu's online marketing practices allowed some paid search results to surface that were not clearly identified as paid online marketing and could mislead users. Baidu has modified its paid search practices to "deliver a better user experience and build a safer and more trustworthy platform for users, including turning down customers who do not meet Baidu's new requirements," it said in a statement late Monday.
Among actions that Baidu has taken include increased review of ads and usage fewer sponsored links, a move that will limit revenue growth, the company said. The company expects second quarter 2016 revenue to be in the range of $2.8 billion (18.1 billion yuan) to $2.83 billion (18.2 billion yuan), down from $3.1 billion (20.1 billion yuan) to $3.2 billion (20.58 billion yuan) in its previous forecast.
"Baidu provides a strong, unique value proposition to its users and customers by helping users find whatever it is they are looking for, and connecting online marketers with those users. This role comes with great social responsibility and user experience is our top priority," said Baidu Chairman and CEO Robin Li in a statement. "Although a significant portion of our revenue is sacrificed, the steps we have taken to further bolster a healthy, safe and trustworthy online and offline ecosystem will result in long term benefit and reward for Baidu."
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