Chinese internet regulators on Monday ordered local search giant Baidu to "clean up" certain advertising practices and to make it more obvious when search results are ads.
The Cyberspace Administration of China began investigating Baidu after the death of a 21-year-old student who had sought a costly alternative cancer treatment he found through a sponsored search result on Baidu. Before he died, Wei Zexi had used a public internet forum to lash out at Baidu; his death drew widespread attention in China.
Baidu is China's biggest search engine and the No. 2 in the world after Google, which is blocked by China's Great Firewall. For months, since another scandal also involving healthcare and ad revenues, posts have popped up on Chinese social media accusing Baidu of going too far in search of profits and comparing it unfavorably to Google.
Google's paid search results do seem to be more clearly labeled than Baidu's, said Shelleen Shum, forecasting analyst at eMarketer. Google's paid results have a small yellow label that marks them as an ad. On Baidu, the word "promotion" shows up in gray, off to the side of a search result. Ms. Shum noted that Google has in the past revamped the way sponsored ads show up on their results page, given calls from the U.S. Federal Trade Commission for ads to be more distinguishable.
Baidu said in an emailed statement that it "accepts and supports the government's decision and will implement these measures in a timely manner. We strive to provide the best experience to our users and will continue to uphold high standards to make our platform safe and trustworthy."
It also said it had set up a $153 million fund to compensate users who have been defrauded.
Medical- and healthcare-related ads have been a substantial source of search revenue for Baidu; the stock price dropped last week on news of the probe and was down a further 2.5% on Monday in mid-morning trading, to $169.44.
The regulator's toughly worded statement issued "rectification requirements" for Baidu and noted that search "ranking should not be determined solely on how much was paid."
It ordered Baidu to "immediately and comprehensively clean up and rectify promotion services involving healthcare," and ensure that medical institutions that don't have clearance from authorities are not advertised.
The authority said Baidu must clearly label search results that are promoted and attach a warning notice of potential risks to them. It also said sponsored search results must make up less than 30% of each page.
Earlier this year, Baidu ran into trouble from regulators when it sought to monetize social forums used by people looking for support and information about their medical problems. Many users were angry Baidu accepted sponsorship money from hospitals they consider to offer poor quality of care.