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“China’s Google” Works To Save Reputation

Posted on: Wednesday, 19 November 2008, 17:30 CST

Baidu.com, considered “China’s Google”, is working hard to save its reputation after state media reports accused the company of permitting unlicensed medical suppliers to purchase higher rankings on its search results page without informing users.

U.S. shares of Baidu’s stock plummeted this week since the report, including a 30 percent drop Monday. 

The company says it has suspended thousands of merchants from its paid-search service, but maintains firmly that it broke no laws.

Following its launch in 2002, Baidu (pronounced "by doo") has enjoyed soaring profits, which grew 91 percent in the latest quarter, and has captured 60 percent of the market share, far in excess of Google’s Chinese Web site.

The new accusations, which represent a big setback for the firm, are potentially explosive amid public outrage at China’s recent tainted milk scandal, which killed and sickened thousands of infants.

"There's a very low tolerance for anyone that seems to be involved in exposing consumers to health risks in China," Citigroup analyst Jason Brueschke told the Associated Press.
 
Baidu’s CEO Robin Li said the company is working to reassure users, and is now requiring customers that sell beauty, medical and health food products to prove they are licensed in their fields before they can participate in Baidu’s paid-search service.

However, he emphasized the move was not required by law and said search engines could not be expected to vouch for information on the Internet.

"We are doing this because we care . It is important to us. We want to be a responsible corporate citizen," Li said during a conference call with analysts on Wednesday.

Nevertheless, "if I had to speculate, our traffic will be negatively affected in the short term," he acknowledged.

While little-known outside China, Baidu is one of the most-visited Web sites in the entire world due to its dominance among China's massive population of 253 million Internet users.  Many of these users are proud of the Chinese company that has conquered foreign competitors to become an industry leader.

However, China Central Television (CCTV) said over the weekend that the company’s paid-search service, which lets Web sites pay to be displayed higher among search results, permitted links to unlicensed firms that sold medical products or services. According to CCTV, these Web sites sold treatments for everything from sexually transmitted disease to cancer and other conditions.
 
Some who commented on Chinese Web sites have criticized Baidu.

"The insiders are helping fraud!" one commenter wrote. 

However,  others argued that competitive search engines do the same thing, and urged users to support the company.

Indeed, Google and other Chinese search engines do offer such paid-search services.   The critical issue is whether Baidu distinguishes to its users which of the sites have paid for premium placement within search results.

Google and Baidu's Chinese competitors display paid listings in a separate box, while Baidu lists all results together with the word "promotion" in small characters.

"One of the things CCTV has implicitly said is that because Baidu does not clearly differentiate between what is sponsored and what is natural, the consumer runs the risk of being confused," said Brueschke.

"If there is a muddling of that distinction, has Baidu somehow contributed to consumers' purchasing products that harmed them?"

According to some users, Baidu carries so many paid items that the entire first page of search results consists entirely of promotions.

Li said the company plans to change its display to ensure paid results are clearly distinguishable.


"We thought it was clear," he said.

"But we do hear from the media from time to time that they are confused about paid and non-paid results. So we are working on a better system to address this issue."

The setback is not the first time Baidu's reputation has taken a hit in recent months.  In September, Web sites buzzed with accusations that Baidu was paid to conceal information on tainted milk.    Baidu responded that Sanlu Group, the company that produced the tainted milk, had asked Baidu to exclude bad news about the company from search results.  However, Baidu says it rejected the request.

"Baidu respects the truth and their search results reflect that commitment," said the company in a  statement.

Li also has dismissed claims that Baidu excluded Web sites from search results if their operators failed to pay.  The company has even been sued by music groups that claim Baidu's music-searching service links to Web sites that carry pirated content.

"There is an image problem but it doesn't have to be terminal," Duncan Clark, BDA China Ltd.’s managing director told the AP.

"If they mishandle this it could be a real problem."


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Image Courtesy Of Google

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Source: redOrbit staff

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