The top placement of a “gay treatment” service in Chinese search results that featured electroshock as part of its “treatments” is bringing the Chinese search engine Baidu Inc (ADR) (NASDAQ:BIDU) and its search engine placement policies into strong focus.


Xiao Zhen suing Baidu along with the Xinyupiaoxiang Clinic

In the first legal challenge of its kind in China, 30-year-old Xiao Zhen is suing the goliath search engine Baidu along with the Xinyupiaoxiang Clinic, according to a report in MarketWatch.  Zhen claims the clinic, advertising the “gay treatment,” had a faulty psychiatry license and seeks $1,620 (10,000 yuan) in damages.  It is unclear from press reports if Zhen actually purchased services from the clinic or if he only experienced the search engine listings.

Baidu Inc (ADR) (NASDAQ:BIDU), however, responded, saying the clinic had a business license for  “psychological counseling” and the difference between “counseling” and “treatment” was indistinguishable, a report by state-run Xinhua News Agency quoting the company’s lawyer in the case, indicated.  A verdict has not been returned in the case, which heard final arguments on July 31, according to the press report.  Whether the clinical certification was in order was not known to Biadu, they were only obliged only to examine his business license, which was apparently in order.

US search engines, it should be noted, are not required to check on the background of those who place ads, the first of many apparent differences with China’s Baidu.

Baidu manipulating search results

The case highlights how Baidu Inc (ADR) (NASDAQ:BIDU)’s search results are manipulated by the search engine and don’t distinguish between organic search results and paid listings, a charge made in a MarketWatch press report but disputed by Baidu.

In a statement to ValueWalk, Baidu said: “Baidu DOES distinguish quite clearly between organic and paid search results, and places the latter in the same manner as Google in the right column, or with either a color undertone at the top of the left column on the search engine results page, or with the clear Chinese characters indicating that they’re sponsored results.”

One press report suggested Baidu engaged in “blackmail marketing,” punishing a company’s search listing when the firm failed to pay them. Nearly eight years ago Chinese state broadcaster CCTV accused Baidu of interference in its search results. The charges said the search giant, without any real competition in China, displayed top listings of paid results but didn’t identify this as paid advertising.

The report charged that when companies failed to contract with Baidu, the search engine algorithm would be altered in a way that results hid the listings of companies which refuse to pay Baidu’s “blackmail.”  In this case, Baidu Chief Executive Officer Robin Li denied the deliberate use of blackmail marketing while at the same time apologizing for the “actions of some managers that may have resulted in some result getting buried,” according to the report.

Baidu Inc (ADR) (NASDAQ:BIDU) has captured over 70 percent of China’s search-engine market, as the Chinese company hasn’t faced a serious competitor since Google shuttered its Chinese site in 2010 after a censorship dispute with the government.