A tragic incident has made authorities in China impose restrictions on healthcare adverts carried by search engine Baidu Inc.
The ads will be subject to new rules following the death of a young student who underwent experimental surgery after seeing an advert on Baidu. China’s biggest search engine makes a huge amount of money from healthcare ads, according to Reuters.
Baidu Inc – Baidu shares drop after news of controversy breaks
Regulators will now impose limits on the ads, provoking a 5% drop in Baidu shares in pre-market trading in New York. Healthcare accounts for 20-30% o the company’s search revenue, according to analysts at Nomura and Daiwa. Search revenues made up 84% of total sales in 2015.
The restrictions were imposed following the death of Wei Zexi, a student who found an advert for experimental cancer treatment on Baidu. His death caused great controversy in China, and wiped 10.5% off the company share price last week.
The new rules mean that in-search healthcare adverts must be better regulated, and paid-for search adverts of any kind should not be sold simply to the highest bidder, according to the internet, industry, and health regulators. A statement detailing the changes was published on the Cyberspace Administration of China website.
The statement says that these adverts cannot constitute more than 30% of a page of search results. “If they do enforce that, it would likely significantly cut into revenues,” said Mark Natkin, managing director of Beijing-based Marbridge Consulting.
Crackdown on misleading medical information in China
A Baidu spokeswoman said that the company had received the regulator’s requirements and would implement the changes.
The search engine has been heavily criticized online for the way that it manages ads in search results. Wei Zexi died after undergoing experimental treatment at a military-run hospital, but before his death the 21-year-old student criticized the hospital and Baidu.
He accused Baidu of promoting false medical information. The search engine controls 80% of the Chinese search market, so it’s influence is widespread.
Baidu says that it is conducting its own investigation into the incident, and would also cooperate with regulators on the matter. The search engine said that healthcare customers were subject to special procedures which screen for misleading adverts, as well as a verification program designed to clean up its client base.
