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Troubled health

3 May 2016 By Robyn Mak

Baidu’s selloff shows health is a huge flashpoint in China. Regulators launched a probe after a dying student accused the country’s top search engine of promoting false medical information. Investors have cut more than $5 billion from Baidu’s market capitalisation. That is a big move but not necessarily an overreaction. Health scandals are highly sensitive in the People’s Republic and authorities pay close attention to outbursts of online anger.

The investigation focuses on cancer patient Wei Zexi. State media says Wei underwent an experimental treatment advertised on the search engine, and before his death criticised Baidu and the hospital in question online. Angry internet users accused the $62 billion search engine giant of prioritising ad dollars over safety. China’s internet overseer stepped in on May 2.

Baidu says it carefully vets health advertising. Moreover, China’s current ad legislation does not even cover paid-for search results. Similar to Google, sellers and merchants can pay to be featured prominently in adverts that are shown above or to the right of normal search results, with payments based on click-through rates.

That said, the near-8 percent fall in Baidu’s share price could still be justified. Baidu depends almost entirely on advertising revenues, which at $9.9 billion last year were 96 percent of total sales. Within that, healthcare is one of five sectors that together make up more than half of its total ad sales, according to analysts at Bank of Communications. Baidu could end up accepting less medical business, and spending more on reviewing clients and adverts.

It could also simply suffer from a heavy-handed official response. Scandals over the years, from tainted blood to toxic milk powder, have made public health an especially touchy subject. And Beijing is still reeling from revelations of illegal vaccine sales, which sparked nationwide public anger in March and prompted regulators to punish hundreds of officials. That is particularly potent when combined with online fury.

This piece has been corrected to change the date in second paragraph to May 2.


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