Chinese Internet giant Baidu Inc’s (百度) second-quarter profits plunged 34 percent, as a scandal over its policies for displaying paid advertisements cut into customer growth.
In May, Baidu was summoned by regulators and lashed by Chinese media over the death of a student whose family used the search engine to seek a cancer cure that did not work.
“Baidu faced a challenging second quarter with heightened regulation in the healthcare sector and on Internet advertising impacting our business and operations,” Baidu chairman and chief executive Robin Li (李彥宏) said.
Net income for the quarter ending June 30 was 2.4 billion yuan (US$360.6 million), down 34.1 percent on-year, the NASDAQ-listed company said after the market closed on Thursday.
Revenue rose 10.2 percent to 18.3 billion yuan for the period, it said.
“The implementation of new regulations and the stricter standards that we proactively imposed to make our platforms more robust will likely suppress revenue for the next two to three quarters,” Li said.
Chinese regulators have ordered Baidu to change how it displays search results as they found Baidu’s system for ranking results depended on prices paid and that the company did not clearly state which advertisements were paid for by a sponsor.
The Chinese government is to implement a new law on Internet advertising on Sept. 1, while Baidu has increased requirements for online healthcare advertisers and is expanding them to other business sectors, company officials said.
Baidu said that 667 million people used it for online searches from mobile devices last month, a 6 percent rise year-on-year for the month.
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