China’s Baidu sees slow recovery of online advertising business amid stricter industry regulations

Chinese internet search giant Baidu faces a slow recovery in its core advertising business amid tough measures imposed by regulators, following public outrage over the death of university student Wei Zexi linked to a cancer treatment he found online.

“The implementation of new regulations, and the stricter standards that we proactively imposed to make our platform more robust, will likely suppress revenue for the next two to three quarters,” Baidu founder and chief executive Robin Li Yanhong said in a conference call with analysts on Friday. “This period of uncertainty will pass.”

That may have been a worse-than-expected assessment from Li, as analysts previously forecast the impact of more stringent regulation in Baidu’s online advertising revenue could ease up later this year.

“Our users come first,” Li said. “The stricter standards and regulations will enhance the user experience, and have a long term positive impact resulting in a healthier industry environment.”

Baidu, which commands about an 80 per cent share of China’s online search market, had earlier reported a 34 per cent drop in net profit in the second quarter to 2.41 billion yuan (HK$2.81 billion), down from 3.66 billion yuan in the same period last year.

That was the Beijing-based company’s worst quarterly decrease in profit, which resulted from a modest 4 per cent year on year growth in its online marketing revenue that reached 16.94 billion yuan.