After Baidu was accused of promoting false medical information on its search platform last month, Chinese regulators initiated an investigation on the search engine’s practices and have now issued new rules for online search and advertising in the country. The regulator recently announced that search companies must provide “objective, fair and authoritative” results which shouldn’t harm the rights and interests of the nation, public and other legal organizations. Search companies are also required to identify and label paid ads clearly, distinguishing them from regular search results and limiting the number of paid ads per page. As Baidu works towards meeting these regulatory requirements and reducing sponsored links, the company revised its second quarter revenue guidance from around $ 3.2 billion (its previous estimate) to around $ 2.8 billion (post new regulatory guidelines). Search services revenue per user is a key driver of Baidu’s valuation and a decline in this number will impact the company’s valuation negatively in the short term. That said ethical practices should improve user trust and benefit the company in the longer term to grow its user base.
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