Baidu Shares Suffer from Medical Malaise

19 November 2008

BEIJING: Shares in, China's largest search portal, fell by 25% earlier this week after local news website SINA revealed the portal had sold medical search keywords to unlicensed health clinics and pharma companies. 

Baidu's share price hit a year-long low of $130.51 (€103.22; £86.95) on Monday, closing at $134.09, following reports that health centres and drugs providers with questionable credentials had bought the search terms.

According to investment bank Piper Jaffray, a number of the promoted destinations were probably "non-accredited medical websites that should not score as high on sponsored results."

The sites have now been removed from Baidu's results, a move Piper Jaffray argues constitutes "an acknowledgment that sales techniques allowed questionable websites to buy their way to top positions for consumer-sensitive verticals.”

As medical keywords make up a small proportion of Baidu's search advertising income, most analysts predict the share slump will be short-lived.

Says Steve Weinstein, an analyst at technology investment specialists Pacific Crest: "I think there's going to be such a modest impact because, if you kick all those advertisers out, it's likely there are other bidders for the keywords they were bidding on.

"There are going to be legitimate advertisers who want that traffic."

Data sourced from Wall Street Journal Online; additional content by WARC staff