Internet

Bad Ads: Baidu Adjusts Chinese Revenue Expectations

Signaling that advertisers might shun Internet advertising in an economic downturn, and just weeks after it was hammered by investors for selling illegal medical advertisements, Chinese Internet search engine Baidu.com (BIDU) has rightfully adjusted its revenue expectation for the fourth quarter of 2008 to between CNY890 million and CNY900 million, decreasing CNY100 million compared with its previous estimate.

Baidu previously predicted CNY1.025 billion to CNY1.055 billion revenue in the same period.

The company says the reasons for the adjustment are that the effect of the slowdown of China's economic growth on the Internet market is higher than expectated; the company has recently cancelled the ranking of some pharmaceutical customers, because these customers failed to hand in their operating permits to Baidu; and after a overall check, Baidu.com cancelled the ranking of many customers outside the pharmaceutical industry.

Robin Li, CEO of Baidu, says that advertisers are adapting to the current economic situation and they will recognize the value of the paid Internet search as a performance method. He says he believes that Baidu's market position will be enhanced, because they are evolving their business model in accordance with the rapidly changing market. Looking to the future, Baidu will continue to focus on the improvements of its operation, products and execution capacity.

China Central Television aired a report on November 15, 2008 and said Baidu was being used as a platform for unlicensed pharmaceutical companies to sell their medical wares. Baidu's share price sunk more than 35% on news of the crackdown and the company then pledged to straighten itself out.

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