China has recently tightened the regulation for publishing ads on search engines such as Baidu, according to the documents published by the Cyberspace Administration of China (CAC), which also demands improvement in the censorship system, as well as the removal of any content deemed illegal.
The regulations have been published after the tragic death of Wei Zexi, a 21-year-old student from Shaanxi, affected by a rare form of cancer. The family of the deceased claimed that they had chosen to pursue an ineffective treatment because of an ad on Baidu, which eventually lead to the death of the student in April. The event gained popularity and sparked concern over the regulation (or the lack thereof) of the search engine ads.
Following the news of the death, Baidu deleted over 120 million promotional results related to medical institution, and over 2500 listings. Furthermore, the CAC has requested Baidu to improve its paid-for ads model, in particular to rank them according to credibility and not by price-tag, as it is common in the industry, hoping to improve its auto-regulation capabilities. Furthermore, CAC will demand search engine to verify the advertisers before uploading their ad, as well as to limit the amount of paid results on the web pages. China has a long history of internet regulations, but this is the first time paid search results have been regulated explicitly.
The new regulations will come into effect on Aug 1, alongside channels for users to report bad listings, in order to improve the quality of the digital environment.
Similar to eCommerce, digital advertising is booming in China, and China has quickly become the world’s No. 2 ad market. Baidu is second in terms of global search revenues, topped only by Google (although by a large margin).
Even though Baidu has been diversifying its assets, especially by investing in new technologies and services, the revenue generated by online advertising still plays a vital role in the company. Following the announcement of the CAC, Baidu cut its revenue forecast for the second quarter to between $2.81 billion and $2.82 billion from $3.12 billion to $3.19 billion.