Print 8 comment(s) - last by NellyFromMA.. on Aug 18 at 11:41 AM

Baidu shares have slipped by nearly one-tenth in the two days since the report

After Google exited China's search market last year due to censorship and hacking, Chinese search engine Baidu Inc. stepped in and claimed the dominant position in the country's successful Internet market. According to Analysys International, a Beijing-based technology firm, Baidu snagged 76 percent of the search market in the second quarter.

Despite Baidu's success, it is developing a poor reputation due to fraud. A recent investigative report by China Central Television (CCTV) showed how simple it is to register and promote a fake website on the search engine, which has prompted state media and analysts to push for stricter rules regarding fraud on the company's site.

"As suggested by some experts, if Baidu cannot discipline itself, authorities should consider stepping in," said an article published on the People's Daily website. "Just as we do not live for food, Baidu should not just exist for money."

Since the half-hour CCTV investigative report, which ran two days ago and showed an undercover reporter receiving advice from a Baidu employee on how to get around pharmaceutical advertising regulations, shares of Baidu have slipped by nearly one-tenth. This equates to over $5 billion in market value off the company.

Despite this loss, Baidu shares are up almost 50 percent so far this year with a market value of $50 billion. Analysts believe the fall in share price will be "short-term."

"I have not changed my opinion about the company," said Paul Wuh, an analyst at Samsung Securities in Hong Kong. "The company suggested that it has thousands of sales personnel and some bad behavior is not caught all the time."

But CCTV has ran negative reports on Baidu before, and hopes to use this information to prompt government investigations. For instance, CCTV ran a story last year that accused Baidu of promoting counterfeit drugs.

"As Baidu becomes an essential part of people's Internet life, we believe the news report could trigger potential government investigations on the paid search business model and prospective regulations to protect customer rights," said Wallace Cheung, analyst at Credit Suisse in Hong Kong.

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By MrBlastman on 8/17/2011 11:37:47 AM , Rating: 4
Baidu is a search engine. Search engines let you search for websites. Websites are real, regardless of whether the actual content on the website is factual or fake. Now, if Baidu wants to be regarded as a useful search engine, it would behoove them to provide useful content in its searches.

This is ENTIRELY up to Baidu. It shouldn't be up to the government or the regulators. The company itself should decide if it wants to stay in business or not. If enough people realize the bogus results of the searches, they will begin to use another search engine and leave Baidu.

The only reason I could see for authorities to be involved is if they fraudulently collaborate with known criminals to aid them in profiting off of the unsuspecting. It takes far more than one phonecall to prove this.

What I'm worried about is the following: Say a website gets set up in China similar to... the Onion. Their whole purpose is to parody other websites, businesses and news through their "false" news stories for entertainment value. By requiring Baidu to _only_ allow true websites (or businesses) to turn up in the results, through a careful manipulation of the words, the Chinese government could decree that sites like the Onion are "fake" thus should not show up in the results.

This is a real problem. It isn't like China has not already been doing it. All I am trying to do here though is point out the fallacy of the logic that the Chinese news is trying to report (and I'm sure they are owned by the Government too).

RE: Wait...
By Devilpapaya on 8/17/2011 1:16:54 PM , Rating: 2
I agree, this quote made my brain hurt.

"As suggested by some experts, if Baidu cannot discipline itself, authorities should consider stepping in," said an article published on the People's Daily website. "Just as we do not live for food, Baidu should not just exist for money."


RE: Wait...
By Camikazi on 8/17/2011 3:37:02 PM , Rating: 2
Wait... we don't live for food and a company does not exist for money? WHY DIDN'T ANYONE TELL ME!!!!! Here I was eating when I was hungry so I wouldn't starve and now I find out I didn't have to do it.

RE: Wait...
By NellyFromMA on 8/18/2011 11:41:07 AM , Rating: 2
I for one live for steak, so, in short... 'does not compute'

RE: Wait...
By Smartless on 8/17/2011 2:35:19 PM , Rating: 2
You know that's a good point. By pretending to police themselves they give themselves an excuse to close sights that could be promoting democracy and speaking out. But than again, China's government exists to protect its people from the unfiltered horrors of America like porn, reality TV, and Family Guy. I know way-to-go Captain Obvious(It's morning give me a break).

You know I wonder if we'll ever see China in a different light other than the corrupted business giant of today. Like a humanitarian country or something. lol. sorry made myself laugh.

RE: Wait...
By BugblatterIII on 8/17/2011 5:28:25 PM , Rating: 2
Forget it Jake, it's China.

"Google fired a shot heard 'round the world, and now a second American company has answered the call to defend the rights of the Chinese people." -- Rep. Christopher H. Smith (R-N.J.)

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