Baidu, China’s dominant search firm, suffers record profit drop

Baidu may be the dominant search company in China by some margin, but it is currently in the midst of its toughest period as a public company. The firm today reported its largest drop in profits since its IPO 11 years ago, triggered by a public enquiry following the death of a young man who took a cancer treatment advertised on its service.

Nasdaq-listed Baidu reported net income of RMB2.414 billion ($363.2 million) for its Q2 2016 quarter, that’s down 34.1 percent year-on-year. Revenue for the three-month period came in at RMB18.264 billion ($2.748 billion), up 10.2 percent on the previous year.

Baidu cut its revenue forecast for the quarter last month on the back of the government probe and instituted a number of new policies in response, including limiting the number of sponsored links on a page, attaching warnings to certain ads and continuing to vet its advertiser base, which now requires licenses. But, with search over 90 percent of its revenue and medical companies accounting for around one-third of that figure, the crisis has had a major impact. And it isn’t likely to just disappear.

According to the Wall Street Journal, Baidu CEO Robin Li told investors on a call that it could take two or three more quarters for the business to fully recover.

“Although a significant portion of our revenue is sacrificed, the steps we have taken to further bolster a healthy, safe and trustworthy online and offline ecosystem will result in long-term benefit and reward for Baidu,” Li said in a statement last month.

In a statement following the results, Li put the focus on Baidu’s foray into artificial intelligence and self-driving cars. In addition, its wallet service — which is well behind Alibaba’s and Tencent’s offerings — grew to 80 million active users.

“Baidu’s value proposition remains robust, and our enthusiasm and vision for the future remains undiminished. Baidu is very excited to lead in this age of AI to truly unleash the potential of our platform, serve our users and customers and work with key partners better than we could before,” he said.