Baidu Investigates Claims It Didn’t Check Advertiser Credentials
By Mark Lee - Aug 19, 2011 3:05 AM PT Fri Aug 19 10:05:29 GMT 2011
Baidu Inc., China’s most valuable Internet company, began an internal investigation after state- owned China Central Television claimed it didn’t verify the credentials of advertising customers and their products.
Baidu started a “companywide” probe and stopped working with some external sales agents, Vice President Wang Zhan said in an interview with CCTV yesterday. Baidu will correct flaws in its business processes, Wang said. Baidu spokesman Kaiser Kuo confirmed the interview and declined further comment today.
Baidu has declined more than 10 percent in New York trading since Aug. 15, when a CCTV report said the Beijing-based company sold listings on its search engine to unaccredited advertisers. The program may pose a “short-term revenue impact” for Baidu, JPMorgan Chase & Co. said this week.
Wang apologized to Baidu users who were affected by “false information,” he said.
Baidu’s American depositary receipts fell 6.7 percent to $128.77 in New York trading yesterday. The stock has declined 14 percent since Aug. 15, underperforming Chinese Internet rivals including Sina Corp. and NetEase.com Inc.
The CCTV program alleged that undercover reporters circumvented Baidu customer and product screening checks to obtain paid listings on the search engine by presenting fake business licenses. Baidu fell short of undertakings made in 2008 in response to earlier criticism by the broadcaster of the company’s sales practices, according to the report.
Baidu accounted for 75.9 percent of China’s search-engine market by revenue in the second quarter, rising from 75.8 percent in the previous three months, according to research company Analysys International. Google Inc. (GOOG)’s share dropped to 18.9 percent from 19.2 percent, the researcher said.
To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net
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