Baidu, Inc. (Nasdaq: BIDU) announced revised revenue guidance for the second quarter of 2016 and provided an update on recent business developments.

Baidu currently expects estimated second quarter 2016 revenue to be in the range of RMB18.100 billion ($2.807 billion) to RMB18.200 billion ($2.823 billion)[1], compared to the previously stated range of RMB20.110 billion ($3.119 billion) to RMB20.580 billion ($3.192 billion).

(Street sees Q2 revenue of RMB21.87 billion.)

Since the beginning of May 2016, Baidu has taken steps to implement measures requested by regulatory authorities, such as modifying paid search practices. Baidu has also proactively implemented numerous additional measures to deliver a better user experience and build a safer and more trustworthy platform for users, including turning down customers who do not meet Baidu's new requirements, creating an industry-leading customer credibility ranking system and weighing customer credibility more highly in the ranking algorithm, reducing the number of sponsored links, and making upgrades to Baidu's user feedback system and user protection programs, to name but a few. These measures enhance user experience and the Company observed solid user traffic.

The revenue guidance revision was mainly attributable to the following factors:

First, regulatory authorities continue to review the online marketing practices of medical, pharmaceutical, healthcare and other similar businesses, and have also implemented stricter advertising regulations for medical organizations. The review is being rolled out with varied timing with different levels of implementation and interpretation across geographies. While the review is underway, the Company has observed a reduction or delay in spend from a significant portion of medical customers. These customers may be in the process of receiving instruction from regulatory authorities, gathering and submitting required documentation and adjusting their practices to comply with new regulations.

The implementation of and compliance with new regulations could take place over a prolonged period of time. The Company notes that high quality medical customers who have reduced or delayed spend would likely be compliant with new regulations over time. As such, the Company expects spend from these customers to recover gradually.

Second, the Company has reduced the number of sponsored links across the platform. This measure impacts revenue over the short term but enhances user experience and will drive benefit to Baidu over the long term.

"Baidu provides a strong, unique value proposition to its users and customers by helping users find whatever it is they are looking for, and connecting online marketers with those users. This role comes with great social responsibility and user experience is our top priority," said Robin Li, Baidu's chairman and chief executive officer. "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."

Baidu believes higher standards related to customer requirements, sponsored links, user feedback and user protection mechanisms, will help improve the user experience, strengthen Baidu's market position and benefit the Company over the long term.