Baidu has removed about 1,000 clients from its paid search listings, particularly medical and pharmaceutical firms without business licenses, according to National Business Daily.
Baidu employees who allegedly helped these unlicensed customers with fake documents will be sacked, the report said.
State-owned China Central Television ("CCTV") reported on its program "News in 30 Minutes" on November 15 and 16 that Baidu had been including Websites of medical companies that do not hold proper licenses in its paid search listings. The report added that Baidu excluded certain Websites that did not pay for keyword listings.
Baidu's share price on NASDAQ dropped approximately 25 percent following the report. On Monday, Baidu issued an apology stating: "We put too much effort in competing technically with Google, and in doing so overlooked our advertising system and its management."
Li Yanhong, CEO of Baidu, said the pay-for-performance ("P4P") paid search platform was easy to distinguish as the links and Web page information of the search results were marked with Chinese characters meaning "Promotion."
"But we do hear some complaints through media that some users might get confused by the ordinary search results and the customers on our paid search platform," Li was quoted as saying. "We are developing a new advertising system to solve the problem."
He said the number of visitors to Baidu had not been affected thus far.
"I expected a slight drop in traffic in the short term, but in the long run, our visiting rate will continue to rise," he told National Business Daily.
According to a report by Morgan Stanley, released shortly after the issue became public, Baidu's fourth quarter results will drop 7 percent, the newspaper said.
