China orders Baidu to revamp advertising results in online searches

One week after launching an investigation into the advertising practices of Internet giantBaiduInc.,authorities ordered the company to revamp the way it handles advertising results in online searches.

Internet regulators opened the investigationafter the deathofWei Zexi,a college student with cancer who had taken a therapy found through an online advertisement on Baidu.

On Monday evening, China’s Cyberspace Administration said Baidu must change its system by the end of the month, by attaching “eye-catching markers,” as well as risk warnings, to all paid results. It also said ads must comprise only 30% of results displayed on a page.

In a written statement, Baidu said it accepted the results of the investigation and would implement the recommendations soon.

“Baidu should provide better and more reliable search services,” saidXiang Hailong,Baidu’s senior executive in charge of search, in the statement. The company said Mr. Wei’s death “prompted all Baidu employees to re-examine the responsibilities of a search company.”

Investigators found that Baidu’s keyword pay-for-placement services influenced Mr. Wei’s medical choices and that Baidu’s search algorithm influences fairness and objectivity of results, which misleads Internet users.

“It’s not permitted to only consider the amount of money that has been paid,” the investigators said.

The regulator said the new requirements applied to all business promotion, including those for medical services, drugs and other health products, and that any illegal information must be taken down immediately. It also said medical institutions that haven’t received regulatory approval aren’t allowed to advertise.

Such changes will bring Baidu more in line with other search engines, most of whom prominently mark advertisements. Currently, Baidu places small gray wording at the bottom of the displayed links saying “tui guang,” or promotion. Critics say using that identifier instead of “guang gao,” or advertisement, and lumping sponsored results in with regular ones is misleading.

Baidu also will be required to establish systems to protect the rights of users, including the ability of users to seek damages from Baidu itself and establishing more efficient channels for users to complain about services.

The company said it would change its algorithm as requested and that it wouldno longer provide paid results for unapproved medical services, or for services associated with the military and the paramilitary police. The hospital where Mr. Wei received treatment was run by the military.

Baidu also will set up a one billion yuan ($154 million) fund to compensate users who suffer verifiable economic harm as a result of fraudulent information found in paid results, according to the statement.

Mr. Wei’s death caused widespread criticism, both from state media and Internet users, of the murky online environment for health information in a country where one search company dominates. While medical research papers are available online via Chinese databases, large numbers of Chinese still prefer to turn to fellow patients in online forums for advice. That has made Baiduthe main go-to site for medical information.

During the course of the investigation, the government and Baidu jointly identified and pulled down 126 million paid ads, including ones from 2,518 medical companies.

The Cyberspace Administration said Beijing plans to soon publish regulations tightening management of search services and online advertising.

A separate government investigation found the hospital where Mr. Wei underwent experimental cancer treatments had published false and misleading information, the official Xinhua News Agency reported late Monday. The hospital was also discovered to have entered into an unapproved partnership with a private health-care provider, it said.

The hospital, run by a division of China’s paramilitary police force, was ordered to end the partnership, cease offering unapproved medical services and stop all publishing of misleading advertisements, Xinhua said. Hospital staff responsible for the violations faced administrative punishment and possible criminal liability, it said.

The hospital temporarily suspended operations after the controversy over Mr. Wei’s death surfaced. Hospital representatives couldn’t be reached for comment.

(THE WALL STREET JOURNAL)