Bottom line: Baidu’s new policy of greater transparency in its search results is long overdue, and is unlikely to have a major impact on its business due to lack of other choices for advertisers in the China search market.
What a difference a week makes. After coming under unprecedented assault for putting profits above everything else, leading search engine Baidu (Nasdaq: BIDU) has just done a major overhaul of its core search service to make it more transparent and useful. The overhaul was long overdue but was hardly voluntary, and only came after the company faced the biggest crisis since its founding in 2000.
It’s somewhat ironic that this particular crisis took so long to come, since the kinds of misleading practices at the center of the controversy are widely known and central to Baidu’s huge profitability. Those practices include selling preferred positions on search results pages to advertisers who pay the highest prices, even though that fact was never clearly conveyed to Internet users.
But all that has changed, and I expect that the engineers in Baidu’s search technology department have been working 24 hours a day over the past week to make major adjustments to its system. I’ve done some searching on the new-and-improved Baidu engine, and the biggest change is that all paid search results now appear in a separately-colored box with the words “promotional link” written in the corner.
The results are also a bit better for overall quality, with official company websites and other relevant information easier to spot. Baidu still seems intent on including links to its own Baike online encyclopedia service, similar to Wikipedia, high among all search results. But overall the changes are broadly positive and quite refreshing for people like me, who only used Baidu reluctantly because we had few other choices.
For anyone who has missed this headline-grabbing story, the crisis erupted after 21-year-old cancer patient Wei Zexi used Baidu to find a hospital to treat his disease. He trusted the hospital he chose partly because it appeared high in Baidu’s results. But he was unaware the hospital got that ranking because it paid the most in an online auctioning system that has helped to make Baidu hugely profitable. Wei later died after receiving an ineffective experimental treatment, though not before complaining loudly about how he was misled.
As a result of the firestorm that followed, Baidu was ordered to clean up its act and has now officially announced a 6-point plan to do just that. (company announcement; English article; Chinese article) I’ve already written about some of the major points of the plan at the outset of this post, and the broader theme is that most are designed to boost transparency and improve the quality of search results.
Baidu founder Robin Li has also issued an internal letter to employees urging them to focus on values rather than short-term interests. Media are focusing on one part of the letter where Li says that trust is critical to Baidu’s long-term viability, and that without such trust the company would go bankrupt in 30 days. (English article; Chinese article)
I could be quite cynical and write at length how Li himself only seemed to discover concepts like values and trust after the current crisis, which has seen Baidu’s shares tumble 15 percent since the firestorm began. But the truth is that Baidu is hardly the only company that engages in this kind of behavior, and the profits-above-everything else mentality is unfortunately quite common throughout China’s corporate culture.
One interesting footnote to the story is whether this move to greater transparency might cause some advertisers to flee Baidu. The answer to that question is probably “no”, since there aren’t too many other major Chinese search engines, and Baidu’s few rivals are also feeling pressure to make similar changes. More transparent western search operators like Google (Nasdaq: GOOG) and Yahoo (Nasdaq: YHOO) are also unlikely to return to China anytime soon due to Beijing’s strict self-censorship policies for anyone who operates in the domestic market.
- INTERNET: Baidu Told to Clean Up Act, Investors Unfazed
- INTERNET: Baidu Scandal Unleashes Crackdown Wave
- INTERNET: Hospital Gives Baidu Headaches, Qihoo Checks Out
- Today’s top stories