Baidu (BIDU) Gets Hammered As It Ceases Listing Certain Drug Resellers From Its Search Results

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November 17, 2008 12:54 PM EST

Baidu.com (Nasdaq: BIDU) i sdown over 20% today as it was reported that Baidu has stopped listing pharmaceutical companies that lack the necessary licenses to market drugs in its search results.

Since the beginning of November, Baidu has required pharmaceutical companies seeking search listing to provide a valid State Food and Drug Administration (SFDA) drug retail license, or Good Supply Practice (GSP) certificate,.

In addition to asking for evidence that a company is legally entitled to sell drugs when it applies for a new listing in Baidu, Baidu also plans to delete all existing information from its site about unlicensed companies tomorrow.

Baidu did not disclose the reasons behind halting the listing of illicit pharmaceutical advertising, Netease reported that Baidu is likely responding to a program that recently appeared on Chinese state media, CCTV.

Over the weekend, a popular Chinese news program, "News in 30 Minutes", alleged that by showing information for companies without proper SFDA licenses, Baidu is committing fraud.

Reporters searched for medicines on Baidu, and found that the top 5 results on Baidu's search results for one specific medicine were from non-licensed pharmaceutical sites, while genuinely licensed pharmaceutical companies were not listed until the second or third page.

The TV report also mentioned complaints by a number of companies against Baidu, which claimed that the search engine actively withheld information about their web sites if they stopped paying for a listing position.

This could be very problematic for Baidu as the company greatly depends on search listing revenue to meet quarterly expectations. Baidu has been trading down all day and is currently down $39.55 or 22% to $138.25.

Baidu.com, Inc. (Baidu) is a Chinese-language Internet search provider.
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