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China search giant Baidu blasted by state media

SHANGHAI-(AFP) – China’s state media has launched stinging attacks on the nation’s hugely popular search engine Baidu, in what analysts say may signal government unease about the firm’s growing market power.

This is the second time that Nasdaq-listed Baidu has come under strong media criticism, after state television blasted its advertising practices in 2008, forcing it to revamp part of its business.

The state-run China Central Television (CCTV) once again attacked the firm — which accounts for more than three-quarters of China’s web search market — earlier this week in a programme that alleged fraud by Baidu advertisers.

The show, aired on CCTV’s business channel, claimed Baidu users were losing money on phony airline tickets allegedly sold by advertisers on the search engine, among other charges.

Wu Yue, host of the programme, told the audience: “Obviously Baidu is not able to solve the problem through self-discipline. A company’s fundamental motive is to chase profits.”

“If there is no law or regulation in place to restrict it, it is difficult to improve the situation at the roots,” she said.

The People’s Daily, mouthpiece of the ruling Communist Party, joined in the criticism with an opinion piece Tuesday that said Baidu could be “abandoned” by Internet users if it only focused on short-term profits.

“It’s time for Baidu to shoulder social responsibility,” it said.

A spokesman for the search engine declined to comment.

Bill Bishop, an independent Beijing-based analyst and adviser to Internet start-ups, said there were several theories as to what was behind the criticism, including possible machinations by current or potential competitors.

“Baidu has become an effective monopoly in Internet search,” he wrote on his blog DigiCha.

“It is unlikely the government is pleased with Baidu’s market power, and the CCTV report may be a sign that Baidu should expect increased scrutiny and regulation.”

Several Chinese companies are seeking to chip away at Baidu’s market share, including established players like web portals Tencent and Sohu, and Alibaba Group, which is partly owned by Yahoo!.

Newer entrants include state media giants, such as the People’s Daily and the official Xinhua news agency, which have both launched search engines.

In 2008, CCTV criticised Baidu for allowing advertisers to pay for space alongside top search results, without labelling it as an ad, prompting the search engine to overhaul its advertising business.

This week’s criticism has sent Nasdaq-listed shares of Baidu down more than eight percent.

Dick Wei, a Hong Kong-based analyst with JP Morgan, said the issue could have a short-term impact on the company’s revenue, but was still bullish about the firm.

“Given differentiated technology and market leadership, we think the long-term prospects for Baidu are still very positive,” he said.

Baidu’s major rival remains global Internet giant Google, which partially moved out of the Chinese market last year amid a public spat with Beijing over censorship.

Since then, Google has steadily lost its China market share, which now stands at just 18.9 percent, according to an estimate by China-based technology advisors Analysys International.



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