Baidu: got a bit evil?
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On Nov 17, Baidu (Nasdaq: BIDU), China largest web search company got a huge blow in the market as the news of “Baidu placed “faked doctors and drug ad” broke (see BW for more details). This reminds me of the Focus Media (Naqdaq: FMCN) Spam text messaging story about 7 months ago. In both cases the news was broke in CCTV, Chinese national TV channel and a part of offical Chinese media. Some people may not know CCTV has large market share in the TV Ad market. Some people may sympathize with Baidu and call for “buy” the BIDU stock amid this temporary weakness.
Before this news about Baidu, actually there were reports that Baidu was guilty of “intensionally hiding the China San’lu milk powder scandal” during August this year (Olympics time). Luckily to them, local goverment officials did the exact same thing to keep the big party on. But this time they got caught. Some financial analysts naively think those Ad. made up a small portion of the Ad. revenue. This maybe true. But I don’t the problem is that simple.
Both Focus Media and Baidu did a bit evil here, much more evil than the alcohol ad. on CCTV. More importantly, CCTV, the dominant player in China TV ad. market, is not willing to give up the top spot easily.
Interestingly, I found many local TV stations (TV shopping channel) do similar ad. on TV too, when I visited China last time. I remember one company Acorn International (NYSE: ATV) is listed in the US, its stock went from the high of $28 to about $2 in about a year. So what’s the business lesson here?
Do not do evil.