Pressure on Baidu (BIDU) continues amid Baidu advertising revenue uncertainty. As GeoInvesting mentioned yesterday, it will try to dig further into the story between Putian (China) Health Industry Association and BIDU. Regarding this incident, one of BIDU’s official accounts on Weibo, Baidu News, responded and it said the united boycott from Putian association is due to BIDU’s more intense administration and delisting of rule-breaking hospitals.
Baidu said that last year BIDU declined more than 13 thousand rule-breaking medical institution clients, and over 60% of them are from Putian association. In addition, according to the statement, BIDU will not change its decision of “high entrant level, tight review and examination,” [for its medical promotion clients] and it will continue to administer the rule-breaking medical promotions, including [medical clients from] the Putian association.
Nomura Securities Discusses Baidu Advertising Revenue
In terms of potential impact of this incident on Baidu advertising revenue, there is an article on Barrons that discussed information provided by an analyst from Nomura securities:
What’s the direct revenue impact from this [on Baidu advertising]? Caixin reported that Putian hospitals have boasted back in 2013 that it contributed to 12 billion of Baidu’s 26 billion yuan advertising sales. Baidu has brushed away that claim, saying Putian is not that big an account. Nomura Securities estimates that Putian hospitals in Beijing, Shanghai and Guangzhou currently contribute around 10-15% of Baidu advertising revenue.
The most likely outcome from this media fiasco is that Putian hospitals won’t have to commit to growth. Based on Nomura’s share estimate, that would impact Baidu’s top-line growth by around 3 to 6 percentage points. Baidu is expected to grow by 39% this year.
We remain cautious about the numbers provided in this article, as BIDU didn’t publicly disclose this information. We will provide updated information regarding this incident as it becomes available.
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