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Baidu sorry for medical scam ads

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Unlicensed music distributor Baidu has admitted taking money from unlicensed medical companies.

Baidu dominates the search business in China, the bulk of its revenue coming from pay-for-placement in its search pages, which it calls "Page Rank Bid". The company says it will now stop the practice, which accounts for 10 to 15 per cent of its revenue by its own estimates.

Investment bank Piper Jaffrey, a stock Booster for the NASDAQ-quoted company, puts the figure much lower, at 3 per cent of revenue. Baidu made the announcement after a TV investigation in China.

Much of Baidu's appeal stems from its role as an enabler for the flow of free music, largely unlicensed. The company admits as much in its SEC filings, explaining that “a significant portion of our traffic is generated by users of our MP3 search service”.

As we revealed in September, a Baidu user can be almost guaranteed to find free music downloads. A mysterious network of domains ensures the music keeps flowing - despite takedown requests.

The international music group IFPI filed suit in February and a hearing took place last month. A verdict is expected by the end of the year.

Baidu's investors include Morgan Stanley, JP Morgan, Fidelity and Goldman Sachs. ®

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