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Baidu’s Revenue Drops for the First Time Following Govt Pressure on Ads

| Oct 30, 2016 11:57 PM EDT

A woman walks toward a booth owned by Baidu at the China (Shanghai) International Technology Fair in Shanghai in April.

China's leading search engine Baidu saw the first-ever decline of its quarterly revenue as a result of government restrictions on advertisements.

A BBC report said that Baidu's revenue drop to 18.3 billion yuan ($2.7 billion) in the third quarter, 0.7 percent down from the previous year's record.

According to the report, the continuing government control on Baidu's advertising has affected its profit and resulted in the drop in revenue.

The regulators' crackdown was made in response to paid-for ads listing which reportedly provide incompetent medical treatment. The crackdown came following an outcry over the death of a student who took an experimental cancer therapy treatment that was advertised on Baidu and on top of its search list.

In 2014, Wei Zexi, a 21-year-old student was diagnosed with synovial sarcoma. While searching through Baidu, he found out about the controversial cancer treatment. But the treatment was unsuccessful and he finally died on April 12.

Before he died, Wei denounced the hospital publicly and blamed it for the false information about their cancer treatment in its advertisement. He also criticized Baidu for the way it ranked advertisements in the search results and for selling promoted search listings for medical information.

Baidu, however, denied the accusation and said that it does not rank hospitals in its search results based on the amount of money that advertisers pay, adding that the Beijing municipal government has approved the hospital.

As China's largest search engine, Baidu takes 80 percent of the market share. It said it is expecting again a slight decrease in its revenue for the fourth quarter, as compared to last year's.

To seek new opportunities for growth, Baidu has announced earlier this month a $3-billion investment fund to help mid- and late-stage startups.

The search engine company has also made investments in artificial intelligence and self-driving car technology to expand its growth.

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