Bottom line: Baidu’s massive ad wind-up in May and shuttering of a site for travelers reflects ongoing pressure on its cadre ad-dependent search merchantry while spotlighting its inability to workshop into non-search areas.

Baidu search wind-up continues

Search giant Baidu (Nasdaq: BIDU) is in a couple of headlines as we throne into the latter part of the week, reflecting two major challenges the visitor is facing. The larger headline says the visitor has just removed millions of ads, a whopping 237 million to be precise, for reasons including stuff misleading and promoting unhealthy topics like porn. The second has the visitor shuttering a relatively minor travel site, which made me laugh just slightly, since I wasn’t plane enlightened the visitor had such a site.

The first story is certainly the most important, since Baidu still derives the vast majority of its money from ad sales related to its cadre search business. By comparison, the second story demonstrates once then Baidu’s inability to diversify into areas besides search. This particular travel investment, while probably quite small, follows a long stream of similar, and often much larger, investments into other areas like takeout dining, and e-commerce, just to name a few.

The worthier picture is that Baidu has recently wilt a visitor in search of a future, as its cadre ad merchantry comes under fire from an industry slowdown and moreover from external pressures on the visitor to wipe up the kinds of ads it’s now taking down. I’ve written well-nigh these dual pressures recently, including last month when the visitor reported its first-ever loss. Just last week the visitor was moreover when in related headlines when it was rebuked by the Shanghai internet regulator for posting misleading and “vulgar” ads.

All the negative developments have taken a toll on Baidu’s stock, which has lost increasingly than a quarter of its value this year. That’s officially taken Baidu out of the top three Internet stocks for China, as its current market value of well-nigh $40 billion has been unelevated that of online-to-offline services giant Meituan Dianping (HKEx: 3690) for at least a few weeks now.

All that said, let’s delve into the latest headlines whence with the one well-nigh Baidu’s ongoing wind-up of misleading and otherwise problematic ads. The reports say Baidu took lanugo the 237 million ads in the month of May alone, and moreover refused a large number of requests for unrepealable misleading keywords on medical topics. Removed ads fell into a wide range of categories, including ones involving porn, gambling and ones with “harmful” effects on society.

Limited Impact

Baidu hasn’t given us any verisimilitude on how the removal of so many ads might stupefy its business. Plane if we seem each ad just represented a penny of income, the effects would still be relative large, totaling $2.37 million in lost income. But then again, Baidu reported nearly $15 billion in revenue last year, so unmistakably this won’t have a devastating effect. It does underscore the huge number of ads that churn through the Baidu system, as 237 million is a relatively mind-boggling number.

Next there’s the travel services news, which is relatively minor and says the visitor will officially shutter its travel site at the end of this month. This particular site doesn’t really offer travel services, but rather was designed as a place for people to post things like trip photos and other travel memorabilia to show friends and families. The move was theoretically a long time coming, as Baidu hasn’t updated the service, first launched in 2011, for quite a while.

This particular service was obviously never meant to be a money-spinner for Baidu, and undoubtedly the very investment was probably quite small. But it does underscore the difficulty the visitor has had in gaining traction for anything outside its cadre search business. Baidu’s record of major past failures include forays into the travel services merchantry with its now largely-irrelevant Qunar unit, as well as its increasingly recent foray into takeout dining services that it sold two years ago to rival Ele.me.

At the end of the day, these two stories really just protract the theme that’s been playing for years: Namely that Baidu is a one-trick pony that for years did quite nicely pumping the booming China ad market with a near-monopoly position to fuel its own growth. But now that those heady days towards to be dwindling with China’s sputtering economy and Baidu cleans up its act, it’s far from unrepealable what lies superiority for the company.