Chinese search giant's model 'misleading': regulator

Chinese Internet giant Baidu, the country's equivalent of Google, must change how it displays search results, regulators said Monday, following an outcry over the death of a student whose family had sought a cancer treatment using the search engine.

The ruling by the Cyberspace Administration of China (CAC) calls into question Baidu's business model, which is quoted in on the Nasdaq exchange in New York and has a market capitalisation of more than $60 billion, even after it fell heavily in the wake of the scandal.

Wei Zexi, 21, had been diagnosed with a terminal soft tissue disease. His family searched for a cancer cure on Baidu where they found an experimental immunotherapy treatment at a Beijing hospital run by the armed police force.

Before he died, Wei denounced the firm online, and after his comments went viral, the firm has faced an onslaught of criticism.

"Baidu's mechanism for ranking paid results depends too heavily on price paid and does not clearly indicate paid results, as well as other problems," the CAC said in an article in its in-house newspaper.

The system "influenced the impartiality and objectivity of its search results, making it easy to mislead users, and must be immediately rectified".

In a response on the CAC website, which Baidu also posted on its own site, the Internet firm pledged to display "eye-catching" markers and warnings on advertised content and limit the proportion of paid search results to 30 percent per page.

It also pledged to set up a fund of 1 billion yuan ($154 million) to compensate future victims of paid content.

"The death of Zexi incited a huge response from all of society, and has given Baidu great momentum, triggering all Baidu staff to reexamine our responsibilities as a search engine company," said Baidu senior vice president Xiang Hailong.