BEIJING • Baidu Inc's CEO has called on employees to put values before profit in response to a scandal arising from the death of a student who underwent an experimental cancer treatment he found on the company's search website.
China's biggest search engine is setting up a billion-yuan fund to compensate consumers who suffered from misleading adverts hosted on its site, the South China Morning Post has reported.
Before his death, student Wei Zexi, 21, had criticised the military-run hospital that provided the failed treatment for misleading claims about its effectiveness and accused Baidu, which controls 80 per cent of the Chinese search market, of promoting false medical information.
In a letter to employees, Baidu chief executive Robin Li wrote: "If we lose the support of users, we lose hold of our values, and Baidu will truly go bankrupt in just 30 days!"
He said staff were making compromises for the sake of commercial interests and placing earnings growth above user experience.
The controversy over Mr Wei's death erupted at the beginning of the month and led to a joint investigation by the health authorities, officials from the Cyberspace Administration of China (CAC) and the State Administration for Industry and Commerce.
The CAC found that Baidu's business model - which allows advertisers who pay a fee to be featured more prominently in search results - had affected Mr Wei's choice of treatment, reported the Post.
The regulators on Monday imposed curbs on the advertising business Baidu relies on for the lion's share of its income.
"These measures may hurt our company's revenue," Mr Li said in the letter posted on Sina.com. "But we have to take decisive action because... this is the right thing to do."
CAC ordered Baidu to offer clear markers that indicate when posts have been paid for, review its medical ads and remove those that do not meet new standards.
The move could hurt a key source of revenue for Baidu. Healthcare ads account for 20 per cent to 25 per cent of Baidu's search revenue, an analyst told Bloomberg.
Mr Li also wrote that the company he founded in 2000 had lost its way. "These days, whenever it's the dead of night, I think: Why do the people who use Baidu's products no longer love us? The outrage is greater than in any crisis Baidu has experienced before."
The military hospital in Beijing where Mr Wei was treated was found to have violated regulations on outsourcing some specialist departments, and to have made false claims in medical advertisements.
Two senior executives have been sacked and six other staff punished, said Chinese media. Two civilians suspected of committing crimes have been handed over to the police, according to an article on website China Military Online.
The No. 2 Beijing Armed Police Hospital was also ordered to terminate its partnership with the private Shanghai Claison Bio-tech, which provided the experimental cancer treatment for Mr Wei.