Baidu will shift its business model to AI

Baidu's logo shown on its website on May 9, 2016.[Photo/IC]

The head of Baidu Inc has pledged to shift the company's business from a search-oriented model to one based on artificial intelligence, after a recent government probe put a chill on its core search business.

Baidu CEO Li Yanhong said in an internal letter on Tuesday that the shift will allow the company to develop such areas as voice search, automatic translation and driverless vehicles.

Li, who is a co-founder of Baidu, which runs China's largest online search engine, also vowed to emphasize user experience over income and to set up a department to root out any behavior that might damage user experience.

"The department will have the final say to veto any behavior that is not in line with a good user experience," Li said in the letter, which Baidu made public later on Tuesday. "Some of the measures we take may have a negative impact on the company's income. But I believe it is the right thing to do."

Analysts said the move is expected to dampen Baidu's near-term profitability, which in turn would make it more challenging for the company's new business initiative to gain momentum.

The vow to put users ahead of business performance came after a government investigation led to a demand that the search giant overhaul its paid listing system. The probe came after the death of Wei Zexi, a 21-year-old college student, who underwent an experimental medical treatment that had been advertised among Baidu's search results.

The Cyberspace Administration of China, which launched a joint investigation of Baidu with other authorities last week, said on Monday that the company had "influenced the impartiality and objectivity of its search results, making it easy to mislead users, and this must be immediately rectified."

In response to the government's demand, Baidu said on Monday that it will restrict the proportion of sponsored search results to 30 percent per web page and adopt a new listing system that does not fully depend on the advertising price, but also considers advertisers' "reputation".

Other actions include placing clear disclaimers on advertisements, so that online users can tell them apart from natural search results, and establishing a 1 billion yuan ($153.4 million) fund to compensate netizens cheated by false promotions.

Industry observers said the moves are likely to hurt Baidu's short-term profitability, since medical-related ads are estimated to account for 25 percent of its revenue.

Lyu Ronghui, analyst with internet consultancy iResearch, said Baidu's revenue is likely to decline in the near future because the company will have to turn down some medical-related ads and might also spend more money to verify the qualifications of medical organizations or enterprises.