With the recent scandal surrounding the death of a student linked to a medical ad in Baidu search results page, Chinese government has demanded an overhaul of how Baidu rendered its search engines results.
Baidu swiftly responded to the request by implementing a major change in its ad policies on the evening of 23 May, substantially cutting the number of paid ads allowed to be showed in the search engine results pages.
Unlike Google, who limits to show up to four paid search ads to the top left or bottom left of its search results pages, with a clear divider between its paid and organic search listing.
Historically, Baidu allowed ads to be shown throughout its search results page, both on the left side and the right side of the search results. It was commonly to find search ads to occupy the entire search results page for popular keywords such as cheap flight tickets.
According to an email sent to the advertisers by Baidu, to comply with the request by the Chinese authorities, Baidu now limits its ads to appear in no more than 30% of each search engine results page, which means that only up to 4 ads in total is allowed to appear throughout the page, including ads on the top left, right, as well as the bottom.
While the changes in Baidu ad policy was foreseeable, its sudden announcement and swift changes caught many advertisers off guard. Due to the decline in the number of ad spaces available in each search engine results page, we foresee that the competition for the popular keywords will be more severe, with significant increase in their CPC.
The long term impact remains to be seen, after the initial knee-jerk reaction that advertisers normally do after seeing their ads not showing on the search results page. For example, the recent removal of right hand sided ads in Google search engine results page caused an initial spike in CPC, but the CPC level stabilised after the first few weeks, with keywords only seeing a minor increase in CPC compared to before.
For marketers, especially the non-big spenders on Baidu, the reduction in the ad spaces on search engine results page should be welcomed. This allows them to have a fair chance to appear on the first page of the Baidu search results, putting search engine optimization (SEO) to be as important as that on Google and Bing.
Marketers should monitor the changes in their ad CPC as well as their ad positions by comparing their ad performance metrics for the week leading to 22 May (before the policy change was implemented) as well as the week after 5/24 to see if the changes remain significant to warrant any change in bidding strategies. Also, they should also look into the changes in organic traffic coming from Baidu before and after 5/23, to see if the reduction in ads lead to an increase in their organic visibility and organic search traffic.
In short, I think marketers should welcome this change in Baidu ad policy, which finally allows them to look at both organic and paid search holistically, in contrast to the old days when big budget would help you win the game in search. Investors, however, would need to wait and see if this change will hurt Baidu ad revenue in its upcoming quarter earnings report.
Antony Yiu is head of digital of North Asia at MEC.