Putian's Bosses Pull Search Advertising
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1 Talking Point 5 Week in 60 Seconds 6 Internet and Tech Week in China 7 Telecoms 8 Economy 10 Rail and Infrastructure 11 China Consumer 10 April 2015 13 Society and Culture Issue 276 17 And Finally www.weekinchina.com 18 The Back Page Fevered brows m o c . n i e t s p e a t i n e b . w w w Putian’s hospital tycoons boycott Baidu’s ads – triggering a fall in the search engine’s stock Brought to you by Week in China Talking Point 10 April 2015 Taking their medicine Putian’s bosses pull search advertising; Baidu’s stock catches cold Meet the press: Robin Li’s internet search firm Baidu is getting media attention over hospital row ast Saturday the Hilton hotel in call a halt to all paid promotional town selling the homemade cure Lthe Putian was reminiscent of activities on Baidu, the dominant for as little as Rmb1 per bottle. He the scene from The Godfather film search giant in China. The bosses was so successful that other people when the leading mafia families claimed that the move was not de - in Putian followed suit, turning the met to settle a dispute. All the big signed to provoke a confrontation small enterprise into a national bosses from this city in Fujian with Baidu, or to put commercial medical network. province attended, no cameras were pressure on the company. But crit - Putian businessmen now tend to allowed inside, and bodyguards ics say they are doing exactly that. target treatments that have higher made sure that no one was wearing margins and that can be performed wiretaps. Of course, the tycoons in What’s the big deal? at relatively lower risk. Fertility pro - the boardroom weren’t from the As profiled in issue 242, business - grammes, plastic surgery and dental underworld. Instead they lead men from Putian, once a small fish - care have been especially popular. many of the country’s hospitals, ing village, make up the single Importantly, these sectors aren’t controlling as many as 8,600 med - biggest group of private hospitals normally included under national ical facilities in an empire worth operators in China. medical insurance, so patients often more than Rmb260 billion ($42 bil - They got their start in the early choose private hospitals that spe - lion), according to Changjiang 1980s, when a local doctor came up cialise in these categories. P h o t o Times. with a remedy for treating scabies – The Fujian tycoons like to keep S o u r After the four-hour session, the an infectious skin rash that was low personal profiles, but they were c e : R e Putian tycoons presented a united widespread at the time. To make his one of the first business groups to u t e r s front, announcing that they would living, the man travelled around advertise medical treatments on TV 1 Week in China Talking Point 10 April 2015 and radio. They were also some of the earliest advertisers on Baidu’s Planet China search pages, putting their ads on Strange but true stories from the new China the site from 2002 (two years after Baidu was founded) to lure people LADIES MAN. looking for medical services. Propped up in his hospital bed after a nasty car accident last “In the beginning, it was a great month, a man surnamed Yuan from Hunan province must have wanted partnership: Baidu brought many visiting hours to be suspended indefinitely. new clients to Putian’s private hos - That’s because he was playing host to a gaggle of girlfriends, all unaware pitals; and Putian’s advertising in - of the existence of their love rivals. vestment was instrumental to the According to media reports, at least 27 women have turned up to see rapid growth and later success of Yuan, some of whom had even given birth to his children. “I was really Baidu,” Changjiang Times con - worried when I heard that he was in hospital,” Xiao Li, one of the girlfriends, cludes. told Hunan Satellie Television. “But when I started seeing more and more beautiful girls show up, I couldn’t cry any more.” She has even set up a ‘girlfriend group’ on WeChat so that the women How did it all fall apart? can establish the full extent of his trickery. In the past, most of the private hos - Yuan had even convinced a number of the women to give him financial pitals have signed annual advertis - support, with one lady said to have been handing over most of her salary to ing contracts with Baidu. But the him for nine years. search engine, leveraging its near- The disgruntled girlfriends then went to Changsha police to accuse Yuan monopoly status, has become a of fraud. But while some netizens have fumed at his behaviour, others tough negotiator, pushing for in - seemed rather dazzled by his duplicity. “A liar always acts perfectly,” one creases in advertising spending of noted. “The only thing he paid them were compliments, which are all that at least a third a year. women wanting a perfect life will need. So as a consequence, they were Putian hospital operators are cheated on.” now pushing back. With more than an 80% market share of private clin - That may not be too much of an led nowhere and Google’s retreat ics, they are some of the biggest ad - exaggeration. One owner of four from China in 2012 has seen Baidu vertisers online in China. The city’s private hospitals told the Fujian strengthen its position in the search municipal secretary Liang Jiangy - Daily that he has spent more than market. One plastic surgery clinic ong even boasted back in 2013 that Rmb10 million on advertising on says it used to cost around Rmb30 Putian-owned hospitals contributed Baidu over the last year. His own per click when a user searched for Rmb12 billion ($1.93 billion) of margins have been shrinking: he cosmetic surgery. But that rate has Baidu’s Rmb26 billion in advertising claims net income for his hospitals gone up to a few hundred yuan to - sales. Baidu has countered that this is only Rmb20 million. day. In areas of the country where figure is dramatically overstated, “Our advertising budget is very consumers are wealthier like Shen - but industry analysts have esti - small compared to other larger pri - zhen, the price can reach Rmb999 mated that Putian-owned business vate hospital networks. I know for the top spots, says Fujian Daily. could contribute between 15% to some spend up to Rmb300,000 a The hospital owners are fed up. 30% of its revenues. day on Baidu just to become the “Domestic private hospitals dedi - Meeting Baidu’s growth targets high bidders on search results. So cate up to 70% of their advertising for online spending has become in - you can imagine after a year, the ad - budget to Baidu. But as the cost for creasingly difficult and in late vertising costs become very scary,” top spots becomes higher and March the hospital bosses decided he told the newspaper. higher, the only way for us to re - to rebel – with the Putian Health In - main profitable is to decrease the dustry Chamber of Commerce an - Baidu, the bully? quality of our service or increase nouncing that its hospitals would It isn’t the first time that Putian’s our prices, which is bad for our stop paid promotional activities on providers have accused Baidu of brand,” an industry insider told Baidu. “The industry is facing severe overcharging. In 2011, a number of Southern Metropolis Daily. problems and many medical facili - hospitals said they had to pay up to ties have been reduced to working Rmb600 for each click if they And the other side to the story? for internet firms,” the association wanted to appear in its recom - Last week Baidu fired back at the claimed. mended results. But the complaints hospital bosses, describing the Put - 3 Week in China Talking Point 10 April 2015 ian protest as retaliatory. It says the ‘pre-diagnosis assessments’. keeps the private hospitals alive. tycoons are embittered because it So the row with Putian comes at They can work with other search en - has been refusing to post false or a time when digital innovation gines, such as Sogou, but those sim - misleading ads, and that up to 60% looks set to shake up the sector, ply cannot offer the search traffic of the rejected content was from bringing the established operators that Baidu does,” Lu Zhenwang, an members of the Putian association. into more direct competition with internet expert, told the China The healthcare ad market is “a their former commercial partners. Daily. long-term driver of revenues” for Almost all the population now has Sure enough, on Thursday this Baidu, insists Robin Li, its chairman, basic health insurance, up from a week there were signs that Putian’s and it needs to offer higher quality third in 2003. But health care cover - tycoons were trying to reopen ne - information about medical treat - age has not kept pace with potential gotiations by reinstating some ads. ments than its internet rivals Al - demand, and the internet brands But investors in the search firm ibaba and Tencent, which have sense a huge opportunity to step seem worried too. Since news of the started new services to search for into the gap. dispute started to make headlines medicines and pharmacies, and to Bloomberg gives prescription in late March, Baidu’s shares on Nas - make doctors’ appointments. drug sales as an example.