Baidu, Inc. says it has no details about the reported arrest of one of its joint founders Shi Youcai for publishing information about illegal gambling on the site. However, Baidu "insists on zero tolerance against all violations of laws and regulations."
Shi's arrest was reported by Caixin Global, The Paper and the 21st Century Business Herald which all quoted sources familiar with the matter. Caixin claimed its story this week was an "exclusive." Shi was detained at Hangzhou Xiaoshan International Airport on Sept. 15, some of the reports said.
Tapping A Veteran To Boost Flagging Revenues
Shi returned to Baidu in June 2019 as the head of its mobile ecology group and in charge of the company's direct sales team - replacing senior vice president Xiang Hailong. He had worked as sales director, vice president and in other roles at Baidu between 2001 and 2011.
During Xiang's tenure, there was a strict prohibition on illegal sales because "one could face 10 times the fees as punishment if caught," a former Baidu staff member told 21st Century Business Herald. "No one would dare to take the risk."
The internal punishment policy was eliminated after Shi returned. Instead, he introduced gray and even alleged illegal business through an advertisement proxy company called Wuxi Fanya Information & Technology.
Listing chess and cards under "game advertisements" Wuxi Fanya sometimes would spend 10 million yuan on customized advertisements in a single day, a source close to the matter said.
Analysts said the proxy company possibly has connections with Shi. They said corruption might also be involved in the illegal advertisement business.
In addition, the browser operator said in May 2019 that it had removed bad content and spoken with police after its forum site was bombarded with Cambodia gambling companies' recruitment postings for marketing staff to lure players from China.
The Cost of Business
As of May last year, Baidu reported a loss of 327 million yuan ($47.95 million) - its first quarterly loss since being listed in 2015, according to its report for the period. After Shi took over control at sales Baidu's second quarter of 2020 saw 18.93 billion yuan in revenues at its core business relying on advertisements - a year-over-year rise of 24%.
Original Sin
Baidu was exposed in May 2019 for flooding its communication platform, Tieba, with illegal casino recruitment information. Under the guise of job advertisements for "marketing staff" it attracted online users via chat rooms to internet gambling. The more people recruiters introduced, the higher the commissions they were paid, according to The Paper.
In response Baidu said the report was correct but Baidu claimed it wasn't sure these practices were a law violation. It said the company would collect relevant information and report to the police.
Elsewhere, Baidu advertisements have endorsed some medical treatments at hospitals. In 2016, a 21-year-old Shaanxi college student died after receiving DC-CIK, an experimental treatment for synovial sarcoma at the Second Hospital of the Beijing Armed Police Corps. He and his parents learned about the "highly recommended" hospital from Baidu. After spending more than 200,000 yuan, they were told by the hospital the cancer had worsened.
Online users and state news media said Baidu was responsible for Wei's death. The Cyberspace Administration of China investigated and imposed restrictions on its advertisement.
