Baidu, China's largest internet search engine, yesterday admitted that some companies had used its website to market fraudulent information, as it faced mounting criticism for auctioning top search result rankings to the highest bidders.
In a statement, Baidu said it had started an internal investigation into the problem, pledged to co-operate with regulators and expressed a "sincere apology for hurting the feelings of users and other customers".
Baidu's Nasdaq-listed shares suffered a 25 per cent fall on Monday following a barrage of criticism on state-run television channels at the weekend, a sign that its business model could be open to challenges from the government.
Unlike most search engines, Baidu mixes sponsored links with "genuine" search results without marking the sponsored links clearly.
Baidu's customers can bid for search keywords and the link to the highest bidder's website will appear at the top of the search results.
The fees generated from these auctions account for almost all of Baidu's revenues, as opposed to the advertising revenue its competitors rely upon.