NEW YORK: Baidu reported lower second-quarter earnings Thursday as the Chinese Internet giant experienced slower user growth following a scandal over its policies for displaying paid ads.
Net income for the quarter ending June 30 was 2.4 billion yuan ($363.2 million), down 34.1 percent from the year-ago period.
Revenues rose 10.2 percent to 18.3 billion yuan ($2.8 billion).
Baidu, sometimes referred to as the Google of China, said that 667 million people used it for online searches from mobile devices in June.
While that is a six percent rise compared with the year-ago period, it marks a slower rate of growth than the 21 percent rise in the December 2015 quarter or the nine percent gain in the April quarter.
Chinese regulators in May ordered Baidu to change how it displays search results following the death of Wei Zexi, 21.
Wei had been diagnosed as having a terminal soft tissue disease when his family found an experimental immunotherapy treatment at a Beijing hospital run by the armed police force via a Baidu search.
When it didn't work, Wei accused the hospital of exaggerating the treatment's efficacy and accused Baidu of ranking medical information search results by the amount paid by advertisers.
Chinese regulators found that Baidu's system for ranking results depends on prices paid and that the company did not clearly state which ads were paid for by a sponsor.
Results were also hit by higher costs in a number of key areas.
Content costs accounted for 9.3 percent of revenues, up from 5.1 percent in the year-ago period, mainly due to higher costs for Baidu's online video platform, iQiyi, which has been likened to Netflix.
Costs were also higher for bandwidth and traffic acquisition.
"While we experienced a tough second quarter, our value proposition to our users remains solid," said Jennifer Li, chief financial officer of Baidu.
"Delivering a superior user experience and building a trusted platform are the pillars that will drive our long-term sustainability."
Baidu shares fell 0.4 percent in after-hours trade.
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