Baidu, Alibaba Face Profit Hit From New Rules on Search Ads
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Internet giants Alibaba Group and Baidu could face a hit to earnings from new regulations in China that will tax search advertising.
China’s State Administration for Industry & Commerce last week issued new rules on the classification of internet ads. From September, paid searches will be treated as Internet advertising for the first time and that revenue could be subject to an additional 3% tax.
Such a move could force Baidu, operator of China’s most popular search engine, to cut its earnings for fiscal 2017 net income to $2.4 billion, according to analysts at Daiwa Capital Markets led by John Choi. That’s about 4% below the average of estimates compiled by Bloomberg. About 50% of Alibaba’s revenue in the first quarter would be affected, suggesting a 2.4% hit to earnings, he wrote.
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