The Putian (China) Health Industry Chamber of Commerce started a boycott of Baidu’s advertising service that began March 22 over what they’re calling exorbitant fees. It was said that almost 98 percent of China’s small private hospitals have investors from the city of Putian in southeast China’s Fujian Province, and at least 80% are practically controlled by owners from Putian.
Companies in China’s health care, education and e-commerce sectors are the biggest generators of Baidu ad revenues, and Putian hospitals together comprise the biggest health-industry client. A research report by the U.S. investment firm JPMorgan Chase said Putian hospitals last year may have contributed 5 to 12 percent of Baidu’s revenue.
Baidu is the leading search engine in China and it has faced the boycott head on. They claimed the boycott was in response to the search engine’s decision to block healthcare search results that violated industrial regulations or that had generated too many consumer complaints. On April 7, the search engine said it was asking for a police probe after the Putian chamber’s interference with their clients’ normal operations.
The chamber has blamed Baidu’s ad pricing system for the deteriorating relationship. Many hospitals have been reduced to practically working for Internet companies. This year, the chamber said, the search engine has doubled its mandatory spending floor for a single advertiser to 10 million yuan annually. Baidu had required that hospitals increase their ad spending by 10 to 20 percent annually.
This fight actually signals the advent of a transforming phase of the Chinese health care industry. People from Putian make up the majority of laymen who develop careers in health care and they as a whole contribute significantly to the budding private health care sector in China. Chinese health care market is dominated by the public sector, which makes sense for a communist country where every thing is in theory owned by the general public. In the past, people from Putian traveled all over the country to provide unlicensed health care services in the under-served areas with some times exaggerated advertisements. That’s why they depend heavily on online ads when search engines become the leading ad providers. As time changes and China’s economy is booming, the demand for higher care quality increases and the Putian style promotion has to change as well. The Putian hospitals have also moved from focusing on primary care to tertiary care. With the Healthy China 2020 initiative full steam ahead, government policies in encouraging the expansion of private healthcare sector posed a unique opportunity for the upgrading and enlargement of Putian healthcare. This fight between Baidu and Putian chamber actually indicates that Putian hospitals need to improve their quality to earn patient’s trust and rely less on the Internet to attract patients, which in effect will secure an even better and brighter future for the Putian healthcare system.