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Baidu, Alibaba Face Profit Hit From New Rules on Search Ads

  • Search to be taxed an additional 3%, like Internet advertising
  • Daiwa estimates Baidu earnings will fall below consensus
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China's New Advertising Rules May Hurt Alibaba, Baidu

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Alibaba Group Holding Ltd. and Baidu Inc. 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 percent tax.