Banking on Baidu

Companies pay a lot of money to move to the top of a popular search engine's results pages. In China, all you need to do now is be a major state-owned bank.

China's Ministry of Public Security is requiring search engines to list five state-owned banks at the top of every page. The world's most populous nation claims that this is a move to curb online fraud. That may very well be true, but it's also a way for regulators to flex their muscles.

Forcing Baidu (Nasdaq: BIDU  ) , Sohu.com's (Nasdaq: SOHU  ) Sogou, and all of their smaller rivals to jump through this hoop -- even if it may be an eyesore on the niche's minimalist design and a general distraction to users -- lets everybody know who's the boss in China.

This doesn't mean that there isn't a problem with fraud in China. Consumers there generally don't trust the Internet when it comes to completing financial transactions. Back in November, e-tailer Dangdang (NYSE: DANG  ) posted a larger-than-expected quarterly deficit, blamed partly on the need to roll out a cash-on-demand network in more than 130 cities. In other words, this is a service where couriers process payments personally once an order is physically handed over because shoppers just don't trust doling out sensitive financial payment through cyberspace.

However, it remains to be seen how consumers will benefit by being constantly fed links to five specific banking giants. It's not as if that will save folks from getting hoodwinked by phishing schemes that show up in emails. Are the naive that fall for those fraudulent missives going to have the gumption to close their emails, fire up their search engine of choice on their browsers, and head to the real links provided? I doubt it.

This won't necessarily take any business away from Baidu and Sogou, unless the state-owned banks will no longer feel a need to advertise for financial-based keywords given their rampant presence on the sites.

However, if this is what the government is imposing on the search engines that have historically played along with China's restrictive demands on content filtering, one can only imagine what regulators have in store for the Web 2.0 darlings. SINA's (Nasdaq: SINA  ) Weibo and leading social networking website Renren (NYSE: RENN  ) better start to worry.

They're probably next.

Motley Fool newsletter services have recommended buying shares of Sohu.com, SINA, and Baidu. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz calls them as he sees them. He does not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.


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