Baidu's sales in the January to March quarter fell after it removed paid ad listings from unlicensed medical and pharmaceutical vendors at the end of 2008. They were pulled in response to public uproar after China's state-owned broadcaster revealed them amid a nationwide poisoning scandal over melamine appearing in dairy products.

Those removals combined with the weak economy and a slowdown during the week-long Chinese New Year holiday to reduce revenue, Baidu said in a statement.

Baidu will continue to monitor and remove ad customers as it sees necessary, though the round of removals started last year are "to a large extent" completed, Jennifer Li, Baidu's CFO, said in a conference call on the earnings.

Baidu's revenue in the first quarter was 810.7 million yuan (US$118.8 million), a rise of 41 percent from a year earlier but a fall from sales of 902.1 million yuan in the final quarter of last year, Baidu said. The revenue figure beat Baidu's own forecast for the quarter.

The firm expects a return to growth in the second quarter with sales of as much as 1.1 billion yuan as it continues to increase spending on marketing, Li said.