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The purpose of this blog is for my personal use. It serves as my personal diary as I investigate Chinese internet/gaming companies for investment purpose. If you have any comments or disagreement, please give me feedbacks.

Tuesday, March 19, 2013

Netease's Reply to CCTV attack, part 2

My last Netease article talks about the attack from CCTV investigative reporting. One can find the link below:

On March 15 every year, CCTV will conduct a 2 hours special on investigative reporting on fraudulent activities conducted by companies. Every companies that got mentioned by this episode usually suffer negative publicities. Worse yet, often times, government agencies crack down on it right away.

This year's CCTV 315 show went after the following companies/industries:
Apple, several gold companies, China JAC Motors, Volkswagen, several drug companies, several broadband suppliers, Netease, and Google's Android phones operating system.

Here is some English article on its report on Apple and Volkswagen. (It is WSJ, so you need to use google search to get it)

But the English articles usually are only interested in its effect on American Companies.

The Chinese article on the CCTV 315 reporting:

It is a big deal to be on the CCTV 315 reporting. CCTV is the official government mouth piece. The 315 reporting is largely commercial in nature. But we are talking about China, most times, it is hard to tell apart governmental and commercial interests.

Company suffers negative PR from it. Most importantly, government agencies cracks down on it.

For example, one day after the reporting, China's General Administration of Quality Supervision, Inspection and Quarantine order the German company to conduct a recall. Knowing how slow Chinese government agencies work, it is pretty clear CCTV had provided those information to all the government agencies long time ago. So don't think of CCTV's 315 is just like America's 60 minutes. (I doubt any US government agency will conduct punitive order just one day after a 60 minutes show.)

See this English article (up to 680k VW autos will be recalled):

In addition, China JAC Motor just announced a 120k vehicle recall.

But I am only interested in the part on Netease. The following Chinese article gives the detailed description on CCTV 315 attack on Netease:

This TV segment is really creepy. While the 315 segments on Apple and VW are actually pretty good and professional. They actually have footage to prove what they try to investigate. The one on Netease is the opposite. It is full of innuendo and insinuation.

Unlike other segments, it is actually kind of hard to know exactly what Netease is accused of. The name of the segment is "Netease collect users personal secrets". But the part that actually directly named Netease only consists of 1/5 of the segments. In the first 3/5 of this segment, it talks about the cookie file. Cookie file is part of every internet browsers. It records the users habit. In the first 3/5 of this segment, it interviewed many 3rd party companies that collects users cookie file. Therefore, those 3rd party companies collects user behaviors for all of China's users.

But the four major portals (Sina, Sohu, Ntes, and Tencent) won't allow the 3rd party to collect cookie file. But by putting the ads on those portals, the 3rd party companies can collect users' cookie.

The part where it attacked Netease is on the 4/5 of the segment. It said that in addition to cookie, Netease also use its email service to collect user's behavior. Netease is dominant in China's email market. It has about 70% of China's market. CCTV actually get a Netease email branch manager to say that they can see the content of users email. Netease can use email's content to analyze the users. Netease then can target the advertising more precisely.

The last fifth of the segment go back to cookie again.

Therefore, the totality of this segment gives the impression that Netease is really bad in protecting user privacy. It not just gives 3rd party cookie permission. It also do more than that and snooping users email content.

But if reviewing this segment in detail, it never prove that Netease gives 3rd party company permission to users cookie file. The part about Netease email service is really not central to what this segment is about. I am pretty sure google email or yahoo email uses content of users email to generate target advertising. I shall know. I have both gmail and yahoo email, the advertising I got certainly seem to be highly targeted only to my interest.

More importantly, the part about Netease is not highly tangential to the core of this segment. What does email privacy have anything to do with 3rd party companies snooping users cookie file?

I ran out of time. I will provide Netease's official response in my next post.


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