Netease's replay to CCTV 315 investigative report, part 3

One may find part 2 of this article here:

Part 2 here.

From my write up in part 2, CCTV actually had a pretty good target. There are about 4 or 5 3rd party companies that somehow grab the user information as contained in the cookie file through back door. It is not very clear how those 3rd party company did it.

CCTV actually make this reporting much weaker by turning it into a hit piece against Netease. It is not clear why will CCTV want to do that.

I can only think of four reasons why will CCTV wants to do this.

1st possibility: It is part of a larger plot. Government is trying to send a signal to Netease and its News editors. Netease News is famous in China for being the "News with Attitude". But the possibility for this is very low. Government can just summon NTES's CEO to Beijing for some tongue lashing. In addition, other government agencies would have gotten into the act. It had been 5 days and no other government agencies had any corresponding measures against NTES. Therefore, this possibility is very low.

2nd possibility: CCTV's 315 editor is not professional. Actually, this is not the case. The overall CCTV shows may be of low quality. But the show 315 is actually of high quality. I personally think this possibility is also very low.

3rd possibility: CCTV's 315 show actually have more materials in their pocket. I also consider this possibility is very low. Why would any editor want to make their show of low quality to begin with? That doesn't sense at all. One could hold on to some evidence while still coming out with high quality product. 315 show editor is too smart for that.

4th possibility: This is the one I considered to be by far the most probable. CCTV's editors coming out with a very good investigative reporting on how unscrupulous 3rd party companies stole personal user information through the back doors of China's four major portals (Sina, Sohu, Ntes, Tencent). But the editors is being overruled by their managers. Sina, Sohu, and others purchased advertising slots on CCTV. All except one, Netease, are major purchasers of CCTV's advertising slots. For commercial reason, CCTV managers forced 315 editors to change the original program into a hit piece against Netease. I think the reason why the central themes so ambiguous is because 315 show editors have to change the focus of the show at the last second. The show never address the central themes. Why does NTES's emails have anything to do with a bunch of 3rd party companies steal users' cookie file? Why will NTES want to let those 3rd party companies steal their internal company information?

Of course, the above are only my conjecture.

Finally, Netease announced its official position on 3/16/2013:

Netease's official announcement

I will translate below:

"Netease always protect user's privacy. As an company listed on NASDAQ, Netease has very strict system and technology to safe guard users privacy. We always obey all laws and industrial standards. We completely forbid any Netease organizations or Netease employees to read users email content. We always protect all citizens' constitutional rights of free and private information.

After reviewing CCTV's investigative reporting, and to completely remove any doubts by our users, Netease had established a special investigative team to investigate this matter. We will provide the result of our investigation at the earliest time. Netease wants to thank our users and CCTV for their attention and criticism. We offer our utmost gratitude for your continuous oversight."

Personally, I think it is a great reply. While I am pretty sure Ntes read the content of their users emails, it is machine that does that, not any individuals or organizations.

China is still a communist country. CCTV has the obligation to provide it users "proper guidance and to educate its users so the users can have the proper thoughts". CCTV and Netease News are not equal.

CCTV is still the most watched programs by far in China. Netease really shall spend some money to buy advertising slots on CCTV's shows. Hopefully, that will be the end of that.

end.

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:

My last NTES article

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)

An English article

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

The Chinese article on the CCTV 315 reporting:

Much more detailed description in Chinese

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):

up to 680k VW vehicles 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:

CCTV's segment on NTES

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.

end.

NTES's Portal business's rebirth – part 3 – Targeted ads

This is the 3rd part of a 3 part series on what NTES is doing to rejuvenate its portal business. Part 2 of this article can be found here:

http://chinese-net-gaming-stock.blogspot.com/2009/05/ntess-portal-businesss-rebirth-part-2.html

Netease just start a new service that will allows for precision targeted advertising. That service can be found here:

http://jz.163.com/

This service can potentially cause major upheaval in the internet advertising field. Two biggest areas in internet advertising is search and portal. They targeted two different kinds of clients. The portal targets brand ads. Its clients are big cooperation. Search on the hand, because it can target very specific sector, is catered to small and medium companies.

NTES provides blogs, photo album, and email services to its users. These services are free to the users. But they do provide their personal information to NTES. Information such as their ages, their locations, their sex, their hobby, their likes and dislikes, are very useful information. That information can therefore be used for highly segmented targeted advertising. Therefore, this is great for small and medium companies.

Therefore, NTES just come out with a way for the portals to grab businesses away from the search engines.

At this point, NTES is targeting this service for SME (small and medium enterprises). NTES has 300 million email accounts, 80 million blog accounts, and 23 million photo album accounts. Therefore, it represents a very attractive target for advertising to the millions of small businesses in China.

NTES just start this service, to avoid too much inconvenience to their users, the ads will be put in a few places at the beginning.

At this point, I don’t think NTES will get a lot of new revenue at the beginning. But if other portals start to follow suit and start to do this, it would allow all the portals to put more ads in more easily observable locations. By then, it would really become a threat to the search engines.

NTES’s Portal business’s rebirth – part 2 – Cooperate Email

This is the second part of a 3 part series on what NTES is doing to rejuvenate its portal business. Part 1 of this article can be found here:
http://chinese-net-gaming-stock.blogspot.com/2009/05/ntess-portal-businesss-rebirth-part-1.html

From the following article :
http://it.sohu.com/20090325/n263005508.shtml

The 2nd thing NTES will do is to monetize its email business. NTES has virtually monopolized the email service in China. But they had never really trying to monetize this service. On 3/25/2009, they are starting a new service for companies. They will provide enterprise email account. They will guarantee the email in this service.

This service will also try to intercept spam emails. Any company that uses Netease’s service will be compensated if there are any lost emails or in-sufficient spam blocking. NTES will set aside $10M rmb this year for compensation.

Companies signed up with NTES will also receive other services including bigger email capacity, email virus protection, and email monitoring.

In a separate article indicating the dominating position of NTES in emails, Netease’s Email users exceeds 300 million
http://tech.163.com/09/0330/00/55K53EOR000915BF.html

From the following article,
http://big5.xinhuanet.com/gate/big5/www.zj.xinhuanet.com/newscenter/2009-04/02/content_16144993.htm

Only 10% of China’s cooperation has its own email system (compare with 60% outside of China). Therefore, this can potentially be a lucrative business.