INTERNET: Regulator Rebukes Baidu for Malicious Apps

By on

Bottom line: Baidu’s stock won’t suffer more short-term damage from a recent series of transparency scandals, but its reputation could suffer over the longer term.

Baidu software under fire
Baidu software under fire

Leading search engine Baidu (Nasdaq: BIDU) is fast becoming synonymous with the word “opaque” due to long-standing practices that have helped it become one of China’s most valuable Internet companies, often by exploiting unsuspecting consumers. Following a recent series of scandals involving various opaque practices, the company is back in the headlines after a number of apps from its mobile assistant store landed on a malware black list from China’s telecoms regulator.

I’ve been trying to be fair throughout this series of scandals for Baidu by pointing out that many of its opaque business practices are common and widely tolerated throughout China due to an immature corporate culture. But Baidu’s status as one of the nation’s most valuable private companies has made it an easy target for critics of such practices.

China’s regulators also seem to be jumping on the bandwagon these days, realizing that criticizing Baidu will generate big headlines and send a strong message to the many smaller players that engage in similar actions. That’s the price of being big. In Baidu’s case the recent spate of negative publicity was costly for the company’s stock, knocking as much as 18 percent off the shares before a recent rebound.

According to the latest headlines, China’s Ministry of Industry and Information Technology (MIIT) has just published a list of 29 malicious apps, including 4 that are distributed on Baidu’s Mobile Assistant app store. (Chinese article) The MIIT created the list after surveying 43 different app stores, and offenses included collecting personal data without authorization and adding unwanted software to users’ smartphones.

The 4 blacklisted apps from Baidu’s store included 3 that added unwanted software, and a fourth that collected personal information without the smartphone owner’s consent. The MIIT embarks on periodic campaigns of this type, including earlier ones that criticized some smartphone makers for including too many unwanted apps and also for creating models that consumed large amounts of data without users’ knowledge.

Common Practice

Baidu’s collection of personal data without users’ knowledge is quite common in the industry, and security software specialist Qihoo 360 (NYSE: QIHU) has also come under periodic criticism for such practice. The stealth downloading of unwanted software onto people’s smartphones is also quite common, especially for web browsers.

This latest negative news comes nearly a month after a much larger scandal that saw Baidu attacked for misleading practices in its core search results business. That scandal saw a cancer patient choose a hospital for treatment partly based on a high result on Baidu search, only to later learn the hospital got such placement simply because it paid the highest price.

Since then, Baidu has also come under fire for allowing private companies to sponsor and manipulate discussion in some of the specialized communities on different topics in its Tieba service. Last week the company got blasted by a real estate services site that said Baidu forced it to pay large sums in “protection” money for inclusion in a special industry-specific area of one of Baidu’s other websites. (previous post)

At the end of the day I really don’t have much sympathy for Baidu, even though it’s certainly not the only one engaging in this kind of practice. The company gloated back in the 2005-2010 period when it rapidly stole search market share in China from Google (Nasdaq: GOOG), citing its better understanding of the local market. That explanation does indeed seem to be the case, since Google and other big western names would be unlikely to engage in the many opaque business practices that are now causing negative publicity for Baidu.

Related posts:

(NOT FOR REPUBLICATION)

(Visited 188 times, 1 visits today)