INTERNET: Tencent — An Internet Whistleblower or Tattle-Tale?
Bottom line: Tencent should limit itself to only reporting rivals or former employees for illegal behavior in major cases of criminal behavior, or risk being labeled a tattle-tale and undermining its own image.
Media are flocking to the latest China Internet scandal that has seen software security specialist Qihoo 360 (NYSE: QIHU) accused of hosting pornography on its cloud service. But this time it’s not so much the act of hosting pornography that’s drawing attention, since this kind of problem is relatively routine on China’s unruly Internet scene.
Instead what’s drawing the attention is the source of the accusations that led to the scandal. In this case the pornography was uncovered in an investigative TV report, after central broadcaster CCTV was tipped off by Internet giant Tencent (HKEx: 700). China Internet watchers will recall that Tencent has a long-running feud with Qihoo 360 dating back to a clash 5 years ago. Observers will also recall that Tencent was in similar headlines last month when it leveled corruption allegations at a former executive who defected to e-commerce giant Alibaba (NYSE: BABA).
I wrote about this issue of vindictive whistle-blowing several weeks ago at the time of the Alibaba scandal, which was part of a broader internal probe that saw Tencent accuse about a half dozen former employees of corruption when they worked at the company. One of the accused executives was Patrick Liu, who had left Tencent and was working as president of Alibaba’s digital entertainment unit when he was arrested on suspicion of corruption. (previous post)
At the time of that report, I observed that such corruption is common in China’s corporate landscape, and often sees company executives accept bribes from their customers. Such bribery certainly has no place in a healthy corporate environment, but I also noted that Tencent’s motives seemed slightly suspicious since they targeted a former executive who went to work for a competitor.
Now other media are also noting that Tencent’s motives perhaps weren’t entirely selfless. They are pointing to similar tattle-tale cases that may have been aimed at attacking rivals, including this latest one involving Qihoo 360 and an earlier one involving the maker of an online video player that hosted pirated material on its website. (Chinese article) The tattle-tale accusations prompted Tencent to say it reported Qihoo 360 after links to some of the pornography started showing up on its popular social network (SNS) platforms. (Chinese article)
Politically Motivated?
While the 3 cases all involved unethical and illegal behavior, it does seem slightly suspicious that each targeted a company that was a rival of Tencent. Whistle-blowers like Tencent are an important tool for investigators who lack access to insider information, though in my earlier post I commented that such law enforcers also needed to be careful to avoid pursuing cases that might be politically motivated.
In this case I’m actually quite sympathetic with Tencent, which is a generally ethical company that probably feels like it plays by the rules and is constantly facing challenges from rivals who are far less scrupulous. The clash 5 years ago with Qihoo was such a case, which saw Tencent’s popular QQ messaging service viciously attacked by Qihoo’s free security software. Similarly, Tencent probably felt like Patrick Liu was violating non-compete conditions in his work agreement when he left the company to go work for Alibaba.
All this brings us back to the issue of whether Tencent is emerging as an Internet tattle-tale, and whether this kind of a tactic is a good way to punish rivals and former employees who engage in unethical behavior. I would say the answer is “yes”, though I would also add that Tencent should probably keep a low profile when taking such steps and only pursue more extreme cases. Otherwise, it could quickly gain a reputation as an Internet tattle-tale, which seems whiny and slightly vindictive, and could ultimately undermine the company’s image.
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