Online security firm accused of stealing user info

Qihoo 360 Technology, China's largest Internet security service provider, has been under the media spotlight again recently, after being accused of stealing users' private information.

The Shanghai-based National Business Daily (NBD) reported on February 26 that Qihoo had stolen users' information through its security software and browsers, which are offered free of charge to more than 400 million active registered users.

The NASDAQ-listed company's stock price fell by almost 5 percent the same day.

The NBD report cited an independent researcher who posted a video on his personal Weibo showing how Qihoo's Safe Guard and Browser tracked every click by users on their computer and secretly transmitted the information to its cloud server. It also, allegedly, has a mechanism for wiping out the evidence of this, making it hard for people to discover and expose it.

Qihoo was also accused of secretly uninstalling software from competing firms during program upgrades.

The report cited the fact that Apple Inc had deleted all of Qihoo's applications from Apple Stores since January 25 and has not lifted the ban. Though Apple did not give any official announcement on this decision, an opinion from an IT insider was circulated on Weibo saying that Qihoo's products were removed partly because of their collection of users' information.

Some even posted the source code of Qihoo's program for taking users' information.

A reporter with the NBD told the Global Times on condition of anonymity on February 27 that all NBD employees had been required to uninstall Qihoo 360's products for fear of retaliation.

Qihoo responded on February 26, saying that the report was just a rumor fuelled by unidentified individuals and rival firms, and that it had seriously harmed its reputation. The company also said it would sue the NBD for the report.

A member of the NBD editorial staff surnamed Qin said that the newspaper had no official response to Qihoo's lawsuit.

Users concerned

There is "no privacy" when using Qihoo 360 products, Zhang Ning, a white-collar employee told the Global Times when she heard of the report.

Zhang said she had been using Qihoo's browser and Safe Guard software, as it is free of charge.

"After I have been shopping online, my computer always pops up advertisements for the same type of products that I bought a few minutes ago," she said, noting that Qihoo products must have monitored her behavior on the computer.

Almost all search engine providers monitor users' behavior for advertisement purposes, said Li Zhi, an analyst with Analysys International.

The real problem is that China has no law for violation of privacy and has no clear definition of privacy, such as whether shopping behavior can be monitored for advertising or commercial campaigns.

After the report was published, many netizens said on their personal Weibo that they had the same concern about Qihoo's products and some said they would uninstall their Safe Guard software.

"After I used the 360 browser, I could no longer use other browsers," Shu Yuan, a medical distributor, told the Global Times, adding that he once needed to get access to a client's website via Internet Explorer but failed.

If users uninstall Qihoo's Safe Guard from their computers, it would be the end for Qihoo, Guo Yu, a security researcher, told the Global Times on February 28.

Qihoo responds

At a media briefing on February 28, Qihoo pointed out that the NBD report did not interview Qihoo staff but only cited anonymous industry insiders from Qihoo's competitors, including Baidu, Tencent and Kingsoft.

The company said that the interaction of 360's browser with cloud computing is aimed to match and identify virus programs.

As for the deletion of its products from the Apple Store, the reason is that the products did not accord with Apple's rules for applications, but had nothing to do with the privacy of users, said Zhou Hongyi, founder and CEO of Qihoo 360 at the media briefing.

Zhou said the reason for the rumors is that Qihoo 360 has been successful in entering the search engine market, which is still dominated by Baidu, and also its success in achieving greater market share than competitors such as Tencent.

"Since we launched the search engine service in August 2012, the market value of Baidu has fallen by 100 billion yuan ($16 billion)," Qu Xiaodong, the head of PR at Qihoo, said at the media briefing.

Qihoo grabbed market share quickly by first launching free Internet security products, in particular its Safe Guard in 2006, and it is now the No.1 provider of Internet and mobile security products and services in China in terms of user base.

It launched its browser in 2008, which has climbed in terms of market share to the No.2 spot from eighth in January 2011, according to CNZZ, an Internet market intelligence agency.

While providing free products, Qihoo generates revenue from web games and online advertisements, which contribute about 70 and 30 percent of the company's total revenue, respectively, based on financial results released by the company in November.

Qihoo is set to release its fourth quarter report for 2012 Tuesday.

"Given that Qihoo is attacking Baidu, Sohu and other Chinese companies, the government has a vested interest in stopping the infighting," the Motley Fool website reported Saturday. "If the company backs down in the face of government pressure, then the negative impact on sales could be devastating for investors."

Qihoo said in a statement sent to the Global Times on February 27 that it aims to raise its share of the search engine market from the current 15 percent to 20 percent by the end of 2013, and increase it annually by 10 percent till 2015.

Not the first time

"If a company attracts too much controversy, it would certainly affect its development," said Li from Analysys International.

Qihoo has experienced similar problems before, said Tao Ran, an analyst with Snowball Finance, an Internet-based financial services company.

In 2010, it became embroiled in a battle with Tencent. The two firms accused each other of stealing users' private information, uninstalling or blocking each other's applications and unfair competition.

Following a court verdict in April 2011, three Qihoo-related firms were required to apologize to Tencent and pay it compensation of 400,000 yuan for slander and unfair competition.

The legal battle resumed in April 2012, when Qihoo sued Tencent for abuse of dominant market position, and Tencent filed a counter-claim against Qihoo. The court has yet to deliver a verdict.