Advertisers In China Are Getting Burned, Too

China has a reputation in the U.S. as a haven for click-fraud artists. Now, Chinese advertisers say they, too, have fallen victim to the proliferating racket.

In August, Chinese advertisers carrying placards even staged a small demonstration in front of the Beijing office of (BIDU ), China's top search engine. Leading the protest was Dr. Liu Wenhua, director of the Beijing Zhongbei Cancer Medical Research Center. Liu claims that his center, which advertises its services online, has suffered from fraudulent clicks on its ads on a Baidu-affiliated music and entertainment site. Baidu has offered a refund, Liu says, but he turned it down, preferring to take Baidu to court. "I'm not satisfied," the doctor says.

Zhang Xinwei, a partner with the Beijing Hetong Law Office, represents Liu and four other advertisers that also have sued Baidu, alleging fraud. "The problem is very serious," says Zhang. Another plaintiff, Land of Maples Tourism & Culture Exchange, a Beijing travel agency specializing in trips to Canada, has hired a different lawyer. Steven Donne, who runs the agency, says he became suspicious of a batch of 600 clicks this summer because they all came from one source. But Donne feared he wouldn't be able to prove click fraud, so his suit focuses on a claim that Baidu manipulates search results to punish certain advertisers. The legal cases are all in a preliminary stage.

Baidu officials declined to comment but provided a statement denying any impropriety. "Baidu places the highest priority on preventing fraudulent clicks," it said. "We have set up numerous measures both through automated technology and manual efforts to prevent fraudulent clicks and the effectiveness of which [has] been verified by [an] independent third party.... We are, however, continuing to invest aggressively in safeguarding measures which will help ensure that our customers and users continue to have the best possible experience."

Despite such assurances, advertisers say concern is spreading. Executives at Analysys International, an info tech researcher in Beijing, noted earlier this year that clicks on its ads on Baidu soared without any uptick in business. In April alone, Analysys burned through one-third of its modest yearly online marketing budget of $3,800. "It was like crazy," says CEO Edward Yu.

This spring, Analysys conducted a survey of 2,000 online advertisers in China and found that one-third believe they have been click-fraud victims. Yu continues to patronize Google's (GOOG ) Chinese affiliate, but he has stopped buying advertising from Baidu and Yahoo (YHOO ) China, which is owned by Porter Erisman, a spokesman for Alibaba, said in an e-mail that "click fraud is a serious but manageable issue," adding that less than 0.01% of his company's customers have complained.

By Bruce Einhorn

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