IT WAS A spectacular bit of timing. On November 16th Baidu, a Chinese online-search giant, said it would buy YY Live, a China-focused video-streaming service with 40m monthly users, for $3.6bn. Two days later Muddy Waters, an American short-seller, published a report claiming YY Live was “an ecosystem of mirages” and “almost entirely fake”. The share price of JOYY, YY Live’s parent company, slid by 26%.
Muddy Waters alleges that JOYY’s platforms, including YY Live, are infested with “bots”—computers that log on to “watch” streams, pretending to be human. Many, it says, appear to sit in JOYY’s internal networks. The upshot, it alleges, is that somewhere between 73% and 84% of JOYY’s revenue is suspect.
JOYY responded by saying the report contained “numerous errors, unsubstantiated statements and misleading conclusions and interpretations”. It said it would be open to “cash verification and diligence” conducted by “competent third-party advisers”. (JOYY and Baidu did not respond to requests for comment.)
The allegations are unusual in accusing the platform of creating its own fake users. Technological complexity and minimal human oversight means the “attention economy” is full of virtual eyeballs. But such mischief tends to be the work of outsiders. Last year America’s Federal Trade Commission fined the boss of a firm called Devumi $2.5m for selling fake YouTube views, the first time such a complaint had been brought. Digital advertisers pay to have their ads shown to users. It is an open secret that many end up served to fake viewers, generated by computers infected with malware written for this purpose.
A new report by the University of Baltimore and CHEQ, an anti-fraud firm, estimates that $35bn is lost annually to such scams, from a total market worth $333bn. South-East Asian fraudsters employ humans to scoot between racks of smartphones, tapping ads and installing apps, says Gary Danks of Machine, a firm that offers ad-fraud detection. Those in places with higher labour costs simulate phones on computers.
Companies are fighting back. Last year Uber sued more than 100 ad agencies, accusing them of buying fake views on its behalf. Facebook launched a lawsuit against firms it says create malware that hijacks users phones, forcing them to generate fake ad clicks. Neither suit is likely to stem the fraudsters’ rise.
This article appeared in the Business section of the print edition under the headline “You’ve been botted”
