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How a China firm scrubbed bad Internet publicity - Caixin Online

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The company’s founder, 30-year-old Gu Dengda, is awaiting trial on a variety of charges including bribery. He’s one of at least 10 Internet clean-up specialists currently being detained by police. And Yage is one of several companies closed over the past year by authorities for turning China’s website administration process into an illegal money machine.

The last vestiges of China’s web-scrubbing industry were apparently wiped out in July when police raids targeted Yage and a related public relations firm in Beijing’s Haidian District.

More than 100 employees — even janitors — were detained. Authorities were so determined to leave no stone unturned that every uniformed officer in the district was dispatched for the raids, even a forensic examiner.

The Haidian clampdown had its roots in a national campaign launched three months earlier by four central government agencies — the Propaganda Department of the Communist Party’s Central Committee, the Ministry of Industry and Information Technology, the Ministry of Public Security, and the State Administration for Industry & Commerce — aimed at uprooting website administrator bribery and other illegal, Internet-related public relations activity.

Targets included employees at public relations firms, major news portals such as Netease and Sohu, the Beijing-area news portal Qianlong, Internet search giant Baidu and local government Internet regulators.

A primary goal was to finally stop the moneymaking scheme that Gu started and Yage perfected before being imitated by other businesses across the country. His and other businesses rescued companies from image-damaging content on the Internet by paying website operators to delete posts and news articles. They would also arrange to beef up online reputations for companies and government officials.

Most of those detained during the Haidian raids were caught by surprise. While under interrogation, police said, several shook their heads “no” after being asked whether they knew that deleting web posts was against the law.

Wealth track

Gu, whose name in Chinese means “reaching prosperity,” found a shortcut to fortune in 2006 after learning how website operations work as a low-level staffer at China’s largest search engine Baidu.

He decided money could be made based on the fact that at that time Internet users were posting more than 2 million messages on Baidu’s public forums every day. In addition, news and information website readers were posting massive numbers of reader comments.

By deleting postings and comments that painted a negative picture of a company or individual, Gu decided he could make a decent living.

Gu’s knowledge of Baidu’s website-user rules worked to his advantage. He knew, for example, that the search engine’s around-the-clock complaint department would work with website technicians to quickly remove any posts about which they received a Baidu-user complaint.

At that time, blog posts, comments and other data could be scrubbed based entirely on a single complaint.

Moreover, Gu knew how to make direct contact with website administrators and their colleagues. This skill — coupled with his ability to grease palms and cultivate good relations with website staffers — proved to be the key to his business success.

Gu started by charging 800 to 1,000 yuan ($128 to $160) per deleted post while still employed at Baidu. He would start working his magic after finding an image-conscious customer, who wanted something scrubbed from the Internet. He would then file complaints with Baidu /quotes/zigman/97715/quotes/nls/bidu BIDU -2.27% about relevant postings, and watch the Web until they disappeared.

A former Yage colleague said his boss managed to pocket tens of thousands of yuan /quotes/zigman/4869230/sampled USDCNY -0.1099%  during this moonlighting phase, before launching his company.

Gu once told employees at Yage ‘s that “traditional crisis management skills are public apologies and paying compensation to victims. But what’s needed by those companies that want to get listed (on the stock market), or those that don’t want to spend much to manage a crisis, is to prevent the spread of (negative) information.

“This is especially true for local government officials and entertainment stars,” Gu told his staff, according to the former Yage employee.

Gu’s sideline business took off, so he quit Baidu in 2007 and set up Beijng Yage Time Technology Ltd. He later changed its name to Yage Time Advertising and registered the firm under the name of his wife, the chief financial officer.

Yage’s clients ranged from small, private companies to heavyweights such as China Mobile /quotes/zigman/22400 HK:941 +0.88%   /quotes/zigman/263044/quotes/nls/chl CHL +0.25%  and FAW-Volkswagen, the joint venture set up by German carmaker Volkswagen and Chinese counterpart First Automobile Works /quotes/zigman/1863461 CN:000800 +1.23% . Foreign concerns, including Pizza Hut and the Japanese restaurant chain Yoshinoya, also hired Yage.

But Yage’s best clients were local government officials. They were generally eager to pay for his help with building a positive image and a clean record on the Internet.

A former Yage staff member said about 60% of the company’s profits came from business with officials from second- and third-tier cities. These clients included many police chiefs.

As part of Gu’s strategy, dozens of Yage staffers spent the workday surfing the Internet in search of negative news, comments and postings about government officials. Any official whose reputation seemed to be threatened would be contacted and offered Yage’s services as soon as negative information surfaced online.

High season for Yage’s business with local government clients was usually just before the National People’s Congress and China People’s Political Consultative Conference held every March in Beijing. It’s around conference time that officials typically come under attack from whistleblowers. It’s also when these officials are often willing to pay a premium to see negative publicity vanish.

A former Yage staffer recalled that Gu once announced at an internal meeting that a deal with a nervous government official was worth no less than 500,000 yuan.

Yage’s cream of the crop employees built good client relations with government officials. These included a dozen hand-picked by Gu and carefully trained so they could successfully pitch the company’s services to even high-ranking officials.

Gu also found ways to profit from value-added services. For example, after scrubbing negative content for a client, Yage sales staffers often recommended Internet surveillance software that could be used to self-monitor web forums. Yage could buy a single software license for 100,000 yuan and sell it to a gullible client for 400,000 yuan.

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