After merging with Dianping.com, group purchase website Meituan has become entangled in a scandal involving click farming and other fraudulent practices in its hotel reservation business.
Click farming, a form of click fraud, directs large groups of people to click purchase links and boost apparent website sales. It’s a common tactic used by China’s online retailers. CCTV reported a massive click farming campaign by Taobao in December, when one click-farming group was exposed to be driving fake orders to Taobao shops.
With its $3.3 billion in finances, the Meituan-Dianping group has been exploring movie tickets, hotels and food delivery. But strong competitors like Ctrip.com have left the new company at a disadvantage in hotel bookings. The recent scandal involves not only fake orders, but also fake comments, prices and fictitious hotels.
This is not Meituan’s first time exploring click fraud.
In 2014, Meituan was criticized for using click farming to promote its takeout service. The company boasted 1.5 million takeout deals per day, but an investigation by Kanchai.com found the “food deals” mostly consisted of non-food products such as locks and cosmetics sold on the company’s takeout platform.
In the hotel sphere, a unique reservation system is what made it possible for Meituan to boost its clicks so quickly. While traditional room booking services account for room type and check-in time, Meituan users must purchase hotel coupons before making their reservation.
“My hotel has 12 rooms. We can accept at most 360 reservations per month. But if the reservation is made via coupon, it can appear we had more than 1,000 bookings. That leaves a huge gray area for manipulation,”said Wang Si, a Tianjin hotel owner, in an interview with Sina.com.
Meituan gets a commission of 8 to 10 percent on each order. The cost of click farming involves paying that commission fee and acquiring a large number of accounts. Pre-registered accounts can be purchased on Taobao for as little as 0.2 yuan each. When considering the subsidies Meituan offers to both hotels and users, the cost for click farming approaches zero.
“It’s an easy way to boost your hotel ranking without spending anything,”Wang said.
Most of the click farming is being driven by the hotel themselves, but some have recruited customers to help by making special offers, such as accepting nine 10-yuan hotel coupons for 100-yuan room.
Hotels on Meituan seem to share one common feature: an unbelievably low price. Some rooms are priced as little as 10 or 20 yuan.
With few exceptions, the stated prices are false and hotel staff will instruct whoever made the booking that they must pay more or risk losing their reservation. Others attempt to deter cheap guests by saying the room will lack a private toilet and hot water.
Shen Huaxuan is a hotel owner in an ancient town in Zhejiang province. He said the passenger flow in the town where he does business is split between 10 hotels listed in the first three pages on Meituan.
At first that sounds odd, because Meituan lists 20 hotels on each page. In fact, the same hotels appear under multiple names throughout the listings.
“A hotel might have five or six names registered by different family members. Some hotels use real photos while others grab random pictures from the Internet,”a hotel owner in Zhejiang province told Sina.com.
“Our shop will not be closed for click farming if we’re caught. But without click farming, all we would do is lose money,” said a Taobao shop owner who would not be named.
It’s a common saying on Taobao among business owners who turn to click farming. To support it, a highly developed industrial chain provides accounts and buries their activity from supervision.
Professional click farmers enter the industry by joining online chat groups and paying a “membership fee” for training. In addition to name and gender, candidates are asked to provide their birth date, address, IP address and a photo of their ID card. Click farmers can earn between 200 and 300 yuan per day according to the number of orders they complete.
On shopping websites that require verified shipping, such as Taobao, the workers frequently receive empty packages. Chutian Metropolis Daily reported that one of the larger click farming groups has 2,000 members.
The websites themselves have been reluctant to step in. Many online markets, including JD.com and Dianping, are plagued by click farming.
Wang Zhongping, general manager of Hongling Capital, told Beijing News that many companies can’t profit in the early phase of their establishment. To run a business, they need investors support. Fake sales are a way to inflate their apparent user base.
“The number of sales is something every investor wants to know. Most of them expect a fake number, but few are aware of just how fake it is,” Wang said.
“Almost every online retailer has to deal with click farming. Generally, click farming scales back when the company finds steady market performance and faces less financial pressure. But for firms sandwiched between competitors, click fraud never goes away,” an anonymous regional manager told Sina.com.
But click fraud risks collapsing customer trust.
After the hotel click fraud scandal was unveiled, Meituan released a statement that click farming was only a minor action limited to only a few hotels. It announced a zero tolerance policy for hotels caught using click farming to compete.
The Administrative Measures for Online Trading released in 2014 declared click farming to be unfair competition, punishable by fines of up to 20,000 yuan. It also grants standing to competing businesses who wish to seek legal action.
The regulation has had absolutely no affect in curbing click farming.
“There is no effective method to end click farming today,”says Zhu Zhengyu, an analyst for Analysys International. Zhu said the best solution may be to leave it up to the free market.
“Bad performance will decrease the company’s reputation and crush investor faith. For companies who care too much about transaction volume, that uncertainty may be a real threat,”he said.