Cheetah Mobile Inc. (NYSE: CMCM) got slammed on Wall Street today after stories surfaced this week alleging the company committed advertising fraud by falsely taking credit for downloads involving eight apps in the Google Play store.
As reported by BuzzFeed News, app analytics company Kochava concluded after a study that “eight apps with a total of more than 2 billion downloads in the Google Play store have been exploiting user permissions as part of an ad fraud scheme that could have stolen millions of dollars.”
Seven of these apps were created by Cheetah Mobile, Kochava said, and include Clean Master, CM File Manager, CM Launcher 3D, Security Master, Battery Doctor, CM Locker, and Cheetah Keyboard. The eighth app, called Kika Keyboard, received an investment from Cheetah in 2016, the report said.
Cheetah Mobile, which has vehemently denied the report, saw its shares plunge more than one-third in value this week in response. The Beijing-based company lost 33 percent of its value on Tuesday alone, closing at $5.48 per share, down $2.68 on the day. The company’s stock closed last week at $8.80 per share.
“There are numerous untrue and misleading statements in these two articles,” Cheetah Mobile said today in a press release refuting the allegations. “The Company plans to take legal actions against those parties such as Kochava and the responsible persons that the Company believes have generated and disseminated those untrue and misleading statements.”
According to the BuzzFeed story, the alleged scheme exploited the fact that app developers pay a fee, usually between 50 cents and $3 for helping push new downloads of their apps. Kochava alleged that Cheetah was falsely taking credit for these downloads in a technique called “click flooding” or “click injection.”
“This is theft — no other way to say it,” Grant Simmons, the head of client analytics for Kochava, told BuzzFeed News.
Cheetah, whose stock was trading above $16 per share earlier this year, has run into other controversy previously. The company was the target of a scathing report by Prescience Point Research Group in October 2017 that alleged Cheetah was misstating its revenue, customer growth, and traffic figures. The company said at the time that it believed the “allegations are unfounded and contain numerous errors, unsupported speculation, and a general misunderstanding of the industry and the Company's business model.”