Cheetah Mobile Again Denies Ad Fraud Accusations; Stock Soars in Rebound

Cheetah countered that one of the biggest mistakes involved whether the company had any control over the software development kits (SDKs) it uses on its site.

Selina Cheng
    Nov 28, 2018 5:32 PM  PT
Cheetah Mobile Again Denies Ad Fraud Accusations; Stock Soars in Rebound
author: Selina Cheng   

Shares of Cheetah Mobile Inc. (NYSE: CMCM) rebounded more than 21 percent in New York to close at $6.64 per share Wednesday. The stock then jumped an additional 3 percent during after-hours trading after the company posted its third press release this week, denying allegations of extensive ad fraud that surfaced in the past couple days by providing what it said was additional evidence in its favor.

"Upon analyzing the videos and other evidence, the company discovered that Kochava's testing methods contained fundamental mistakes, leading to a number of false or misleading conclusions," the company said, referring to the app analytics firm Kochava that made the recent fraud allegations against the company.

Indeed, according to Cheetah Mobile's press release, one of the biggest mistakes involved whether Cheetah had any control over the software development kits (SDKs) the company uses on its site. In short, SDKs help calculate and determine attribution of app installations.

Kochava has claimed that SDKs involved in what it alleged was click fraud were developed by Cheetah Mobile itself. In fact, Cheetah Mobile has maintained that "97% of Cheetah Mobile's overseas utility revenue comes from third-party advertising SDKs." Therefore, any incorrect calculation by these external SDKs was unrelated to Cheetah Mobile's apps.

Apart from vehemently denying the accusations, the company also said it planned to take legal action against Kochava for providing false information regarding Cheetah's advertising system to the media, which as a result, sent Cheetah's stock price reeling yesterday. 

Kochava alleged earlier this week that Cheetah and an associated company called Kika Tech committed advertising fraud by falsely taking credit for downloads, or commonly known as "click injection," involving eight apps in the Google Play store. 

As reported by BuzzFeed News, 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." 

As a result, 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. 

Following the unusual stock performance, Rosen Law Firm announced it opened an investigation of securities claims against Cheetah Mobile on behalf of its shareholders.