Alibaba's Data Faking Unlikely Isolated Incident
You may have heard it – Tmall, the B2C platform of New York Exchanges-listed Chinese ecommerce giant Alibaba lied about its numbers.
For readers who have not been following this story, here is a brief version of what happened: Someone noticed a sudden, unexplainable spike in preorder numbers of the new 4G Smartisan T1 smart phone on Tmall and dug into it, suspecting that the numbers might not be authentic.
As usually happens, skepticism was validated – the numbers were indeed cooked. To be specific, the amount of preorders was three times as high as it should have been. The programmer simply added a multiplier of three in the code, and voila, for every order actually placed, people who visited the webpage would be under the impression that three had been taken.
Alibaba Admits Fakery But Tries To Downplay the Seriousness Five days after Alibaba’s initial apology, a report, which has yet been confirmed by Alibaba, has been widely reported by the Chinese media and circulating on the social media platform such as WeChat and Sina Weibo.
"The data was revised manually – it was not the original data generated by the system." Says the report, "Although the ordering number will not affect the final transaction volume, we should always uphold our principle, which is whatever the real data is, it should be the one presented to the customers. The approach of using exaggerated preorder numbers to do starvation marketing may sound to be a clever idea, but it is wrong and we don’t approve it."
Starvation marketing is something you hear quite a lot here in China. What it tries to do is to create an illusion of scarcity, through which, inducing a mental state of anxiety among consumers. Many brands, such as Apple AAPL +1.46% and Xiaomi, had been criticised of "starving" their consumers by holding back their phones. The desired effect is consumers being led to believe if they don’t act now, they would miss out on something.
Suppose you go to Tmall to check out a new smart phone. You find that 30,000 people have already placed orders, the following can be your thinking process: If so many people wanted this phone, it must be good. If I don’t place an order now, my friends would get the phone before I can lay my hands on it and they will be happier / look cooler –It may sound silly, but a significant number of us fall for it.
Anxiety is a natural response to scarcity, but in light of the recent incident, this perception of scarcity can be a result of manipulation. In the scenario that I just described, the decision was made based on the assumption that the number is real. Consider this: Would you still buy the phone if the number of preorders dropped to 10,000? Would you still want to buy it if the number is 1,000 or even 100? You may or may not, but what is irrefutable is that Alibaba’s Tmall tried to manipulate your perception by feeding you with fake information and that is wrong and more serious than it tires to make people think.
An isolated incident? Typical of organisations caught red-handed doing things that don’t like to be associated, scapegoats were found. According to the report, two directly responsible persons had been fired. An unnamed executive was demoted. Tmall’s President and HR head both received a "demerit", which can be serious or nothing. Already some Chinese media are praising Alibaba for showing great sense of accountability.
So is this just an isolated incident, and now with the bad apples having been removed, things will be back to normal and we need not to worry?
Some people seem to be of a different opinion.
On Zhihu.com, a Chinese Quora-like Q&A site, a user wrote about his experience interning at Alibaba.
I worked as a front-end engineer… my project was a mobile lottery game’s webpage. There was a "like" button. It was supposed to be users who click the bottom to generate the number of "likes". However, I was told by the product manager to just make up a number. I was shocked. I even suggested if we should stick with the real number but they rejected me. In the end, I felt I was just an insignificant intern…
What he says seems to have confirmed that this sort of practice has been done systematically and even been taken for granted.
A One-time Liar is a Rare Bird Dishonesty is rarely isolated incident. Spotting someone lying about one thing, there is a good chance that you will catch him lying about other things as well.
Like a fever, lying is a symptom that can indicate something more serious.
From the perspective of the investors, if Tmall lied about the number of preorders, what would prevent them from lying about other things? Is its US$80 billion dollar annual transaction volume true? Maybe, but at least now we have a new reason to be more sceptical.