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Why I'm Short Qihoo 360

Stocks in this article: QIHU

I found this process to be quite disappointing because I had been hoping to get "independent" verification of the price of links as opposed to iResearch simply calling the company and asking what the price is (which anyone, myself included, can easily do). In short, the conclusion I reached was that I am not willing to rely on the iResearch data because of the miniscule sample size, the incredibly low price point of the report and the reliance by iResearch on direct interaction with QIHU to gather their data.

Because I was unsatisfied with the iResearch approach, I decided to do some independent verification on my own by calling QIHU's marketing department. Oddly, less than 3% of QIHU's ad revenue comes via ad agencies. Instead, almost all of it comes via direct contact with the end client. So my goal was to replicate the experience of a potential advertiser.

QIHU has disclosed that it has 125 paid links on the home page, and that prices for each of them are renegotiated every quarter. Obviously, from a practical standpoint, this sounds like a lot of work. QIHU has described its marketing department as consisting of "less than 10 people," but in my discussions with the marketing department,t I found that there were only two people who were designated to deal with potential advertisers. They were the same two people whose email addresses are listed on the website. Getting through to either of these two people was an exceptional chore because there is no phone number listed for potential advertisers.

I engaged two other potential advertisers to try to place ads on QIHU's page and neither of them ever received a response from the marketing department despite sending repeated emails. I eventually managed to get contact numbers for both individuals in the marketing department by going through the corporate switchboard, however, it took me a full week to actually get either individual on the phone. In short, as I tried to replicate the experience of a potential advertiser, I found that attempting to place an ad on QIHU's website was nearly impossible unless one was truly determined. Incidentally, the price I was ultimately quoted by QIHU's marketing department was 100,000 RMB, which was in line with the original iResearch estimate.

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