Qihoo’s Newest Trojan Horse: Cheap Routers

Qihoo launches 99 yuan routers

I’m not the biggest fan of software security specialist Qihoo 360 (NYSE: QIHU) due to its sometimes dubious business practices that often result in lawsuits and other complaints against the company. But I do have to admire the creative ways it finds to secretly install its products on people’s computers, which I suspect is the main motivation for its newly announced wireless router that carries a very low price tag. Of course all this stealth activity is just slightly ironic for a company like Qihoo, whose core product is software that’s supposed to make users’ computers more secure.

All of that said, let’s review the latest headlines that say Qihoo has just announced a new wireless router product that will go on sale later this week with a price tag of just 99 yuan, or about $16. (English article; Chinese article) Launch of this dual-antenna stationary router comes just a week after Qihoo launched a similar portable router device. Anyone who has purchased a router lately knows that this 99 yuan model is half the price or less of most rival products, meaning hordes of price-conscious Chinese consumers are likely to flock to these new routers.

My main advice to anyone considering buying one of these routers would be: Don’t do it! Obviously few if any people will see my advice, and the handful of people who do will probably ignore it if they were already considering buying a new router. After all, most people will say, what danger could possibly come from a router offered by a company that specializes in computer security software?

My answer to these potential buyers of this new router would be that there’s probably no real danger if your main concern is keeping your computer free of viruses and other hacker-produced malware. But Qihoo has a history of using its original security software, which is free, for many other self-serving uses. Those include installing software for its other products onto people’s computers without first asking those PC owners if they actually want such products.

That strategy has helped to make Qihoo’s self-developed web browser one of the most popular in China. It’s also an important weapon that is helping to drive the rapid growth of Qihoo’s year-old search engine So.com, which is posing one of the first challenges in years to China’s dominant search engine operator Baidu (Nasdaq: BIDU).

Some might say this kind of tactic is acceptable, and is similar to strategies used in the past by global tech giants Microsoft (Nasdaq: MSFT) and Google (Nasdaq: GOOG) to promote their own products. But Qihoo’s strategy of using its low-cost and free products as Trojan Horses sometimes goes to extremes that most other companies would never consider.

One such tactic made headlines in 2010, when Qihoo retooled its software security product to hijack Tencent’s (HKEx: 700) popular QQ instant messaging software on people’s computers. That case resulted in a heated and very high-profile war of words between the 2 companies, with Tencent forced to take extreme measures to fight back. Tencent also filed a lawsuit against Qihoo in the matter, which just reached a verdict in April in Tencent’s favor. (previous post)

I have little or no doubt that this new router product is installed with software that will encourage users to go to Qihoo’s various websites and use its other products. Perhaps more sinister, I suspect these new routers probably contain software that will allow Qihoo to secretly monitor what computer users are doing while online and mine that data. While such data mining is becoming increasingly common among even mainstream companies, many still say it raises many ethical issues since computer users are often unaware they are being monitored.

At the end of the day, I expect these new 99 yuan routers will quickly find their way into both mainstream retailers as well as the thousands of computer malls that are part of China’s retail landscape. When that happens, look for consumers to quickly buy the product, not only for its low price but also because it carries the familiar Qihoo name. But such consumers should also realize they’re most likely buying a Trojan Horse that will tie them closer to Qihoo.

Bottom line: Qihoo’s new 99 yuan wireless routers will continue its tradition of using low-cost or free products to secretly steer consumers toward of its products.

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