BEIJING – Recently, pharmaceutical company Renhen Pharmacy went through a public relations nightmare after a doctor wrote on the popular Chinese micro-blogging site Weibo that its children’s cold medicine was dangerous. Could better preparation and response on Weibo have substantially mitigated the damage to Renhe’s image?
On Jan. 21, a Weibo post about Renhe Pharmacy quickly plunged the Jiangxi-based company into a PR crisis. The company’s share price fell 10% in the ten days following a post about Youkadan, a popular children’s cold medecine, resulting in a one billion yuan ($160 million) loss of market value.
Earlier in January, PR firm Ogilvy & Mather and Chinese consulting agency CIC had jointly issued a White Paper on crisis management in the Weibo era. The report said that while China’s micro-blogging platforms (like Twitter and Facebook) have become an important medium for brand marketing and communication, they have also played a significant role in the outbreak, spread and aggravation of crises. Research found that the first eight hours after a public relations crisis breaks out are a critical window that companies must use to respond.
A crisis in short bursts
On Jan. 21, a doctor at a Beijing hospital, identified by the surname Meng, noticed that many children under one-year-old were taking Youkadan medicine. Recalling what he thought was a Food and Drug Administration alert on the medicine, Dr Meng posted the following message on the Weibo micro-blogging site: “Youkadan and Haowawa medicine have been proven toxic to children’s livers. Children under one year should absolutely not take it. Children under six should take it with caution.”
He then asked, “Why are their advertisements still in the media? Celebrities, please spread the message and have these advertisements removed.”
Although the doctor had less than 2,000 followers, his Weibo identity as a pediatrics doctor gave the message authority. On the evening of the 21st, Chinese television star Wen Zhang reposted the message to his 26 million followers and ignited Renhe Pharmacy’s PR crisis.
On Jan 25, one of China’s most famous comedians, Song Dandan, who has done advertisements for Youkadan, added fuel to the fire by making a public apology on Weibo for endorsing the company.
It turned out though that the doctor had been misinformed. Youkadan later released a statement, corroborated by the Jiangxi Food and Drug Administration, saying, “The medicine is safe for children from age one to 12 and won’t cause harm to liver. Children under one should not take it due to the lack of empirical statistics on safety and effectiveness - but not because it harms the liver.”
However, the damage was already done.
A rapid response
Chu Wen, a partner at Ogilvy & Mather, says that research shows that if a public relations crisis is handled properly, then the company’s share price will be up 7% after six months. If mishandled though, the share price will still be down 15%.
On many occasions, as in the case of Youkadan, harmful reports against companies turn out to be false. But if the response is mishandled, market value will be difficult to salvage.
The Chinese company BaWang Group, for instance, had a PR crisis in July 2010 when a magazine reported one of its shampoos contained dioxane - a substance known to cause cancer. However, it was later shown that the amount contained in the shampoo poses no threat to humans and that dioxane is in fact found in many shampoos.
Nonetheless, BaWang’s share price tumbled. The annual report showed that sales in the second half of 2010 dropped 63.2% compared to the same period of the previous year.
The eight-hour rule
Through a statistical analysis of 50 domestic and international case studies, Ogilvy & Mather found that issuing a response within eight hours shortens the duration of a crisis. If the first response comes more than a day after the crisis breaks, then it will significantly extend the duration of the fallout.
According to Chu Wenn, if a company’s first response is within eight hours, the average duration of the crisis is six days. If it comes between eight and 24 hours, the crisis will last seven days. Waiting between a day and a week to respond will draw the crisis out to 15 days, and waiting more than a week will result in a 19 day crisis.
On Jan 23, two days after the crisis began, the first article about Youkadan was published in the Chinese media. It wasn’t until that evening that Renhe Pharmacy issued a clarification.
Instead of responding online, the company waited to respond through “traditional” media.
Chu Wen says brands that have already established official Weibo accounts before a crisis can reduce their response time by 12 hours and shorten the average duration of the crisis by two days.
In 2012, the company that most successfully averted a Weibo crisis was McDonalds. At 8 p.m. on Mar 15 last year, Chinese state-owned television CCTV reported that McDonalds was selling food past its expiration date. The report was picked up by many micro-bloggers, and less than two hours later at 9:50 p.m., McDonalds issued an apology on its official Weibo account.
According to Chu, McDonalds’ success in handling the crisis lay in the speed of its response, the sincerity of its attitude and the authority that came from communicating through its established Weibo account. Had the company not been on Weibo, it would have had to wait until the next day to speak to the media and get its message out.
According to the Ogilvy & Mather White Paper, when “opinion leaders” participate in spreading a message on Weibo, the average amount of discussion increases 37 fold and the duration of crises extends by six days.
Chu advises brands to reach out to opinion leaders in the industry, turn them into loyal fans and maintain a daily relationship with them. “Opinion leaders cherish their feathers, and will be relatively cautious to speak,” Chu says. “A brand needs to establish a mutual trust relationship with them.”
After actor Wen Zhang reposted the doctor’s Weibo message during the Youkadan crisis, it was shared more than 20,000 times. And Song Dandan’s apology for endorsing the company was reposted more than 10,000 times.
The importance of a company having a Weibo presence can’t be ignored. During the McDonalds crisis, the message containing the company’s apology was reportedly shared 8,400 times within the first half-hour. But that doesn’t mean issuing a timely response on the platform guarantees a crisis will be fully mitigated
Chu says that Weibo is often a platform for emotional expression. Therefore, Weibo users tend to prefer reposting messages with negative connotations. “Compared to the relative neutrality of traditional media, Weibo has personal likes and dislikes, and strong emotions.” Chu said.
Most of the clarifications issued by Renhe Pharmacy during the Youkadan crisis were useless. The doctor who posted the original message even apologized and clarified several times that he had posted “without adequate fact checking.” However, popular Weibo users lacked the same enthusiasm to repost these clarifications and none of the corrections received anywhere near the same amount of re-postings as the original message had."
Translated by Zhu Na.
It is today a proven fraud, nailed by the French stock market watchdog: Air Next resorted to a full range of dubious practices to raise money but the simplest of errors exposed the scam and limited the damage to investors.
PARIS — Air Next promised to use blockchain technology to revolutionize passenger transport. Should we have read something into its name? In fact, the company was talking a lot of hot air from the start. Air Next turned out to be a scam, with a fake website, false identities, fake criminal records, counterfeited bank certificates, aggressive marketing … real crooks. Thirty-five employees recruited over the summer ranked among its victims, not to mention the few investors who put money in the business.
Maud (not her real name) had always dreamed of working in a start-up. In July, she spotted an ad on Linkedin and was interviewed by videoconference — hardly unusual in the era of COVID and teleworking. She was hired very quickly and signed a permanent work contract. She resigned from her old job, happy to get started on a new adventure.
Others like Maud fell for the bait. At least ten senior managers, coming from major airlines, airports, large French and American corporations, a former police officer … all firmly believed in this project. Some quit their jobs to join; some French expats even made their way back to France.
Share capital of one billion
The story began last February, when Air Next registered with the Paris Commercial Court. The new company stated it was developing an application that would allow the purchase of airline tickets by using cryptocurrency, at unbeatable prices and with an automatic guarantee in case of cancellation or delay, via a "smart contract" system (a computer protocol that facilitates, verifies and oversees the handling of a contract).
The firm declared a share capital of one billion euros, with offices under construction at 50, Avenue des Champs Elysées, and a president, Philippe Vincent ... which was probably a usurped identity.
Last summer, Air Next started recruiting. The company also wanted to raise money to have the assets on hand to allow passenger compensation. It organized a fundraiser using an ICO, or "Initial Coin Offering", via the issuance of digital tokens, transacted in cryptocurrencies through the blockchain.
While nothing obliged him to do so, the company owner went as far as setting up a file with the AMF, France's stock market regulator which oversees this type of transaction. Seeking the market regulator stamp is optional, but when issued, it gives guarantees to those buying tokens.
The infamous typo that brought the Air Next scam down
Raising Initial Coin Offering
Then, on Sept. 30, the AMF issued an alert, by way of a press release, on the risks of fraud associated with the ICO, as it suspected some documents to be forgeries. A few hours before that, Air Next had just brought forward by several days the date of its tokens pre-sale.
For employees of the new company, it was a brutal wake-up call. They quickly understood that they had been duped, that they'd bet on the proverbial house of cards. On the investor side, the CEO didn't get beyond an initial fundraising of 150,000 euros. He was hoping to raise millions, but despite his failure, he didn't lose confidence. Challenged by one of his employees on Telegram, he admitted that "many documents provided were false", that "an error cost the life of this project."
What was the "error" he was referring to? A typo in the name of the would-be bank backing the startup. A very small one, at the bottom of the page of the false bank certificate, where the name "Edmond de Rothschild" is misspelled "Edemond".
Before the AMF's public alert, websites specializing in crypto-assets had already noted certain inconsistencies. The company had declared a share capital of 1 billion euros, which is an enormous amount. Air Next's CEO also boasted about having discovered bitcoin at a time when only a few geeks knew about cryptocurrency.
Employees and investors filed a complaint. Failing to find the general manager, Julien Leclerc — which might also be a fake name — they started looking for other culprits. They believe that if the Paris Commercial Court hadn't registered the company, no one would have been defrauded.
Beyond the handful of victims, this case is a plea for the implementation of more secure procedures, in an increasingly digital world, particularly following the pandemic. The much touted ICO market is itself a victim, and may find it hard to recover.
- Crypto Tipping Point: Is Digital Currency Too Big To Fail ... ›
- Bitcoin, Petro, Libra ... Why Cryptocurrency Isn't Really Currency ... ›
- Inside The Himalayan Hideaway Of Chinese Bitcoin Mines ... ›