The Spy in the Ad Agency

How the Chinese regime uses ad agencies to steal proprietary information
By Joshua Philipp, The Epoch Times

According to a security and counterintelligence expert, Fortune 500 companies and the world’s media face a crisis. Chinese operatives are gaining control over the crucial nexus through which market intelligence is gathered and cash flows to media companies: ad agencies.

The issue is known to top executives at some of the largest companies in the United States. Five spoke off the record and gave a common answer: they’re aware, but cannot step forward for fear of retribution.

“They admit that it’s an absolute crisis,” said Casey Fleming, CEO of BlackOps Partners Corporation, which does counterintelligence and protection of trade secrets for Fortune 500 companies.

Fleming said his firm has confirmed the Chinese regime’s targeting of ad agencies “through our volume of intercepts.”

A chief information security officer at a Fortune 500 manufacturing firm said the problem “is much worse than we previously thought.”

After having learned that spies were targeting proprietary information through their ad agencies, a chief executive officer at a Fortune 100 technology firm said, “We had no idea as to the relentlessness and depth the Chinese were willing to go to in obtaining our negotiating and pricing strategies.”

Ad Agencies

Most major companies don’t handle their media planning and ad buying internally. They will make a decision regarding their target market in terms of demographic, pyschographic, and geographic parameters, and pass this along to their media-buying ad agency.

From there, the ad agency will decide on which publications or ad vehicles best apply to the client’s campaign. Infiltrating the networks gives the Chinese regime a tool for denying advertisements to media outside China that it wants to silence, as will be discussed in the next article in this series.

Infiltration also allows the Chinese regime to give its favored companies a leg up.

Many of the larger ad companies deal with market intelligence and are often given proprietary information under nondisclosure agreements. This includes each company’s business strategy, planned products, market research, and information on the weaknesses of its competitors.

“What we see—and what we know that they [Chinese spies] want—is any kind of market and negotiation strategies,” Fleming said.

“They also want pricing data because they want to undercut others,” he said. “They intend to manipulate markets.”

A Pattern

Cyberattacks known to have been launched from China over the past decade have targeted the kinds of information being lifted from the ad agencies.

Chinese operatives targeting the ad agencies “fits a known pattern,” according to Peter Singer, director of Brooking’s Center for 21st Century Security and Intelligence, and author of Cybersecurity and Cyberwar: What Everyone Needs to Know.

Security researchers found in February 2011 that Chinese hackers had been spying on global oil, energy, and petrochemical companies since at least 2009. According to a blog post from security company McAfee, which detailed the attacks, the Chinese hackers were after proprietary information on bids.

“This information is highly sensitive and can make or break multibillion dollar deals in this extremely competitive industry,” states the McAfee blog post on the attack, which researchers dubbed “Night Dragon.”

Similar cyberespionage campaigns were uncovered when the U.S. Department of Justice unsealed charges against five officers of China’s military in May.

The Chinese military’s attacks against Westinghouse happened while the company was negotiating to build and run nuclear power plants in China. Chinese hackers stole the technical design plans, and internal communications on the company’s business strategy.

China’s attacks on Alcoa in 2008 stole thousands of emails, which included internal discussion about a transaction with a Chinese state-owned company.

In 2012, United Steelworkers was urging Congress to impose duties on Chinese imports, and within days Chinese hackers had stolen top-level emails discussing the union’s strategy.

Singer said Chinese operatives typically have one of two goals for infiltrating or hacking companies. The first is their theft of intellectual property; they have stolen everything from next-generation fighter jet plans to furniture makers’ chair designs.

The second “is using it for an entry point to something else,” he said. “An ad company working for a Fortune 500 company may be the pathway.”

In the case of the ad agencies, the information is being gathered, according to Fleming, by spies inside the companies.

The sending of agents, rather than the launching of cyberattacks, shows the strong value placed on the targets. Singer said, “You’re talking about something that’s costly on your side, so what you’re going after has to be of great value to you.”

This is the Part 1 of a series. Next: how the Chinese regime uses ad agencies to punish media companies outside China.

Follow Joshua on Twitter: @JoshJPhilipp