Adware: What Went Wrong?
When adware companies make the news, rarely does the coverage discuss positive developments. As lightening rod for controversy, the stories of their transgressions receive much more attention than any relating to their potential thriving. Adware companies have raised a lot of money, made select people tons of money, and spent as much time in legal battles as running their operations. One thing they haven’t managed to do is stay in business for the long-run, as evidenced by the latest casualty, Zango. For those who worked in the performance-marketing between 2000 and 2006, the names Gator, Hotbar, WhenU, 180 Solutions, and Direct Revenue, along with select companies’ rebranded names (Gator -> Claria -> Jelly Fish and 180 Solutions + Hotbar -> Zango) will elicit strong memories of a time period not all that different from the Wild West of today’s flog/review sites. When it came to kings of revenue and controversy, not even email marketing could quite top the adware folks, and in hindsight their challenges mirror every highly profitable, easy to copy, and equally easy to abuse method of advertising.
For those not familiar with adware, those in the space helped create the ad-supported software boom. They operated on the premise that the value of the bundled software made up for any perceived inconvenience from advertisements. It’s a premise that works for multi-billion dollar firms (Google for instance), but the majority of adware companies ran afoul with the following:
A. The nature of the free software – Users love free things. Reader’s of Dan Ariely’s Predictably Irrational will recall empirical data showing not just the value of free but that some of the smartest, most logical people still fall victim to the power of free. As the saying goes, you can fool some of the people some of the time but not all of the people all of time. While free, the software given away to consumers didn’t quite measure up to the non-monetary cost of using it (see point B). The free screensavers, emoticons, wallpapers, etc. weren’t necessarily bad, but they weren’t exactly ambitious undertakings of value. In other words, after seeing them, few would seek them out or recommend them to a friend.
B. The way they display their ads – It’s not that the adware companies did anything truly bad; sure on occasion some stories would emerge of truly bad behavior (hijacking links for example). They just didn’t innovate. When the ad market turned around and websites began offering great products for free with non-intrusive advertising, antiquated software programs with intrusive ads didn’t stand a chance. For those that haven’t installed adware, ads weren’t especially innocuous. They popped-up on your computer at unexpected times and with a regularity sure to annoy. The best of the bunch limited the frequency, but alas there is no way to make pop-up ads tolerable. If only IAC would learn that with their travel properties.
C. The way they obtained their users – It’s one thing if the majority of users entered into the pop-up ad-supported model, understanding knowingly what they would get, but most didn’t. Those acting on better behavior had clear disclosures that users didn’t have to read. Presenting users disclosures they might not read doesn’t imply any wrongdoing; the issue at hand comes from the generally aggressive manner in which the ads were displayed. If you thought the exit pops that the majority of continuity companies use to try and keep users were annoying, you haven’t experienced an ActiveX ad. It’s an ad disguised in an operating system prompt. It is common to see them when installing software, but it takes a trained eye to recognize a prompt for download triggered from ad code and a prompt triggered by deliberate action (clicking "Download" for instance). In the usual ad paradox, savvy users don’t make advertisers money, so whether they didn’t instinctively hit "OK" didn’t matter to them. The money came from the non-savvy user who did and would then keep it installed a beyond average length of time for they didn’t understand what they had installed or how to remove it.
Having understood the ways that the adware companies attracted negative attention, we can then group the major adware players into the following types:
1. Legitimate – While some people would contend that a legitimate adware company is an oxymoron at best, several of the better funded companies could sleep well at night feeling that they did in fact offer a fair value to the consumers. The difference between legitimate and infamous are the exact things that meant the legitimate would struggle to survive – infrastructure. The legitimate players invested heavily in compliance, customer service, and didn’t obfuscate their identity. Over time, they even made it relatively easy for users to figure out whether they had the software and how to uninstall it if they wished. Each step adds costs and lowers their revenue per user. It also makes puts them on the radar as a target for any small issues and allows any who want to criticize them to follow their moves easily. It’s unfortunate, as some of them weren’t that far off from success, and some of the products people did like. They were simply a little too stuck in their ways from a revenue perspective to make the switch to one that had longevity.
2. Infamous – The infamous adware companies are the same group of people (sometimes literally) insuring that flogs will live a short lifespan. They have no staff, no infrastructure, no customer service, and no real concern. The infamous ones ruined it for the rest by taking the shortest route to profit. Why offer free software and attempt to add value when you can simply get a user to install the adware. They realized early on that an ActiveX ad didn’t have to say much to get a user to install a program which simply showed ads. These are the ones that stopped installing a toolbar as well once they realized that a) the major ppc engines didn’t want the traffic and b) it made it that much easier for users to figure out they had installed something. This group perfected the "drive-by" install where in the early days the software could install without a prompt depending on the user’s computer permission settings. And, unlike the legitimate group, they didn’t have investors, weren’t looking for an exit. They had a skeleton crew enjoying the six figure revenue days of high profit, and when it was a little too costly to stay around, they just took the millions and left.
Hindsight makes it easy to see why some of the players failed. The real question is how to predict if other areas will fail. That’s just what we try to determine in Part 2 of "Adware: What Went Wrong?"
