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Spyware, Adware, and the Future

What happens when you put over two hundred thought leaders in a room to discuss some of the major challenges affecting our industry? You wind up with lively discussion, the exchange of some new ideas, and -- with a little luck -- agreement on a basic framework for how to address what has become one of our industry’s largest challenges: spyware and how it relates -- and doesn't relate -- to adware.

At last week’s Network Advertising Initiative Conference on Spyware, participants from many competing backgrounds showed a general willingness to work towards compromise. Although earlier efforts to establish the groundwork by which we can address these issues have floundered, the day’s speakers were intent on working through their past disagreements. By day’s end, a broad outline seemed to be taking shape, whereby we may be able to define, evaluate and even rank all the players. With this a general theme, I think there were a handful of significant points to take away from the day’s events.

Our industry needs to define a set of best practice standards, or else they will be defined for us.

As often as not, government intervention in technology matters often lacks finesse, and can actually serve to curb innovation. Many, even those in government, see legislation as a last resort -- only to be used when an industry has failed to police itself. But what with New York Attorney General Elliot Spitzer’s recent case against Intermix and the myriad state laws beginning to proliferate, the Federal Government has begun to push up the timetable of its response.

David Cavicke, general counsel for the House Commerce Committee, discussed recent efforts to finesse the impending “Spy-Act” before its reintroduction to the House and Senate. In his view, we can expect some legislation in the next year, with a general feeling in Washington that it is high time to draw a line between legitimate and illegitimate adware practices. Similarly, Lydia Parnes, director of the Bureau of Consumer Protection at the FTC, announced that the Commission is increasingly looking at adware and spyware companies for deceptive business practices. Parnes suggested that the FTC will continue to ramp up its investigations in the near future. By now, the message should be clear: if we don’t start to figure out these issues as soon as possible, the government is going to step in and figure it out for us.

The future of adware: dream or reality? 

As one panelist pointed out, imagine if adware companies had an incentive to compete on the quality of their code, or the value of their bundled software products. In fact, over the past year, a few leading adware companies have taken steps to differentiate themselves from others in the space by adopting best practice measures. But many companies in the adware space have not done so -- and this puts those who are dedicating resources to doing the right thing at a competitive disadvantage.

There may actually be short- to mid-term financial disincentives for companies to adopt best practices. In the long term, good behavior may be rewarded, but this depends upon agreement and acceptance of industry wide best practices. That’s one reason why adware companies such as Claria, Direct Revenue and WhenU have publicly supported Federal Legislation -- despite its limitations.

Advertisers are increasingly accountable for the practices of their media partners.

Advertisers can’t afford not to pay attention -- or just turn a blind eye -- to the practices of rogue media partners. We heard Jules Polonetsky, CPO of AOL, describe his company’s recognition that their ad partners might reflect poorly on AOL’s brand name. Not wanting to be associated with surreptitious practices, AOL has subsequently cut off its relationship with some of its former advertising affiliates.

This should be a lesson to other advertisers: reputation does matter, and how an ad is served will be associated with the brand (Mr. Spitzer’s office is making this point painfully clear).

Moreover, some of the panelists noted that advertisers, by refusing to work with bad players, have the power to cut off a great deal of the problem at its knees. Of course, we want to assume that advertisers value consumer perception more than the cheap clicks and conversions, which are sometimes driven by media partners who are more willing to break the rules. But AOL’s example is heartening, and just as with the adware companies, advertisers should be obliged to examine the long term consequences of their choices.

What’s good for the adware company goose is good for the anti-spyware company gander.

Any discussion of standards must include the anti-spyware software companies. One of the less-discussed issues in the spyware debate is the financial incentive anti-spyware companies have to fan the flames of consumers’ privacy fears. While many of the anti-spyware companies don’t use unnecessary hyperbole, their industry has several companies that do overstate the number of threats on user machines.

The Ponemon Institute's Larry Ponemon suggested that there’s a problem when consumers have become so frightened that they apply a “big hammer to a little nail,” often removing wanted software and cookies from their desktops. Similarly, Bennie Smith, CPO of DoubleClick, took issue with anti-spyware programs that misleadingly label entirely benign third party cookies -- like DoubleClick’s -- as “threatening.” While it is wrong for adware companies to place software onto consumer desktops without providing adequate notice and consent, it is equally wrong for anti-spyware companies to remove software from consumer desktops without providing adequate notice and consent. 

The discussion needs to be continued -- and probably expanded.

Trevor Hughes, Executive Director of the Network Advertising Initiative, said in his closing comments, “While this is the end of today’s event, we should not let this be the end of our discussion on this very important issue.” It’s starting to become clear what constitutes acceptable adware practices, and how a set of standards might be formulated that most companies would be willing to strive towards.

As this happens, we can begin to ask the more difficult questions -- who are the “bad players” in the adware space? How can the industry overcome the less than savory practices of some while avoiding restrictive legislation?

The forum successfully incorporated speakers from different advertising backgrounds. Hopefully this trend will continue, with future input from advertisers and others. Companies like Ask Jeeves that provide download toolbars must surely be facing similar problems, and their input should be on the table as well.

The forum ended on an optimistic note, and with hard work, mutual understanding, and, as one attendee, noted “a level of compromise by everyone involved.” The various businesses that seek to monetize the consumer desktop can learn to co-exist, and compete, in a way that benefits all involved -- including the consumer.

Isaac Scarborough is manager of market intelligence at Chapell & Associates. Read full bio.

Isaac Scarborough is manager of market intelligence at Chapell & Associates. Read full bio.

Isaac Scarborough covers market trends for Chapell Associates, a consulting firm that helps companies understand privacy and incorporate consumer perception into product development. Chapell & Associates has been instrumental in the development...

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