Yahoo! (YHOO) has long been conflicted on the issue of unwanted pop-up ads. For more than two years, it has raked in millions of dollars by selling its search ads to makers of adware -- software, often downloaded without the user's consent, that delivers pop-up ads based on the user's surfing habits. At the same time, Yahoo offers a free tool to help people rid computers of nefarious or unwanted software, including applications from some of the very companies it counts as partners.
Now, Yahoo is making a push to end the adware identity crisis. On Nov. 16, it and several other industry stalwarts are announcing a new program that sets tougher criteria for makers of spyware and adware. Dubbed Trusted Download Program, it will require software makers to more plainly disclose to users what they're downloading and to make these applications easier to remove.
NO GRANDFATHER CLAUSE. "This could be the end of unwanted pop-up ads," says Fran Maier, executive director of TrustE, a nonprofit organization that will administer the program.
For a self-regulatory effort, the program has considerable teeth, according to watchdogs. For instance, adware makers can't grandfather in their existing users. Those that wish to comply will have to reach out to most current users, make them aware of what's occurring on their PCs, and gain approval before continuing to operate on their machines.
Adware outfits that don't comply will face ostracism by participating advertisers and ad networks, such as Verizon Communications (VZ), Time Warner's (TWX) America Online, and Yahoo. "Yahoo is absolutely prepared to walk away from adware companies that don't comply," says Doug Leeds, Yahoo's vice-president for product justice.
MANY QUESTION MARKS. Making good on this threat would strike a blow to adware purveyors, such as Claria, WhenU, and 180solutions, that are already entrenched on tens of millions of computers. Giving users a clear-cut explanation and an easy path to ridding themselves of the software could erode the reach and profitability of these companies. "It's a step in the right direction," says Ari Schwartz, associate director of the Center for Democracy and Technology. "There will be a lot less gray area in the spectrum of spyware."
But the industry effort, which Yahoo has helped lead, is far from being a surefire success. Despite a 22-page document outlining the specific requirements of the program, it still has many question marks. For instance, the language that adware companies must use when disclosing their products is still up in the air and could make all the difference. A potential customer may be much more tolerant of "ad-supported software" than, say, "software that tracks your online activity and generates pop-up ads."
Says adware researcher and critic Ben Edelman: "The devil is in the details."
CLARIA CONNECTION. Still, it's an interesting twist in Yahoo's approach to adware. The Internet giant became a large player in the business when it acquired Overture Services in 2003. Overture had cut deals with adware companies, such as Claria, by letting them distribute its search ads inside the adware pop-ups. If a person who has adware on his machine does an Internet search for "rental cars," for example, he might get a pop-up that contains a list of rental-car search ads provided by Yahoo. The adware companies and Yahoo then divvy the money.
Such agreements have been booming business, with few rivaling Yahoo's impact on the market. In 2003, the portal accounted for more than 30% of Claria's revenues, or approximately $35 million (see BW, 6/28/04, "Guess What -- You Asked for Those Pop-Up Ads"). And the deals have been highly controversial.
Claria is considered to be one of the most reputable adware firms, doing a better job of disclosing what its software does and making it easy to remove. Even so, research has shown that more than half of Claria users aren't aware they're downloading software that generates ads. And half of these people remove the product within one month of downloading it, according to Claria filings.
YAHOO SERIOUS? Yahoo came under increased fire this year when Edelman, the adware researcher, discovered the Internet giant's ads were appearing in several other adware programs (see BW, 9/26/05, "For Yahoo, Mistrust Is Popping Up"). Yahoo execs have insisted that by remaining active in the industry, they could push for reform and benefit consumers.
This industry program appears to be the culmination of such efforts. It won't go live until the first quarter of 2006. After that, the seriousness of Yahoo's efforts to reform adware will very quickly become apparent.
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Elgin is a correspondent in BusinessWeek's Silicon Valley bureau
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