About Faces Lawsuit Over Pay-For-Surf Program
An October initiative has spawned allegations of fraud against the Alley's leading content play.
An ad-sponsored, pay-for-surfing startup filed suit this week against About, Inc., alleging that About executives made fraudulent statements when negotiating a partnership deal signed in October.
According to the terms of that deal, About agreed to use Santa Clara, Calif.-based TargetFirst’s technology to run a branded, pay-for-surf program similar to AllAdvantage.com, in which users would view ads in a floating window in return for an hourly payout.
The suit alleges that the misrepresentations were made by About in order to induce TargetFirst to make up-front payments and to permit About to inflate its revenues and expected earnings for the third quarter, fiscal year 2000 reports — when About posted better than expected earnings. Since that time, About has agreed to be acquired by publishing player Primedia, with the deal set to close in late February.
TargetFirst, then known as ClickRebates.com, said that it had been induced to enter into a partnership with About, and that About representatives made false and misleading representations with respect to the proposed partnership.
But more trouble evidently began when less than a week after inking the TargetFirst deal, About signed an agreement with Oakland, Calif.’s Spedia, Inc. — another startup also in the business of providing pay-for-surf programs.
“The highest levels of the About organization, including chairman and CEO Scott Kurnit and CFO Todd Sloan, repeatedly misrepresented About’s ability to meet its obligations,” TargetFirst said in a statement. It is unknown precisely what obligations were in question; financial details of About’s agreement with TargetFirst were not disclosed.
“There’s no merit behind it,” said About spokeswoman Tabatha Sturm of the suit, “and it’s immaterial.” She declined to comment further on the lawsuit, and on About’s contracts with either TargetFirst or Spedia.
TargetFirst’s suit seeks both unspecified compensatory and punitive damages.
At the time of the two deals, About.com was fairly tight-lipped about why the content portal had agreements with two similar ASPs. Spokespeople the firm said the apparent redundancy only served to support About’s large user base of more than 20 million — although both ASPs claim to have scalable platforms for their pay-for-surf programs.
Other facts muddy the situation: About began linking to Spedia’s service from a front-page “Make Cash” link in mid-October, before either deal was announced. And although it was announced earlier, TargetFirst’s program launched later, on November 1.
At the time of Spedia’s deal, TargetFirst’s’ chief marketing officer Chris Yeh said he wasn’t aware of Spedia being involved with About, Inc., but added that his firm does not necessarily consider Spedia a competitor because TargetFirst aggregates About content in its surfing bar, which displays ads.
TargetFirst president and chief executive Jim Fitzsimmons declined to comment in detail about the suit.
“The facts in the press release are accurate,” he said.
