AzoogleAds Agrees to Pay Florida AG $1 Million

Florida Attorney General Bill McCollum is crusading against misleading Web ads, and AzoogleAds is the first to bear the brunt of his push for online ad industry reform. Yesterday AzoogleAds agreed to pay $1 million to Florida’s new CyberFraud Task Force following an investigation of the firm’s online offers for mobile ringtones. The AG claims consumers in the Sunshine State and elsewhere have been “victimized” by online marketing practices, typically implemented for lead generation purposes, that fool consumers into signing up for paid services without clear consent.

AzoogleAds is not alone. The Task Force is conducting civil investigations of Think Partnership, Intermark Media, Traffix and others for allegedly deceptive lead gen-oriented practices. There’s even a chance AzoogleAds will be called upon to assist in those investigations.

“We will be taking enforcement actions in the near future because the Attorney General is passionate about this issue,” Florida Attorney General’s Office Financial Investigator Jonathan Gillman told ClickZ News. “We’re in talks with many others,” he added.

As the Federal Trade Commission carries on with its own investigation of the sector, pressure is building on its players and trade groups to develop clear and specific standards for its business practices. According to AzoogleAds CMO Michael Sprouse, the FTC has not contacted the company in regards to its separate investigation.

AzoogleAds was investigated for unfair and deceptive trade practices relating to online ringtone offers under Florida statute 501, which deals with clear and conspicuous disclosure of advertiser offer terms. Investigators found consumers responding to the firm’s Web ads for free mobile ringtones often ended up unwittingly registering for subscription plans that were automatically billed to their cellphone accounts.

The agreement, called an Assurance of Voluntary Compliance, states AzoogleAds has not admitted to any wrongdoing. In fact, the $1 million payment owed within seven days to Florida’s Department of Legal Affairs is actually listed as a “contribution” in the agreement document. That cash will be added to the department’s Revolving Trust Fund to cover attorneys’ fees and other costs affiliated with the AzoogleAds agreement.

The money will also help pay for future investigations of similar practices by other firms in the lead gen business. Referring to the payment as voluntary, AzoogleAds said in an e-mailed statement, “this contribution reinforces AzoogleAds’ commitment to improving industry standards in the fight against fraudulent and deceptive internet advertising.”

AzoogleAds itself may also be asked to assist in future investigations by the Task Force. Indeed, according to the agreement, the firm must provide an “excel spreadsheet” listing third party wireless content providers it has worked with to promote ringtones, including contact information.

The Task Force is also investigating Think Partnership, Intermark Media and Media Breakaway for alleged use of deceptive ads to enroll consumers in monthly subscription plans. Verisign-owned m-Qube is under investigation for billing unauthorized charges to cell phone accounts for ringtones and other content. Traffix and W3i are being investigated by the Florida office for alleged use of deceptive co-registration paths to enroll consumers in monthly subscription plans. Co-registration is a common technique employed in lead generation campaigns.

Among other things, the agreement requires AzoogleAds to include details about the price or terms of mobile content offers prominently in the ads themselves, or even in the subject lines of e-mail offers. For instance, a sponsored search result touting “Free ringtones” would have to be changed to something like “Free ringtones with paid monthly subscription of $9.99 per month,” rendering them less-appealing if not oxymoronic. The real cost of the offer also must appear adjacent to specific registration form fields.

“The injunctive release that we worked with Azoogle on has created what we view as the model going forward,” said Gillman.

AzoogleAds has 60 days to implement the terms of the agreement. Although the agreement is intended to protect Florida consumers, Gillman expected it will affect the company’s operations nationwide.

AzoogleAds’s Sprouse implied the company will implement the newly required practices across the board for the ads it serves on behalf of all advertisers, not just mobile ringtone purveyors. “Our position is we are the industry leaders in compliance, no matter what vertical, so we’re trying to take an industry-leading position, not just in mobile but in Internet marketing standards,” he said in an interview with ClickZ.

In September 2006, the company announced its creation and adoption of an Acceptable Use Policy for online mobile content offers, mandating its “Double Opt-In and Full Disclosure standard.” Included in the policy is a requirement “that all mobile offers prominently disclose the cost of the content.” Sprouse said the policy has “been a work in progress” that was not prompted by the Florida investigation.

While Florida continues its investigations of lead gen firms engaged in fraudulent practices, a similar process is underway at the national level. The FTC is soon expected to announce a settlement with ValueClick over the company’s promotions-related lead gen transgressions, and is also thought to be scrutinizing other unnamed firms.

Meanwhile, industry consensus on self-regulation standards seems distant. Neither the Interactive Advertising Bureau’s Lead Generation Committee nor the Online Lead Generation Association has published official and complete guidance on best practices for the sector.