Despite Tiny Fines, NY Settlement Could Push Big Brands from Adware

Three well known advertisers have settled with New York for alleged adware use, but the seemingly paltry fines may not scare away others from using adware or spyware. The settlement could, however, inspire big brand advertisers to ensure they’re malware free.

In conjunction with its investigation of alleged spyware firm Direct Revenue, New York’s Internet Bureau found Priceline.com, Travelocity.com, and Cingular Wireless were among advertisers using Direct Revenue’s software to target their ads to Web users.

Besides cutting ties with adware outfits violating the settlement agreements, the settlement requires the advertisers investigate how their online ads will be delivered before choosing ad networks or other ad delivery firms. They’ve been asked to do the same each quarter thereafter.

“That’s the only thing that would have given me pause,” said Assistant Professor at Santa Clara University School of Law Eric Goldman, regarding the requirement. Since such due diligence could take substantial time to accomplish, added the tech law blogger, it “might drive [advertisers] to use [TRUSTe’s] Trusted Download program.” Privacy watchdog TRUSTe is in the process of creating a whitelist of downloadable software that has been certified to adhere to best practices.

According to a company statement, Travelocity said it ended its relationship with Direct Revenue in early 2006, adding, “We comply with our industry’s strict adware guidelines, as found at www.interactivetravel.org.” The guidelines, from the Interactive Travel Services Association’s Best Practices for Adware document, note the organization endorses the use of adware, if advertisers follow guidelines similar to the New York settlement’s requirements.

“There’s no excuse for people not doing due diligence before their buy and not deploying technology to determine where their ads are running,” said David Smith, CEO of integrated media agency Mediasmith.

The settlement requires the advertisers’ software and network partners to disclose their affiliation with adware programs or bundled software and to mark their ads with an identifiable icon. They must also require consent from consumers and legacy users to download or run software, allow for easy removal of that software, and require the same of their affiliates.

Smith said advertisers using controversial adware or spyware “destroys the consumer credibility of Internet advertising.” However, he notes, “The pressure towards ROI is so great, sometimes [media placement] gets put in the hands of people who don’t understand brand stewardship.”

Despite the potential brand damage from association with questionable adware practices, Smith said the fees the advertisers agreed to pay “are not enough to be a deterrence.” Priceline and Cingular were fined $35,000, while Travelocity was fined $30,000.

Still, by naming prominent advertisers, the settlement could serve as a deterrant to others, according to Goldman, who believes the objective of the settlement was “to find somebody who has enough of a brand presence that they’re not fly-by-night operations, because otherwise other brand advertisers would say they were disreputable.” This, he added, will persuade other brand advertisers to make sure their ads aren’t being served via software that many be perceived in a negative light by the Attorney General’s office.

“The money is not the issue there,” said Goldman. Instead, he said the Attorney General agreed to such small fines because they enable him to “issue a press release that says to everybody else, ‘You’re next.’ ”

In June 2005, Internet marketing firm Intermix Media, then owner of MySpace, agreed to pay $7.5 million to settle a lawsuit brought by then New York Attorney General Eliot Spitzer, accusing the company of covertly installing spy- and adware on home computers. At the time, the company was in negotiations to sell to News Corp., and “didn’t want the cloud of litigation,” Goldman said. The following month, Intermix was acquired by to News Corp. for $580 million in cash.

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