End of the Road for a Storied Adware Firm

After a ten-year ride, one of the few remaining survivors of the adware era, Zango, has shuttered its doors under foreclosure, its assets sold to Blinkx to pay creditors.

Launched as ePIPO in 1999, the Bellevue Wash.-based firm’s founders first embraced a pay-to-surf model. Internet users were paid a small fee to browse the Web while running the ePIPO software, which displayed banner ads. Users also made money by referring others to install and use the app. The company evolved over time into an ad-supported catalog of online videos, games, music, tools, and utilities.

In 2001, about the time of the dot-com bust, the company changed its name to 180solutions. As its business grew, so did its reputation for bad practices such as drive-by downloads of its software, meaning a consumer’s computer might install the adware without his or her knowledge just by visiting a Web site or viewing an ad. With time it became known as a distributor of adware — and in some circles, spyware. But former Zango CTO Ken Smith said many of the ill-deeds were the result not of the company’s direct actions, but of its fast and loose dealings with affiliates. Those affiliates were the real bad actors, he said. He described some of the events in a blog post called What Zango Got Wrong. “Back in 2003-2005, we partnered with some people that we should never have partnered with,” he wrote. “We almost completely outsourced our distribution to them, and we let them promote and install our software without adequate oversight or supervision.”

According to Smith, only about 4 percent of Zango’s installs between 2003 and 2005 were “completely silent,” meaning affiliates used browser security holes to force installs and did not acquire permission from users. Further, he says the vast majority of Zango installs received “inadequate” consent, meaning “the user technically had an opportunity to decline the install, but wasn’t presented with enough information to make an informed choice,” Smith said on his blog.

In a bid to clean up its act, the company joined the Network Advertising Initiative (NAI), a self-regulatory group of online marketing companies engaged in behavioral targeting. At that time, 180solutions spoke out against parties that take advantage of security holes in browsers to install spyware and other harmful software.

Along with other adware vendors such as Claria and WhenU, 180solutions was named in FTC complaints and suits against adware. It later became the defendant in a class-action suit filed in Illinois. (The suit was dismissed). Later the FTC won a settlement against 180solutions, which had by then renamed itself Zango.

A series of acquisitions followed. In 2006 the company acquired an Israeli firm, Hotbar, a provider of emoticons, e-cards, skins, wallpapers and games. It went on to buy LoudCash, a toolbar distribution channel; EasyMessenger, a free IM program designed to support multiple clients; and Full Armor Studios, a game developer.

Zango’s reputation never fully recovered, and neither did its business. The company’s products were often blocked by anti-virus and spyware filters, limiting its distribution, Smith said, and it suffered from the rising cost of customer acquisition and retention. It was also carrying significant debt resulting from acquisitions made using debt rather than capital, he said.

Zango’s trajectory ended in foreclosure. Video search engine Blinkx purchased assets from the banks. Those assets, including some IP and hardware, constituted less than 10 percent of Zango’s total assets, according to a Blinkx spokeswoman. Blinkx was unavailable for further comment.

Employees were reportedly shut out from the Zango network and their e-mail. There are reports they were escorted from their offices by security guards. It is unclear whether these actions were taken by the banks or Blinkx.

Related reading