Gator: Problem or Solution?

I first heard the expression “pay me not to kill you” when working in the cable industry. I was speaking with the VP of programming at a large cable system operator. He was responsible for negotiating carriage agreements with programmers such as CNN, MTV, and HBO. He used the expression in reference to ESPN’s strong-arm negotiating tactics.

ESPN had recently won the rights to televise NFL football games by outbidding other networks. In so doing, it agreed to pay the NFL a princely sum. ESPN needed to recoup the new cost. It sold advertising during NFL games, but that wouldn’t come close to covering the fees to the NFL. So ESPN management turned to its trusted partners, cable system operators who agreed to carry the network years earlier, when ESPN’s programming consisted of horse jumping, dog shows, chess matches, and SportsCenter. The network’s goal was negotiate a higher licensing fee, the sum paid to networks to carry their programming to cable subscribers. ESPN gave operators a choice: Carry NFL games and pay a license fee twice as high as the current one or continue to pay the same fee but black out the games.

Not the kind of choice a programming VP likes to make. He could agree to double his costs for ESPN or be bludgeoned by customer complaints from rabid fans upset football games were blacked out. My colleague referred to ESPN’s negotiation strategy as “pay me not to kill you.”

I wonder if any Gator executives worked at ESPN? You may have heard of Gator. The software company provides an electronic-wallet and form-filling utility. I downloaded Gator in 2000 (deleted it in 2001) and did find it useful when buying on the Web. Today, Gator reports over 25 million active users. Most downloaded the software for free. One catch: The free version is ad supported.

Gator works by lurking behind the scenes, watching your online movements. When an online form needs to completed, Gator recognizes it and springs into action, asking if you want the application to do the job. One click, and Gator fills out everything, including credit card information for purchases. Consumers get through checkout faster, and online retailers transact more business because the process is streamlined. Everyone’s happy, right? Not so happy.

Remember I mentioned the free software is advertising supported? Here’s the rub. Let’s presume I’m shopping for a wireless phone provider. I’m using the Web to research pricing plans and handset costs from a variety of providers. Gator watches my actions and realizes I’m searching for a wireless phone. It happens to have an advertising agreement with a wireless telephone company. It springs into action with a pop-up ad offering a deal with a different provider than the one whose site I’m currently on. Great for the advertiser, terrible for the owner of the Web site I was reviewing before I was lured away by the ad Gator served.

A colleague at a well-known Web property struck the nail on the head when he said of Gator, “I don’t know whether to partner with them or file a lawsuit against them.” That’s the quandary for site owners. Do you advertise with Gator to lure customers away from competitors’ Web sites or sue Gator for luring your customers to your competitors’ sites? As a Gator advertiser, you’re immune to its competitive pop-ups appearing on your Web site.

Does “pay me not to kill you” come to mind?

A number of site owners chose the legal route against Gator. Last week, Six Continents, owners of the Holiday Inn, Crowne Plaza, and InterContinental Hotels brands, sued for copyright and trademark infringement, unfair competition, and computer trespass. The plaintiffs contend Gator launched pop-up ads for the likes of Expedia Travel and hotels.com when consumers visited their own hotel Web sites. A group of publishing companies representing The New York Times, Wall Street Journal, and Washington Post, among others, sued Gator in June, claiming their ads interfere with the publishers’ copyrights and result in unfair competition. The suit’s language was pointed, calling Gator “a parasite on the Web that free rides on the hard work and investments” of site owners. Who says legalese is boorish?

I’ve written about online ad companies such as DoubleClick and AOL that capture consumer activity data and utilize it to deliver targeted ads. I contend Gator’s delivery of target ads based on a consumer’s activity goes far beyond anything DoubleClick or AOL puts into market.

But — is it illegal?

What are your thoughts on Gator? Consider the argument from three perspectives: the consumer who uses Gator; the online advertiser who partners with Gator; and the site owner who loses visitors because of Gator.

Please post your feedback through this link, so everyone can read your thoughts.

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