IAB, Gator.com Parley in Effort to Avoid Showdown

With an eye to preventing any sort of drawn-out legal confrontation, online marketer Gator.com is in what one source described as “early, early discussions” with the Interactive Advertising Bureau, whose lawyers on Monday said they planned to advise the group on potential action against the startup.

Legal counsel for the New York-based IAB, which represents sellers of online media, had been up in arms over the Redwood City, Calif.-based firm’s software, which can deliver a pop-up ad that obscures whatever ads happen to be on a Web page beneath it.

As an industry trade association, the IAB can’t sue anyone directly. But it can petition federal regulators to look into the matter, and — with membership like Web media giants DoubleClick, AOL Time Warner and New York Times Digital — the group can bring significant legal clout to bear in the event of a courtroom dispute.

Now, both parties are hoping it never gets that far. Sources close to each group tell internetnews.com that the two are in talks with the aim of working out a solution.

If they’re serious about reaching an equitable solution, the two parties will need to overcome a host of contentious issues that stem from Gator’s business, and which alarm the Web publishers that comprising the rank and file of the IAB.

Speaking on condition of anonymity, several sites told internetnews.com that they equated Gator’s proposition — grabbing an impression that’s already been sold to an advertiser — with outright thievery. And that’s not the only issue troubling Web publishers: If visitors find a Gator pop-up on their site objectionable and refuse to return, there’s no real recourse for the site.

And from a marketer’s standpoint, a company can contract with Gator to have a discount offer appear when users visit a competitor’s Web site. That poses a problem for the competitor, who often feels “strong-armed” into making a counter-offer to ensure that ad no longer appears over their own site, according to one media buyer from an Alley-based interactive agency.

One way around all this could be through fundamental changes to Gator’s business: The company could make peace with publishers and ad networks by exiting the media business and licensing its targeting software, which delivers ads based on users’ Web surfing behavior.

Gator chief executive Jeff McFadden said while the company is seriously considering major alterations at the moment, such a proposition hasn’t been ruled out, and could find many takers. For one thing, the company’s ad-targeting engine is more detailed than the technology currently being marketed by the ad networks, he said.

Rather than using cookies to place a Web surfer into a pre-defined profile, the company targets pop-up campaigns to specific user actions. Combined with Gator users’ opt-in information, the company’s user-tracking can be used to increase the precision of a campaign’s targeting

For instance, the company’s technology can watch the Web pages that users visit to determine who’s looking at Web content dedicated to the Ford Explorer and Dodge Durango, and then serve them an ad for an SUV.

“Ad networks don’t have enough information to do it well,” said McFadden. “That’s where the magic is with what we do, and it works well for advertisers, and for the consumers. If you’re in the market for an SUV, you don’t want to see the Classmates.com ad for the bazillionth time.”

If Gator’s targeting is as good as McFadden claims, he might not be far off when he says an agreement with the IAB could benefit the much-beleaguered online ad industry. In recent months, the industry group has approved larger ad sizes and new rich media technologies in an effort to make Web ads more palatable for big-name advertisers — efforts that the Gator chief says address the wrong issue.

“The problems isn’t in the unit of the ad, in its shape and so forth, but in relevant advertising that are relevant to consumers, which brings high value to advertisers,” he said. “We know it’s controversial … but this kind of advertising works much, much better than other forms of online advertising. We think that lots of companies are going to want to be talking about this, and we want people to understand … how it can be used to everyone’s advantage downstream.”

Of course, such deals would prove conveniently lucrative for Gator, as many firms in the space are finding that technology licensing is more profitable than media sales. Big online advertising plays that began as media reps — such as DoubleClick and 24/7 Media — are opting these days to focus more on selling the software that powers their ad serving. Likewise, CMGI’s ad network Engage said earlier this week that it is looking into a sale or outright closure of its media division, enabling it to concentrate on technology.

For its part, the IAB is holding off on making any promises for now. But McFadden says Gator’s willing to work with the industry group and its members, and foresees friendlier times ahead.

“If you ask anyone who believes that relevant advertising is better than irrelevant advertising, they’re going to want to talk to us and have a robust business relationship with us,” he said. “I think [the IAB] should be at the top of the list. We’re just starting to get to know each other.”

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