Barbarians at the Digital Gate
By TIMOTHY L. O'BRIEN and SAUL HANSELL
 ARSTEN
M. SELF, who oversees a children's computer lab at a youth center in
Napa, Calif., spends about a half-hour each morning electronically
scanning 10 PC's. He is searching for files and traces of code that
threaten to hijack the computers by silently monitoring the children's
online activities or by plastering their screens with dizzying - and
nearly unstoppable - onslaughts of pop-up advertisements.
To
safeguard the children's computers, Mr. Self has installed a battery of
protective software products and new Web browsers. That has kept some -
but by no means all - of the youth center's digital intruders at bay.
"You would expect that you could use these systems in a safe and sane
way, but the fact of the matter is that you can't unless you have a
fair amount of knowledge, time to fix the problems and paranoia," he
said. The parasitic files that have beset Mr. Self and other
frustrated computer users are known, in tech argot, as spyware and
adware. The rapid proliferation of such programs has brought Internet
use to a stark crossroads, as many consumers now see the Web as a
battlefield strewn with land mines. At the same time, major
advertisers and big Internet sites are increasingly tempted by adware's
singular ability to display pop-up ads exactly when a user has shown
interest in a particular service or product. "Adware has its
place, but to grab market share I think a lot of companies are doing
things that make consumers feel betrayed," said Wayne Porter,
co-founder of Spyware-Guide.com, a Web site that tracks adware and
spyware abuses. "I think we're at a very important inflection point
that is going to decide how the Internet operates." The exact
definitions of spyware and adware, like many things in the
ever-changing world of the Internet, remain open to debate. But spyware
generally refers to programs that reside in hidden corners of a
computer's hard drive and record confidential information like
keystrokes, passwords and the user's history of Web site visits. Some
of the most insidious versions have to be installed on a computer by
someone other than the user - maybe a jealous spouse or lover. Adware,
for its part, marries old-fashioned highway billboard pitches to online
distribution and the possibility of immediate response. Adware vendors
range from fly-by-night operators who hawk pornography and gambling,
wherever they can, to more legitimate companies like the Claria
Corporation, which tries to aim its ads at the consumers deemed most
likely to respond, based on their surfing habits. Claria alone has
about 29 million users running its adware products on their computers,
according to comScore MediaMetrix, an Internet research firm. That
compares with 1.5 million users in early 2000, according to the company. Some
spyware creeps onto a computer's hard drive unannounced, often by
piggybacking onto other software programs that people download or by
sneaking through backdoor security gaps in Web browsers when consumers
visit certain sites. In other cases, consumers technically agree to
download the software, but critics say that the disclosures are hard to
find. FOR all the differences between spyware and adware, their
impact on computers is pretty much the same: screens transformed into
digital versions of Times Square, and overburdened PC's that operate
much more slowly as they struggle with random and uncontrollable
processes prompted by the hard drive. Small wonder that consumers are
throwing up their hands in despair. "From what consumers are
telling us, they feel like their computers are being taken away from
them," Mr. Porter said. "We have some consumers saying it makes them
hesitant to use the Internet at all because of what an annoyance it has
become." Reliable data about the booming adware market is scant,
but consumer complaints have become frequent and vociferous. Privacy
watchdogs like the Center for Technology and Democracy in Washington
have called for closer regulatory scrutiny of the industry. Legislation
seeking to protect consumers from abusive adware and spyware has been
introduced in Congress. One state, Utah, has even outlawed the
installation of any software without users' consent. Consumers
can use some tools to fight adware and spyware themselves. Software
products like Spybot-Search & Destroy, Spy Sweeper and Adaware can
zap some intrusive programs on a hard drive and block attempts to
trespass onto a PC. And many analysts like Mr. Porter recommend that
consumers switch from Microsoft's
Internet Explorer to Mozilla Firefox, a free browser that they say has
fewer security vulnerabilities. (Microsoft has issued software patches
for Explorer and released an update to Windows XP that makes it harder
for consumers to download software unknowingly.) But critics of
the adware industry say solutions to the problems ultimately must come
from vendors themselves. Against this landscape, companies that still
hope to mine the lucrative promises of adware have choices to make: to
abandon the pop-up promotions that consumers find so annoying or to
overhaul their practices so thoroughly that they are seen as
responsible online citizens. Some companies seem unlikely to
follow the second path. Perhaps the most infamous adware purveyor is an
elusive enterprise alternately known as CoolWWWSearch or CoolWebSearch.
The company operates from computer servers in the United States as well
as far-flung places like Russia, Britain, the Virgin Islands and Spain.
It has developed adware that can change its name and its location on a
hijacked computer several times a day - making it virtually impossible
to track. The company did not reply to an e-mail message seeking
comment. Spyware Labs Inc., a Hawaiian company, promotes itself
as a vendor of anti-spyware tools but peddles a product called Virtual
Bouncer that experts like Mr. Porter say functions as spyware and
adware once it is installed on a computer. Spyware Labs also did not
answer an e-mail message seeking comment. Spyware companies are
considered some of the most disreputable players in the industry,
because their products can be used for illicit purposes. While many
adware companies engage in some of the same practices as spyware
companies - both track users' browsing habits, for example - adware
tends to occupy a less nefarious position. In the realm of more
mainstream adware vendors stands Claria, based in Redwood City, Calif.
The company, founded as Gator in 1998, is trying to recast adware as a
more consumer-friendly addition to computers. Smart minds and
smart money surrounded Claria from the beginning. It was founded by
Denis Coleman, a Silicon Valley entrepreneur who was a co-founder of
the company that became Symantec. Among Claria's earliest investors
were Scott D. Cook, founder of Intuit Inc.; Andy Bechtolsheim, a co-founder of Sun Microsystems; and Philip M. Young, an investor with U.S. Venture Partners, a venture capital firm in Menlo Park, Calif. Claria
piggybacks its adware on popular programs like Kazaa, the music
file-sharing service, and has a lucrative partnership with Yahoo, one of the Internet's busiest sites. Claria's
investors and executives say the company has been unfairly grouped with
shadier operators and that its goal was never to spy on computer users
or to gather personal information surreptitiously. Instead, they say,
the aim is to offer useful ads tailored to consumers' real interests
and needs, derived from careful monitoring of their Web use. "A
technique that provided much more relevant information and advertising
to a computer user seemed like a powerful concept," Mr. Young said.
"Claria has demonstrated how much more powerful a message is when it's
delivered to the right user, and Claria's only scratched the surface of
what they're capable of doing when they deploy their software." CLARIA
recently canceled plans to take itself public, citing changing business
circumstances; it declined to offer a more detailed explanation. But
the company's public filings offer evidence of its financial potential.
After a few years of losses, the company earned $91,000 in 2002 on
$40.5 million in revenue. Last year, it earned about $35 million on
$90.5 million in revenue - an enviable profit margin. "At the
end of the day it's real simple," said Jeffrey McFadden, a former
executive at the Internet portal Excite who is now Claria's chief
executive. "Consumers find value in relevant advertising." Advertisers find value in the model, too. Mainstream companies like Verizon,
Panasonic and Priceline rely on adware programs because of their power
to address people's individual interests. Claria said 425 advertisers -
including Cendant, FTD, Netflix and Orbitz - use its adware. Nonetheless, Claria has drawn its share of barbs. Several companies, including The New York Times,
have sued Claria, arguing that its pop-up ads violate trademark
protections when they appear on the companies' Web sites. Claria has
settled most of those suits, including with The Times, but declined to
discuss the terms. Claria has also drawn the ire of advocacy
groups, partly because of its ubiquity and its role as an industry
pioneer. Critics also denounce some of its business practices,
particularly the way it bundles its software with other programs and
the stealth it has used to land on users' hard drives. "They
were very aggressive for a long time, and they turned off a lot of
people," said Ari Schwartz, associate director of the Center for
Democracy and Technology. "That said, they seem now to be moving in the
direction of trying to take steps to make their business more
legitimate." It won't be easy, he added: "They still have a long
way to go to make their product something people want to have rather
than something they're stuck with." Mr. Schwartz said that he believed
that Claria's products were not easy to remove from a computer. Claria
executives dispute that computer users are "stuck with" their products.
They say they have worked closely with Mr. Schwartz and other critics
to make their ad programs more visible and palatable to computer users.
Scott Eagle, Claria's chief marketing officer, said the company
downloads its adware to a user's hard drive only with permission, makes
the adware easy to remove and clearly identifies its products. He also
says Claria does not collect personal information like last names,
phone numbers or e-mail, Internet and home addresses. "We would
rather not show you an ad that's not going to be relevant to you,
because that doesn't add any value to you or the advertiser," Mr. Eagle
said. "The big question is, 'Where does this all go?' Pop-ups and
pop-unders are not wildly accepted by consumers." As a result,
Mr. Eagle said, Claria will move away from providing pop-ups and will
offer more static banner ads on some Web sites. Others in the Internet
advertising industry also say that negative reaction has persuaded them
to forgo the pop-up route. "Everyone is searching for the magic bullet
where the consumer will say yes to pop-ups," said David J. Moore, the
chief executive of 24/7 Real Media, a large Internet advertising
company. "The average consumer will end up with a few of these adware
programs, and it sours them on the entire experience." Mr.
Moore said 24/7 had considered buying an adware company but had passed.
"We were nervous about the long-term business prospects," he said.
"There seems to be a fairly strong groundswell to limit how they do
business." WhenU.com, another prominent adware company, began
as a comparison-shopping service founded by consultants at the Boston
Consulting Group. But the company, based in New York, discovered that
comparison-shopping was an unprofitable service, and it, like Claria,
began bundling adware with a number of file-sharing companies
including, briefly, Kazaa. WhenU, like Claria, uses display ads
called sliders - because they slide up from the bottom of the screen.
The ads are generated by WhenU's software and can be launched even when
a browser is not open - meaning they cannot be stopped by software that
blocks pop-up ads. Other WhenU ads appear in front of an open
application, interrupting the user, while others hide behind the
application until the user closes it. Avi Naider, WhenU's chief
executive, says he believes that pop-ups and related intrusive
advertising will continue to be viable even if some consumers try to
avoid them. "The business spent four years educating advertisers
about the performance you can get from these type of ads, and we didn't
spend much time educating consumers," Mr. Naider said. "We never talked
to consumers about the benefits of software-based advertising." Mr.
Naider says WhenU does not keep user information. Instead, he says, the
software his company installs on users' machines tracks the Web sites
that users have visited and displays relevant advertising. "This
is a healthy direction for advertising to go, with a strong set of
standards," he said. But he conceded it would be "a battle to transcend
the simplistic perception that most consumers have about adware." THE
question remains whether a legitimate business can be built on the back
of an industry that has annoyed consumers so deeply and has been linked
to truly illegitimate practices. "The adware industry has grown
so quickly because it works," said Gary A. Kibel, a lawyer in New York
who specializes in new media and advertising law. "I'm sure 80 percent
of consumers don't want advertising on television, but if you get rid
of advertising on television there'd be no more free TV." Mr. Kibel said federal legislation could help formalize and sanitize the business. But
some computer users remain unswayed. "Adware and spyware and all the
other malwares that are out there just waste a lot of time and make the
whole Internet experience a lot less enjoyable," said Orion E. Hill,
president of the Napa Valley Personal Computer Users Group, a nonprofit
group that educates consumers about PC's. "It's intrusive into your
life, and I don't think that's going to change. "The current
Internet model is just too wide open, and I don't have any confidence
that any of the new models are going to be any better," Mr. Hill added.
"The Internet is just too accessible, and it's too easy for people to
make anything they want out of it." Home Delivery of The Times from $2.90/week - Act Now!
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