In a recent issue of Digital Thoughts, we covered the central themes of Hardball, a book by George Stalk, Jr., and Rob Lachenauer. As they write, “Winners in business play rough and don’t apologize for it.” While playing rough often means making the competition squirm by aggressively growing the business without sympathy if they cannot catch up, playing hardball does not involve breaking the law or going too far into that shade of gray where it becomes hard to find your way out. If too many people venture into that dark shade of gray, it doesn’t take long for that area to become out of bounds entirely, in other words illegal. In the world of desktop advertising, given the pending legislation, a strong case can be made that too many people ventured a little too deep into the woods of ethical business ambiguity.
Whether those who create desktop software, as well as those who knowingly and unknowingly advertise on their inventory, broke the law is up to the courts to decide. I could easily use up this entire column teasing out the subtleties as I see it, but that will in many ways miss the point of the issue at hand. In my opinion, the debate about desktop software comes down to the choice between taking the easy road or the high road. No real player in our space wants to break the law. We all have too much at stake to do that. We might push the envelope, but we will not deliberately cross that line. This does not mean, however, that we, or anyone else for that matter, will always take the high road.
The easy way refers to the choice to make money now even though the means for doing so might not last. I believe an easy way (no pun intended) to illustrate the current desktop software situation is to look back at the progression of email marketing and spam. Like email, desktop software advertising follows a similar curve of too many people wandering too deep into the gray, only to have the law attempt to define the boundaries. Unfortunately, it is unlikely that the trend can be reversed in time to prevent fewer lawsuits or a federal law that makes up for the mistakes of CAN-SPAM and over-restricts.
Email marketing started out heavily content driven with ads interspersed in between content. Users to these newsletters were attracted to sign-up from the site itself. Like-minded newsletters would often promote each other’s newsletters – the beginnings of co-registration. Beginning in late 2000, a confluence of events occurred. The bubble began to burst making inventory more available and more affordable. At that time emailers also discovered that they could make sufficient revenue by sending ad-only emails to users. More importantly, these marketers realized they could make sufficient revenue by sending ad-only emails using ads available through networks and not driven from in-house sales. Given the availability of inventory and the value of an email address, people then began constructing various marketing campaigns aimed at driving email registrations. Co-registration, as opposed to organic growth, became the main means for the acquisition of email addresses and the monetization of the ad campaigns.
As is the case with almost any system that takes advantage of existing inefficiencies, it didn’t take long before many people became involved – so many that the factors enabling the growth started to flip-flop. Inventory became more expensive and the value of an email address dropped due to inbox saturation. Rather than admit defeat, the easier road became trying to make the ad campaigns perform better and increasing the conversion rates of the co-registration partners. What this led to is what we have now with software – in an attempt to grow in a competitive market companies choose options that do not always mean the best result for the end user. To enter a contest, a user might tolerate up to an email message per day. The value of entering a sweepstakes is not however worth thirty messages per day from multiple partners who might flip the address to someone else.
In the case of desktop software, users might reasonably put up with a toolbar being added to their browser, and a signature file added to their email in order to have an extensive library of emoticons, cursors, and icons. Users might accept relevant advertising that pops on top of content for software with a high-perceived value. Users will not accept ads that pop every five seconds they are online and open multiple windows every time they do a search, especially when they do not appear to have received anything in return. Like the development of email marketing, marketers discovered that the desktop space offered a low barrier to entry and that the value an average company could extract was high enough that many jumped into the fray, like sharks smelling blood. What many did not do was focus on the user, on creating a value proposition that exceeded what the user was being asked to give up, or in this case, put up with.
Email marketing quickly escalated out of control and desktop is no different. Taking the easy road and focusing purely on profit, without reeling in the efforts once the market started suggesting problems exist, has led to users thinking of software in the same light as, if not worse than, email. Users do not understand how they received what they received and they feel a lack of control and power to remove it. At the end of the day, the real issue is not about adware and spyware so much as it is about users feeling a lack of control and as though they did not receive anything for what they were asked to accept. The law will determine whether certain methods of installation were inappropriate and new laws will govern installations going forward. The situation is not helped by the global confusion between adware and spyware and people lumping ad-only programs as spyware. In the end it will come down to common sense. In other words, it will need to pass the smell test. If the means for installation smell reasonable, they probably are. If there appears to be an acceptable tradeoff between ads and value, there probably is.
We’re in too deep for there to be a non-litigated way out, and that is sad. As with email, the combination of legitimate and non-legitimate people set back a viable medium by several years. The same is true with desktop advertising. It is only evil because it has been taken advantage of by a mass of people choosing to take the easy road. Is search the next email or desktop? (i.e. a market that is underused and inefficient, open to efficiencies by smart marketers) Whether search falls into this category or not almost doesn’t matter. The next one is out there. I can only hope that human nature and business play out differently so that we preserve the market and create a renewable, recurring revenue stream rather than a one-time stripping of the environment.
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