Digital Thoughts – Legal victory for WhenU

This year, one topic in our industry has arguably drawn more attention than almost any other. From its effectiveness for advertisers, to its ability to frustrate consumers, as well as its almost disproportionate influence on the yearly internet advertising ecosystem, adware stands, for better or worse, in a league of its own. Whether it will help advance the medium or be merely a blotch on the history of internet advertising remains to be seen; among the most important points though is that adware might still have a future. In what WhenU describes as a “landmark internet decision,” the Second Circuit Court of Appeals ruled that the targeting methods employed by the adware maker do not constitute trademark infringement and as a result overturned an earlier precedent setting decision against in many ways not just WhenU but adware in general.
The recently overturned case stems from a 2003 suit filed by 1-800 Contacts that charged WhenU of allowing a rival to the lens maker, Vision Direct, of being able to purchase pop-up traffic when users went to the 1-800 Contacts site. In early 2004, a New York court ruled against WhenU and forbid the software company from showing ads on 1-800 Contacts web pages. Such a decision if enforced across the board stood the potential to cripple not just WhenU but any similar company. The Appeals Court ruled that WhenU did not allow advertisers to directly purchase traffic based specific URL’s and/or trademarks paving the way for more heated discussions by advertisers in the future.
Like Claria, WhenU has invested considerable effort as of late hard to shed its once nefarious image. WhenU looks to join Claria in attempting to be seen as a company that defines what a responsible adware company should be. This includes clear disclosure to the users on install, easy uninstall, notification of origin on each ad, and in WhenU’s case a toll free number included on every ad in case of user complaints. They must be doing something right, because despite all of the turmoil, WhenU and others have the attention of investors and potential purchasers. Not only has Microsoft expressed an interest in acquiring Claria (see Trends Report for more), but WhenU recently announced that it completed a $35 million fundraising round made up of a recent $15 million investment by Trident Capital and $20M in funding secured earlier this year from ABS Capital Partners. Such dollar amounts might be less than the multiple 100+ million deals in our space thus far this year, but for investment firms to allocate that level of funds is substantial. Institutional investors fall on the more conservative side. The money they invest belongs to somebody else, and the last thing they need is to have their current and/or future sources of capital jeopardized.
While the legal victory for WhenU undoubtedly sent a collective sigh of relief through the adware industry, this decision doesn’t resolve the issues at the heart of the adware debate. Whether WhenU or others directly target domains and trademarks will not diminish or prevent a competitor’s ad from showing while the user is surfing the companies site. In the case of traditional adware, that ad comes via a pop-up. Even in the newer models, such as Claria’s BehaviorLink, where ads no longer disrupt the user experience, competitors could still buy each others’ traffic.
Most in our industry fall on the buy side and have not had to consider the impact of having your rival potentially show up on top of your site, and for good reason. Most in our space focus only on performance. We care about brand but see it as a by-product of good performance, i.e. our brand is good because it performs, as opposed to the traditional mindset of if we build a good brand it will help performance. The difference while seemingly slight becomes a chasm when manifested in the marketing world. The branding dollars have only their brand on which to rely, something that by its nature does not lend itself to being easily quantified. They are intangible assets, giving meaning by someone other than the customer. That runs counter to the web where meaning comes from the collective actions of the users. With the web, users can provide instantaneous feedback and define what a brand is rather than that brand being forced on them. Brand is still important and powerful, but the offline techniques and assumptions regarding brands conflict with the dynamic, transparent, and fluid nature of the web.
The playing must be fair, though. Having competitive ads cover the entire window on top of the site they originally entered is not fair. Not aiding the users in finding what they want is not fair and should not be tolerated. Outside of that, let the users decide. Otherwise, the potential of the web diminishes as we are forced to operate in a restrictive and less efficient construct. In other words, if companies want to bid on their competitors’ trademarks in Google, so long as Google provides every means for the trademarked site to be number one in organic search, so be it. Just because a user is searching for Kleenex doesn’t mean they want to buy Kleenex. Offering users other choices benefits us all. But, as we’ve seen with the entertainment industry, the dinosaur companies would rather spend more effort fighting to maintain the status quo rather than trying to benefit from the new.