Trends Report – 180’s Solution

One of the most consistent trends in our industry over the past year revolves around companies in our space either selling a portion of their company for funding or buying another company for growth. Almost daily, for example, many of us expect to hear that another of the major players in our space took in a substantial amount of capital. That particular deal does not appear to have happened yet, but another deal closed recently that has interesting implications. Adware maker180 Solutions purchased CDT, one of its largest sources of new users. This week’s Trends Report takes a look at this acquisition and what makes it interesting. We purposefully avoid the topic adware on a broader context and any details related to 180 Solutions as it operates in the space.

For those not familiar with the company or space, 180 Solutions runs a contextual ad network based off its adware user base. The company operates in the, often contentious, space shared on one extreme by the highly visible Claria Corporation to the two man groups with a post office box in Chile. Regardless of size, their success depends heavily on their ability to place their software with an ever-growing base of users. For many in the space, distribution plays out like a cat and mouse game to continue to load their software onto more computers at a rate greater than the current user base uninstalls it. As such, adware makers continually struggle to not only reach new users but also to keep those they have. The challenges faced resemble in many ways the issues emailers faced in 2003. Those in the email space saw similarly fierce competition from other emailers to reach the inbox (equivalent to the desktop for adware makers), increasing filters preventing delivery (akin to the anti-spyware programs), and dwindling outlets for acquiring new names (the distribution component for adware companies).

Given that the acquisition of new users ranks among the key levers for adware companies, a good case could be made for the acquisition of one’s largest distributors. The case gets stronger especially in an arena like adware. Of the major levers – new users, user value, and user longevity – it is the acquisition of new users that falls most outside of their control. A company can work on new methods to increase the value of a user; similarly, it can also make significant progress internally on its image and perception in the marketplace. Again, though, what it cannot easily do is get more users. The company will constantly rely on partners to help drive it new downloads.

Besides being outside the control of the company, the acquisition of new adware installs comes from a diverse and often hard to comprehend array of sources. Among the most common instances of this include bundling. In this approach, a user installs one piece of software and frequently without explicitly knowing it receives another. Such is commonly the case with certain file sharing programs where users in a hurry to have access to certain content, unwittingly agree to have many other programs installed, including adware programs. Bundling of this nature harkens back to the days of the forced opt-in – certain early incentive sites relied heavily on co-registration revenue and often made it very difficult if not impossible for a user to opt-out of countless email lists.

More often than not, adware firms, especially those that allowed bundling, found they had very little control over where their product gets placed / included. As a result, the company ends up being only reactive to issues. For example, were their product bundled as part of deceptive software pitched to users as a means to access certain (adult) sites, the company might not realize this inclusion, thinking instead that they are being included as part of something more mainstream. The same goes for cases where they are one of a number of programs as opposed to being the main one. This is to say that the chances for distribution confusion compound exponentially when one operates adware.

Ultimately though, like email, adware distribution continues to face mounting hurdles. Similar to any other product marketing initiative, the value or lack of value an offer provides an end-user will determine its long-term success. Ad only email offerings have yet, in the eyes of web surfers, to offer this balance, but adware might escape email’s fate. In either case, companies will need distribution. That 180 Solutions purchased one of its largest suppliers shouldn’t get the hopes up of large publishers in our space. 180 Solutions operates in a space that faces unique hurdles and specialization. What this purchase does tell us is the need to understand factors behind distribution and to fully control how placement of our products occurs. When times get tough and distribution more competitive, it could mean making mistakes that could cost more to one’s business than any amount of gain. Perhaps the summary should be, “Keep your friends close but your enemies closer.”