What Went Wrong? Part II

The adware space has managed to implode gloriously. It lasted years longer than it might at other times because of the rather lengthy media recession following the internet bubble bursting. Then or now, media recessions tend to have the affect – they provide the perfect environment for highly profitable, highly short-term businesses to thrive with some able to convince themselves and others (investors) that they could become something more. The numbers they could generate would make it hard not think that way. It’s the same reason why people who receive lump sum payments spend the amount differently than if they received it over time. The mind wants to look at trends and assume it will continue. As we know now from the closure of Claria and Zango among others, healthy profitability doesn’t guarantee anything outside of the fact that they made lots of money.

Assuming you have a business with some questionable tactics, looking at adware’s successes and failures can help us decode the possibility for other avenues’ long-term success. Chances are that all of the following are not necessary for failure, but having all is sufficient.

• Advertiser Hesitancy – The advertiser’s pay the bills. Mentioning the importance of advertisers liking the vehicle by which their ads get shown is like saying wash your hands before eating or touching you face to minimize the risk of getting sick. Advertiser hesitancy is a challenge for any new platform, even something as popular as Facebook applications. But, there is a difference between the hesitancy that comes from novelty and hesitancy that comes from bad press. Amazingly, the top-tier firms, e.g. Claria, did a stellar job of convincing media buyers for top agencies that they should spend their dollars with them. Like any ad business, the top-tier advertisers made up only a small percentage, but it was a bigger percentage than the casual observer would expect. What the adware companies had going for them though was being able to play into competitive nature of certain advertisers. Because the ads were pop-up, they covered the real-estate of the site, not an ideal format unless you wanted your company’s ad to show on top of your competitor’s page. In this scenario, you the advertiser would overlook the user experience just for the satisfaction of potentially one-upping your rival. Such behavior is ultimately short-lived, especially when enough users complain about the experience. While it might not seem that much different than bidding on a rival company’s keywords in paid search, the experience was just off-putting enough that it didn’t have the same level of plausible deniability and value that Google enjoys. (Even with paid search though, we see that avenue being slowly choked.)
• Publisher Hesitation and Frustration – Since adware consumers didn’t download the software after seeking it out, they had to come across it somewhere. As it wasn’t a visit to download.com that did it, most users installed the programs after visiting some other website. For that website, displaying adware promotions was a Catch-22. They ads provided solid monetization, but it also had the likelihood of cannibalizing future revenue. The long tail of sites, those that simply wanted to make as much possible from their ad inventory, didn’t have a problem running campaigns for adware. But, those who took a longer-term view of their users and especially those that felt a responsibility to show only socially acceptable ads became heavily against running anything adware related. Much like many of the mobile subscription marketing campaigns of today (and now flogs), adware started to face an uphill battle for distribution. Their source of either unsuspecting publishers or lenient (like the Facebook app guys of today) ultimately dried up. And, with both the browser’s and publishers’ battle against the once dominant ActiveX, they had to work that much harder to get installs.
• Consumer Backlash – It is difficult enough when advertisers and publishers start to have reservations about the product and process. It’s another thing when the consumers do as well. Not surprisingly, the consumer leg only adds to the advertiser and publisher ones. When they complain, it makes the others even more weary. Adware had a special property in that it often angered the end user enough to take action. People might not mean to sign up for a quiz/crush service, but when they do, the transaction (including ongoing delivery of content) takes place on the phone, not the web. Not so with adware. When users received a pop and didn’t understand why they did, they took their complaints to the nearest person – either the advertiser being promoted or the site that triggered it. The latter only fueled the fire against adware from a publisher’s point of view. It’s one thing to play a part in promoting the downloading of adware for profit, quite another to feel taken advantage of, i.e., have an ad shown on your site that you didn’t approve yet one your user blames you for seeing. And, similar to advertisers backing out and publishers no longer wanting to show the ads, the consumer sentiment only added to the negative feedback loop of lower lifetime value and increased costs to service the business. Ultimately, it’s this one that will undermine any attempt to truly succeed. If you run a product or service that user’s don’t really want when they fully grasp what they get, you will fail. You might be able to run a highly profitable business, but you will run one that will forever face headwinds. The length of your survival becomes a formula based on the strength of those headwinds.

• Competition a.k.a. Perceived Returns for Little Effort – Speaking of headwinds, nothing will cripple a business trying to survive in an already problematic area like competition from and an invasion by the infamous group. It’s the same thing that happened with mobile subscription services to some degree and especially with the flogs. While there are legitimate players, ones who have listed phone numbers, addresses, customer service and so on, they must compete with companies who carry none of that cost structure and have none of the same concerns about how to treat the consumers. The challenge wasn’t making adware as a whole legitimate, it was differentiation between the legitimate and non-legitimate players. In the end, it wasn’t the model so much as the ease of entry by those without the vested interest. And, this is something we see time and again especially in the performance marketing space. Flogs can very easily be legitimate, but the legitimate ones will not be allowed the chance to thrive so long as the perception among the non-compliant is that there is easy money to be made without having to do much to earn it. If you are trying to build a legitimate company in a space with that perception, think twice.

Is adware dead?
The short answer is no, and just like email marketing, it will prove hard to eradicate completely even if almost every card in the deck is stacked against it. As mentioned above, the adware tale is not just one of profit and potential but ultimately trying to turn a service into something it wasn’t. That profit and potential, though, mean others will continue, some following the lower-hanging fruit routes of copying an idea that made it in the past with others attempting to innovate and improve upon the weaknesses in the original purveyors of adware. In thinking about the survivors and innovators, two companies come to mind – MindSpark (formerly FunWebProducts) and GameVance. The former is the clear winner in what we once called "cute"ware. Unlike the more nefarious adware, the installation of a MindSpark product doesn’t come with the pop-ups. They install a toolbar and have various hooks into the user so that they won’t be tempted to uninstall, but early on, they rid themselves of the behavior that led to the majority of complaints. Thanks for their strength in monetization, savvy in marketing, and persistence, they outlasted their competitors who could not afford to continue buying user and monetizing them. MindSpark continues to thrive even in an environment that doesn’t fully understand their product. The same can be said for relative upstart GameVance, whose casual gaming services seem like an improved version of one of Zango’s endeavors. Users can play GameVance’s offerings for free, including the chance to win prize money, but it comes with the classic adware monetization tool, pop-ups. With fewer bad players still around (and thus no triple serving of ads because people have more than one installed) along with much clearer disclosurers to the users, they have continued to grow and minimize the advertiser / publisher / consumer challenge. Theirs is a lesson in not just doing things transparently but what users will do for the continued chance to win money. For the time being, neither company looks in danger, but we will see if they can cross the chasm into mainstream.