April 29th, 2005
Spitzer on the Move
In the first ever action taken by the NY State Attorney General against a purveyor of adware Elliot Spitzer filed suit yesterday against Intermix Media, Inc. The suit attempts to
(a)permanently enjoin Intermix
from installing any advertising, ad-serving, redirecting, or toolbar program onto any consumer’s
computer; (b) to require Respondent to issue an accounting of its installation of advertising, adserving,
redirecting and toolbar programs; and (c) to require Respondent to pay disgorgement of
unjust enrichment, as appropriate, and penalties and costs to the State of New York.
In this precendant setting case,
The Attorney General has conducted an investigation into the manner in which
Intermix and its agents deceptively and surreptitiously have spread Intermix’s spyware programs
onto the computers of unsuspecting users. Generally, Intermix has done so by first offering
ostensibly “free� software programs (such as screensavers and games) that anyone can
download. Without disclosure to consumers, however, Intermix surreptitiously tacks onto these
programs one or more additional programs that deliver ads and other invasive content. Thus,
when users install a “free� Intermix screensaver or game, they also unwittingly install one or
more spyware programs as well. In this manner, known as “bundling,� Intermix has spread its
advertising programs onto millions of consumers’ hard drives. According to Intermix’s own
figures provided to this office, this includes more than three million installations to New
Yorkers.
The Wall Street Journal paints a concilatory response from Internmix:
“Many of the practices being challenged were instituted under prior leadership, and Intermix has been voluntarily and proactively improving these applications and related consumer disclosure and functionality for some time,” the company said, adding that it voluntarily stopped distributing the applications at issue earlier this month.”
Intermix is a distributor or reseller of products such as herbal remedies and printer cartridges online. From their 2004 annual report:
The primary websites that we sold our products through in fiscal year 2004 were 24HourPayCheck.com, BodyDome.com,
Hydroderm.com, IncreaseYourHealth.com, CoolOnLine.com and our three ink cartridge websites. The top selling products were Apple
Cider Vinegar, Body Shape, Dream Shape, Hydroderm and Vigel.
Intermix lost $13 million on $57 million in revenue in 2004. This also from their annual report indicates that InterMix has a lot in common with Claria the authors of Gator (GAIN).
In fiscal year 2004, we introduced download applications that are distributed by Flowgo.com and bundled with third party free
applications, such as the Kazaa Media Desktop. One application is a customizable toolbar that attaches to Internet Explorer and
contains functionality for paid user actions such as Web search, travel, shopping and games. Another application redirects misspelled
searches and timed-out searches to a search page that helps the user find the desired destination. As of March 31, 2004, we have
revenue sharing arrangements with 16 third-party distributors of our applications. We earn advertising revenues from Overture
Services, Inc. when customers use our applications. Revenues from Overture Services, Inc. were approximately 12% of fiscal year 2004
network segment revenues.
Claria distributes GAIN with Kazaa and also gets a big chunk of its revenue from Overture. The funny thing about Overture, which sells paid search results, is that it was bought by Yahoo! and Yahoo!’s anti-spyware tool bar finds GAIN and KeenValue and the other offerings from these adware vendors.
What is it about online marketers? They seem to have myopia when it comes to discerning right from wrong.
Richard Stiennon is an industry consultant. See his full profile and disclosure of his industry affiliations.
