Advertising.com Settles FTC Adware Complaint

NEW YORK AOL’s Advertising.com has settled charges brought by the Federal Trade Commission, which said it tricked consumers into downloading software that spawned pop-up ads.

The FTC charged that Advertising.com and John Ferber, its chief product officer and co-founder, ran advertisements that advised users their computers were at risk to hackers. Clicking on the ads prompted users to download SpyBlast, Advertising.com software that purported to protect computers from intrusion. Advertising.com also bundled pop-up advertising software with SpyBlast. While the ad software was disclosed in the end user license agreement, the FTC asserted Advertising.com did not clearly disclose the bundled adware.

“Distributors of bundled adware have to clearly and conspicuously disclose that advertising comes with the software,” said Tom Pahl, assistant director of the FTC’s division of advertising practices.

AOL bought Baltimore-based Advertising.com in June 2004 for $435 million. Advertising.com operated a performance-based ad network that buys run-of-site inventory on Web sites and re-sells it to advertisers on a performance basis.

An AOL representative termed the SpyBot adware program a “brief experiment” in adware that Advertising.com undertook in 2003, prior to AOL acquiring it. As part of the AOL acquisition, Advertising.com ceased displaying ads through any adware provider. “Advertising.com does not now nor will in the future distribute adware programs,” the AOL rep said.

The FTC action could have an impact on other adware companies, which have been accused by critics of providing inadequate notice to consumers it bundles pop-up programs with other software. Adware providers like Claria, WhenU and 180solutions have taken steps in recent months to improve the notice given to users who download their software. The FTC, however, began its investigation of Advertising.com after it stopped distributing adware, according to AOL.

Pahl said the FTC is investigating “several” spyware and adware companies. “The bottom line is consumers ought to have a choice of what software is installed on their PCs,” he said.

Advertising.com is not the first prominent Internet company to come under scrutiny for past adware practices. Intermix, which was acquired last month by News Corp. for $580 million, settled charges brought by New York Attorney General Eliot Spitzer, accusing it of tricking consumers into downloading pop-up ad software and hijacking programs.