Microsoft Drops Claria Purchase Talks

NEW YORK Microsoft has ended negotiations to buy Claria in response to the potential negative publicity, according to sources.

The deal, which reportedly called for Microsoft to pay $500 million for the controversial adware company, was terminated in response to the negative reaction generated by stories of the potential acquisition in The New York Times and The Wall Street Journal, according to sources. first reported the ending of the talks.

A Microsoft representative declined to comment. Claria was unavailable.

Claria has generated the ire of privacy advocates, anti-spyware companies and some publishers and advertisers for its pop-up advertising network that shows ads based on users’ Web behavior. Claria’s software is on about 50 million desktops, with much of its distribution gained through bundling relationships with free software programs. Critics claim that many Claria users do not knowingly consent to the software’s installation, a charge Claria denies.

In recent months Claria has moved to transform its business from pop-up ads to behavioral targeting and personalization services. While it continues to operate its pop-up ad network, Eagle said the focus of the company is on its BehaviorLink ad network, which uses its tracking technology to display targeted ads through Web publishers. Claria has a companion offering, PersonalWeb, whose tracking software collects information on users’ Internet habits to compile customized Web content. The company also has plans to roll out a search product that would capitalize on its insight into a wide range of user Web behavior.

According to sources, Microsoft was most interested in Claria for its behavioral-targeting and personalization platform, not the pop-up ad network. Such a system could be used by Microsoft to provide personalized Internet services, such as a home page with news feeds and weather information, based on users’ Web habits. It would also have enabled Microsoft to target ads based on a wide range of consumer behavior, enabling the distribution of Claria’s tracking software with Microsoft’s supply of software programs.