Spyware and its intimate partner, adware, are among the fastest growing threats to computer users. Many Internet security experts now view spyware and adware as variations of the same thing — intrusion.
Industry analysts say spyware and adware together infect at least 90 percent of all Internet-connected PCs. The number of malcreants doing the spying and intrusive adware advertising has grown 50 percent or more every year for the last 10 years. At this rate, the number of infections will be growing faster than computer viruses, analysts warn.
Spyware and adware campaigns, which used to target private users exclusively, are now fighting for entry into corporate networks with an alarming success rate. A recent Harris Survey revealed that 92 percent of IT managers acknowledged their organizations have been infected with spyware. On average, the study found a spyware infection rate on corporate networks of 29 percent.
Factor in the growing occurrence of adware messages that populate computer screens in the workplace. Together, the spyware and adware intrusions at the corporate level increase the corporate threat considerably.
However, new Internet advertising approaches being developed by two Israeli-based marketing firms are offering Internet marketers a more direct channel to deliver their sales messages. These methods adopt long-standing practices of one-to-one marketing and customer relations management (CRM) to the Internet.
John Federman, present and CEO of Dotomi Direct Messaging, said this new business model is sidestepping pop-up and pop-under browser ads and is a consumer-friendly replacement for spyware and adware.
Jeffrey Rutherford, an account supervisor with Trylon Communications, said behavioral targeting technology companies, such as AlmondNet, lets Web advertisers use customer relationship management techniques to get in touch with Web site visitors who leave without asking for more information or buying their products and services.
According to Rutherford, adware companies know their industry faces big challenges. These include lawsuits alleging the violation of third party sites’ copyrights and proposed legislation banning or curbing adware and questionable transparency to the end user typical with spyware.
Successful Internet advertising — whether done by blatant adware methods or more secretive spyware models — depends upon consumers viewing their ads.
The outright illegal tactics such as key logging modules and activity trackers are less attractive to legitimate Internet marketers. However, if consumers don’t view the advertisements, adware companies make less money and advertisers reach fewer customers.
AlmondNet founder and CEO Roy Shkedi says all adware providers face the same dilemma. They have to answer the question of how to deliver ads on behalf of advertisers without exhausting consumers.
There is an extremely high churn rate — the turnover of adware program users — caused by user frustration from frequent pop-up and pop-under ads, according to Shkedi.
Consumers now are more sophisticated about the price of “free” programs, uninstall the adware applications or disable them with antispyware programs. To combat these changes in the Internet environment, adware companies must constantly chase new consumers to download their wares.
Another problem Shkedi cited for Internet advertisers is how to continue contact with potential customers acquired through adware and spyware. Adware companies are sitting on a gold mine of information about specific online behavior that includes sites visited and the frequency of those visits.
Adware providers have not figured out how to serve relevant ads based on that online behavior without alienating customers by serving ads too frequently or too intrusively, according to Shkedi, whose company provides solutions to Internet advertisers and Web site publishers.
Dotomi President and CEO John Federman is confident that his company can revolutionize existing advertising techniques on the Internet. Dotomi Direct Messaging has been up and running in Israel for the last 18 months. It is launching in the U.S. by the end of this year. Direct Messaging removes the need to spy on potential customers and bombard Internet users with unwanted ads.
“With spyware, customer acquisition effort is the driving force, but Dotomi is based on customer loyalty over customer retention,” Federman told the E-Commerce Times.
His marketing model is based on user permissions to send targeted ads. The advertisements are not packed into e-mail in-boxes or used to clutter computer screens with pop-up ads. Instead, ads are sent as banner ads within the user’s browser. These banner ads override banner ads that users would see anyway as they visit commercial websites.
“We don’t track users. Privacy issues are protected,” Federman said. “We are TRUSTe Privacy and FDA compliant. We are trying to establish ourselves as 100 percent compliant with all regulations so we don’t lose customers.”
How It Works
Dotomi Direct Messaging differs from traditional banner advertising in that the consumers opt-in for the marketing service through a merchant with whom there is already a sales relationship. Similar to the benefits of instant messaging software for chatting over the Internet, consumers agree to a permission-based direct communications channel that delivers targeted banner ads in their browsers when they surf the Internet.
When consumers see a message in a banner ad, they already know it fits their interests. A browser add-in replaces other banner ads with an ad provided by a partner merchant.
Clicking the banner takes the consumer to the Dotomi Direct Messaging Center, to retrieve messages, change preferences, forward messages to a friend or choose to opt out of the Direct Messaging service.
In essence, the process elevates the traditional ad banner space to a personal messaging opportunity, Federman noted.
Consumers don’t receive an increase in e-mail spam or popup messages, he said. Thus, nothing bypasses spam filters or pop-up blockers. The consumer has nothing to delete and decides if and when to view the message.
“The user can ignore the messages, but usually won’t because the advertisement is relevant,” Federman told the E-Commerce Times.
Good Versus Bad
New advertising models such as the Dotomi Direct Messaging and AlmondNet might eventually put an end to businesses having to answer a question that often plagues Internet marketers: Is there a good side to adware or spyware?
Apreo President Jerry Periolat, whose company provides Internet security software, sees two sides to that question. In previous discussions with the E-Commerce Times, he discussed active and inactive spyware. He contended that inactive spyware, such as cookies, are beneficial to the industry because they save time for users by tracking information that makes accessing accounts and using Web sites more convenient for consumers.
Active spyware, such as stealth programs that log passwords and account numbers, can lead to information leakage and identity theft, among other security risks. Thus, spyware in general has really raised awareness of the vulnerability of networks. This has liability, compliance and productivity benefits as well.
“Every application developer wants that feedback,” he said, “so it really depends on your definition of spyware and how you use it.”
Mostly, however, Stiennon doesn’t see much consumer benefit. It degrades system performance and puts privacy at risk.
“Bad stuff is being done by spyware,” he said.
This story was originally published on October 2, 2004, and is brought to you today as part of our Best of ECT News series.