Beware, Adware, Washington Is Watching

Creators and users of adware should beware. Over the past few months federal lawmakers and regulators have turned a keener eye to the growing business of online advertising. Usually such increased scrutiny can mean only thing--more regulation.

As millions more advertising dollars migrate to the Internet, and online advertising technology becomes more sophisticated, Congress and the Federal Trade Commission (FTC) are examining measures to protect privacy and to stem abuses. A growing number of consumer complaints have led the FTC to step-up its enforcement against unfair and deceptive marketing practices.

In two recent reports, the FTC examined adware in its review of new online practices. In a March 2005 staff report entitled, Monitoring Software on Your PC: Spyware, Adware, and Other Software the FTC noted that "adware is spyware if users have not received clear notice about what the software will do or have not provided adequate consent to its installation or operation."

In a later report entitled, Peer-to-Peer File Sharing Technology: Consumer Protection and Competition Issues, the FTC noted that "software bundled with peer-to-peer file-sharing programs can have a range of effects. Some of the bundled software will cause consumers to receive ads on their computers. Some bundled software can have deleterious effects. For example, once downloaded to a user's computer, the software can impair computer operation and performance, and even cause the computer to crash. The software also can compromise the user's privacy, such as by facilitating the theft of personal information, monitoring of communications, and tracking of an individual's online activity. In addition, some of the software programs use tactics to prevent users from uninstalling them, or remain active on a computer even after the user deletes the software."

Some in Congress have expressed concern that certain peer-to-peer websites are riddled with pornography, citing a simple P2P search for a song by a popular artist that led to a site containing graphic and inappropriate images. Noting that unsuspecting families and children could be exposed to inappropriate material through adware and spyware, critics point out that banner ads for legitimate, well-known, businesses also have shown up on these sites.

So far,the FTC acknowledges there are legitimate commercial uses of peer-to-peer technology that employs adware, but it urges industry to do a better job educating consumers and finding technological solutions to stem widespread abuses.

For its part, the advertising industry appears to understand what is at stake if it does not find a self-regulatory solution to adware abuse. This solution may be easier said then done; many of the bad actors are companies that lurk outside the mainstream of the industry, and it would be unfortunate if the good guys get painted with a broad brush.

Complying with consumer demands and regulatory expectations should not be a problem for legitimate marketers going forward. The challenge, instead, will be to keep policymakers convinced of the commercial benefits of this evolving technology. It's only the beginning.

(c) 2005, Adonis Hoffman