educational

Zango Settles With FTC

Steve Javors
Editor’s note: this article is based on an event originally reported on by XBIZ News during November, 2006.

The scourge of many adult webmasters got hit where it hurts: in the wallet.

Zango, the adware manufacturer, reached a settlement with the Federal Trade Commission to pay $3 million in ill-gotten gains in response to charges that it deceptively installed adware onto PCs without user consent and then obstructed its removal, violating federal law.

Zango's co-founders Keith Smith and Daniel Todd will be responsible for paying the hefty sum, it was announced. Under terms of the settlement, Zango also must refrain from installing software without easy removal instructions, onto customer computers if it can be monitored remotely without the user consent.

The settlement was not a fine levied by the FTC, nor did it include an admission of guilt by Zango.

"Consumers' computers belong to them, and they shouldn't have to accept any content they don't want," said Lydia Parnes, director of the FTC's Bureau of Consumer Protection. "If consumers choose to receive popup ads, so be it. But it violates federal law to secretly install software that forces consumers to get popups that disrupt their computer use."

The FTC said Zango used third parties to install adware. Programs named Zango Search Assistant, 180Search Assistant, Seekmo and n-Case monitor consumers' Internet use in order to display relevant popup advertising. Zango has been installed on PCs more than 70 million times and has served more than 6.9 billion popup ads.

In an official statement on its corporate blog, Zango blamed its affiliates for the mess.

"Early in our business, and as we've acknowledged, we relied too heavily on our affiliates to enforce our consumer notice and consent policies," Zango CEO Keith Smith said. "Unfortunately, this allowed deceptive third parties to exploit our system to the detriment of consumers, our advertisers and our publishing partners. We deeply regret and apologize for the resulting negative impact."

The FTC alleged that Zango purposely made it difficult to identify, locate and remove its adware installations. Ultimately, it said "Zango failed to label its popup ads to identify their origin, named its adware files with names resembling those of core systems software, provided uninstall tools that failed to uninstall the adware, gave confusing labels to those uninstall tools and installed code on consumers' computers that would enable the adware to be reinstalled secretly when consumers attempted to remove it."

Most importantly, the settlement bars Zango from "using its adware to communicate with consumers' computers — either by monitoring consumers' web surfing activities or delivering popup ads — without verifying that consumers consented to installation of the adware." It also prohibits the company and its affiliates from exploiting security vulnerabilities to download software and requires the company to disclose a plain-language installation consent form. Finally, Zango must monitor third-party distributors and affiliates to make sure they comply with the FTC order.

The FTC vote to accept the proposed agreement was 5-0.

Webmaster Ire
Zango brought down the ire of the adult webmaster community. Webmasters claimed Zango's method undercut the affiliate on whose banner the surfer clicked, effectively "stealing" his commission and giving it to the sponsor who bid on the keyword.

The use of Zango also has pitted affiliate programs against each other by using competitors' keywords against them, which results in popovers intended to confuse the surfer with his intended destination. Even if the surfer clicks off the popover, it's been reported on GFY.com that other windows or consoles could appear, mouse-trapping the user.

DatingGold CEO Allan Henning is a staunch opponent of Zango. He posted an official company announcement on GFY.com.

"We would like to state that we do not in any way knowingly purchase or allow in-house or affiliate traffic that comes from Zango, spyware or similar sources," Henning said. "We have had the opportunity to work with Zango after seeing them at AdTech; however, upon reviewing where their traffic comes from, we thought that would be highly unethical to ourselves, affiliates and other sponsors. We do not feel this is a proper way to run a business. We feel that the only parties who will gain from this kind of marketing are the networks, i.e. Zango, search engines like Google and the sponsor."

Henning continued, "We think companies that allow this kind of marketing have reduced their integrity and are just out to make a quick buck with total disregard for their affiliates or competitors."

And longtime webmaster resource website Greenguy & Jim released a tool for webmasters who wanted to detect and remove Zango from PCs.

In an attempt to take action against the program many believe was adversely affecting affiliate and sponsor relationships, Jim Barnett created a website that contains a link to an htaccess file that detects infected computers and redirects them to a page with removal instructions.

And Zango parent company 180solutions was in hot water with the Justice Department earlier this year. The FTC received a formal complaint from the Center for Democracy and Technology claiming that the adware maker continues "deceptive and unfair" methods in distributing software that generates popup ads.

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