Rumored Microsoft Adware Deal Raises Red Flags

If the software company buys Claria, the adware vendor known for distributing Gator, analysts question whether customer protection will remain a priority.

Published reports that Microsoft is in discussions to purchase high-profile adware vendor Claria for as much as $500 million have set tongues wagging in the security sector, with analysts and vendors questioning the software giants motives and whether the deal will actually occur.

"Given Microsofts emphasis on trustworthy computing and their public stance against adware, I think it would be a really strange acquisition and not the best move," said Matt Rosoff, an analyst with Directions on Microsoft, an independent analysis firm in Kirkland, Wash. "I wouldnt be surprised if there were talks going on, but Id be surprised if this goes through."

The New York Times and the Wall Street Journal separately reported Thursday that Microsoft Corp. has been in talks to purchase Claria Corp., a Redwood City, Calif.-based company best known for distributing the controversial Gator ad-serving software.

Read more here about Clarias Gator eWallet application and its ambiguous classification by Yahoos spyware blocker.

Clarias adware applications include eWallet, DateManager, WeatherScope and PrecisionTime, and the companys behavior-tracking database of users surfing habits is believed to be among the biggest in the world.

David Moll, CEO of enterprise anti-spyware vendor Webroot Software Inc., said the reports show that Microsoft is more concerned with revenue than with security and privacy.

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"I believe Microsoft is in the security business purely as a response to a public outcry, and while they are making these token gestures to enter the space, its clear their mind is on the $12 billion opportunity known as Internet advertising," Moll said. "Im amazed that Microsoft would consider delving into the adware space … Its unconscionable."

Officials at Claria would not comment on the reports, and a Microsoft spokesperson would only say that the company "does not comment on these market rumors."

Rumor or not, if the purchase were to occur, it would put Microsoft in the difficult position of needing to keep adware and spyware off of the desktop while working with adware technology.

"Will they favor the adware or will they favor the customer who doesnt want their computer broken by questionable applications?" asked Michael Cherry, also an analyst at Directions on Microsoft. "This is a very hard balancing act."

Considering that Microsofts current anti-spyware technology flags and removes Clarias applications as computer threats, its highly unlikely that the company would consider continuing that part of Clarias business if a deal is done.

Rather, Microsoft is probably looking to purchase other assets, including advertising, personalization and behavior-tracking technology, in order to catch up with competitors like Yahoo Inc. and Google Inc., two rivals that utilize contextual technology to draw in advertisers.

Webroots Moll said he believes Microsoft is also interested in the "reams of data" derived from years of deploying adware and spyware to consumer desktops. "I think of that as ill-gotten gains of the spyware industry, and for Microsoft to potentially use that reflects how greatly conflicted Microsoft is," he said.

Click here to read about Microsofts beta test of an anti-spyware application.

And for some industry watchers, just the notion that Microsoft has likely entered into conversations about an acquisition raises eyebrows.

"The conversation in and of itself is troubling, because of the significant amount of money involved and the wrong signals it sends to other adware vendors," said Eric Howes, a spyware researcher at the University of Illinois at Urbana-Champaign. "That is just not the message that needs to go out into the market right now."

Howes said he believes that the rumored deal legitimizes the adware industry in some ways, and that other adware vendors would be encouraged to continue or enhance their operations in the hopes of drawing acquisition attention from other large corporations.

Claria has recently attempted to clean up its reputation, distancing itself from some of the partners that secretly installed its software, and making its software easier to remove. Howes said those changes have been minimal, however, and while Claria is not the "worst offender out there," this year he has issued reports on at least two problematic Gator adware programs.

Meanwhile, Webroots most recent spyware report shows Clarias software as the second most prolific adware install, appearing on more than 2 percent of consumer desktops. Webroot lists Clarias GAIN application as the second biggest threat to desktop computers.

"This seems like a very strange acquisition, based on Clarias history and the current product line," said Rich Mogull, research director at analyst firm Gartner Inc., voicing a common reaction. "Frankly, Im skeptical of the whole thing right now."

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