The 3-year-old company filed a lawsuit last week against the Interactive Advertising Bureau, contending that the chief trade group for online advertising made libelous statements in the press about Gator's ad-delivery software. Earlier, the IAB had described Gator's controversial new banner pop-ups, which deliberately obscure banners of the Web sites it represents, as illegal.
McFadden, 47, begs to differ. Because millions of consumers consent to run Gator's helper application and advertising software on their PCs, Gator is within its rights and on its way to transforming the Internet advertising industry, McFadden says.
The company, which employs about 110 people in Redwood City, Calif., was founded in 1998 and launched its first helper application in 1999. It was founded by Dennis Coleman, a co-founder at Symantec, and its investors include US Venture Partners, Technology Crossover Ventures, Investor Growth Capital and Crosslink Partners.
McFadden, a former vice president of business development at Excite, recently talked to CNET News.com after his action against the IAB.
Q: Briefly describe Gator's uses.
A: We offer consumers free software applications and we do that in exchange for a chance to show them some advertising. Our first application was the Gator Wallet with 8 million customers...It fills out forms and log-in screens and automatically compares prices when you shop online.
The form helper application popped up to help people over 100 million times last month at over 700,000 different Web sites. We deliver advertising messages in pop-up windows based on the Web sites a person visits, so it's personalized advertising. An example: A user that is buying flowers might see a coupon for flowers.
For the advertiser, this works 20 to 50 times better than the advertising they can buy at Web sites because it's personalized and relevant. The click-through rate on our pop-up advertising ranges from 6 (percent) to 26 percent--a great deal higher than conventional Internet advertising.
What about the banner pop-ups that have caused a stir in the industry?
Our new form of pop-up advertisements, and the one that's controversial, is the desktop banner pop-up--that is the same size as banner ads on Web sites and pop-ups over the top of a banner ad on a Web page. As any pop-up, it sits in a separate window and the user can drag it to another location on the screen or click the X to dismiss it. Like all of our pop-up advertisements it bears our branding.
Why, when response rates are so weak for banner ads, would Gator choose to sell ads that lay on top of other banner ads? Isn't that tearing down the industry more, and aren't you biting the hand that could feed you in the future?
All pop-up advertising covers up something...that's the nature of the Windows operating system, overlapping windows. This is not substantially different from our pop-up ads that we've been working with over the last year.
Yet the ads are more targeted?
The software sits on the consumer's PC and will observe when somebody is looking at a Ford Explorer on the Ford site, and it regards that as an interest in SUVs by that consumer. That will allow us to display advertising about SUVs over the next hour or days or weeks. That's the personalization and why the advertisers get such high click-through rates.
I've seen a Gator banner advertising a credit
card company's services pasted on top of another
credit card ad on Yahoo--how is that more targeted?
There are two answers to that question. First, we would display a credit card ad because we had some reason to believe that the consumer would be interested in a credit card offer. In terms of the banner, much like any other Windows application, we don't know exactly what's underneath one of our pop-up windows when it's displayed.
How do you respond to this analogy that Gator's
banner pop-ups are like pasting over an ad in Time
magazine. What's wrong with that analogy?
It depends on whether the consumer gave someone permission to put some advertising Post-it Notes inside of the magazine. The consumer is going to give permission if they get a valid return--something worthwhile.
Let me contrast that with somebody driving by and opening my mailbox and taking my magazine out and putting their ads in. In the first case, the consumer has given permission and in the second the consumer has not.
Why have you chosen to sue the IAB when they
haven't taken legal action against Gator?
Some IAB representatives made some egregious statements about the company--a little bit of name calling, but mainly telling people that they thought that our ad model was illegal. I spoke to the IAB and they said they weren't interested in retracting those statements. And that can have a pretty substantial impact on our business. We have 200 advertisers, many of them Fortune 500 and Fortune 50 companies, and I just can't have them saying that what they're buying from us is illegal. So we filed the action (last) Monday.
Let's turn the tables for a minute. Would it be
OK for another company to sell ads that are pasted
on top of the Gator banners or that simply block
Gator-pushed pop-up ads?
That's already happening. That's the point. I don't have any say in what happens. The consumer has a say in it, and the Windows operating system, in a way, has a say in how Windows are going to overlap. We very often see other windows popping up over Gator ads. ICQ, the instant chat application from AOL, is a good example of that. It'll pop up a screen with a big ad over ours.
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