August 7, 2001 5:00 AM PDT

Web sites prey on rivals' stores

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  Gator defends custom ads
Jeff McFadden, CEO, Gator
A growing number of online companies are ambushing competitors through software that puts ads where marketers want them most--in front of customers visiting rival Web sites.

It's called getting "Gatored," after one of the most popular applications underlying it, and some Web sites are out to restrict the practice. But for others it's fast becoming an effective way to feast on competitors in their own front yard.

One e-tailer that's been bitten is 1-800-Flowers.com. When certain Web surfers visit the site to browse for bouquets, a pop-up ad appears for $10 off at chief rival FTD.com. The same sort of thing happens at AmericanAirlines.com, where a Delta Air Lines promotion is waiting in the wings.

Ads like these find their way onto browser windows through "plug-ins" that come bundled with certain software downloads. Several companies are behind the practice, including the eponymous Gator.com.

One online executive referred to Gator and other such programs as "hijackware," applications that easily whisk consumers from a point of sale at one site to a competitor?s site.

Gator is a so-called online helper application that has millions of active users and manages passwords and user IDs. While Gator is free, the company that makes it sells keywords to marketers that lets them launch pop-ups at opportune moments--for example, when a Web surfer visits a competing site.

"Our own clients get Gatored," said I-Traffic media director Jerry Quinn, who says he has purchased Gator keywords for some of his clients. I-Traffic buys online advertising space for companies such as Staples, British Airways and The Discovery Channel. "We don't like it, but it's fairly competitive."

Redwood City, Calif.-based Gator is quickly adding a new spin to the old ploy of selling ad space linked to trademarks and company names. Pioneered by search engines and Net directories, the practice lost momentum after some big brand advertisers cracked down with boycotts and trademark lawsuits. One case involving Playboy Enterprises, scheduled for trial next month in Los Angeles, could help set guidelines over the legality of the practice.

Fears about control of keywords have resurfaced recently, with critics pointing to blurring lines between content and advertising on the Web. In one extreme example, San Francisco-based eZula has been working with file-sharing networks Kaazaa and iMesh to superimpose links to marketers' sites over text on Web pages.

But including links to preferred Web destinations could rally a cry of foul play. Microsoft last month pulled--at least temporarily--Smart Tags from Internet Explorer 6. The Extensible Markup Language (XML) feature let Web surfers use pull-down menus to obtain additional information about select content. A Smart Tag under CNET, for example, might have linked to Microsoft's MSN MoneyCentral Web site for stock quotes and other information.

Some Web sites complained that Microsoft would be able to hijack content from their Web sites, even though the software maker assured them one metatag would disable the linking. Nevertheless, the feature will not be included in Windows XP, the next version of the company's operating system--although it could be resurrected in later updates.

In addition, applications designed to lure consumers elsewhere have been introduced before, often with poor results. Amazon.com, for example, introduced zBubbles in 1999 after its acquisition of Alexa Internet. The helper tool, which launched consumer product reviews whereever consumers surfed the Net, has since been abandoned.

Downloads galore
In Gator's case, the company has seen the number of downloads reach into the millions, in part due to partnerships with file-sharing software and other popular downloads that allow companies to piggyback software. Gator is bundled, among other places, in downloads of AudioGalaxy, Gozilla and WeatherBug.

Because of the bundling, such plug-ins have drawn concerns from consumers who say that the programs are often slipped into downloads without adequate notification. While the companies typically require consumers to agree to licensing and terms-of-service agreements before downloading software, the details of dense contracts can easily be overlooked by consumers. As a result, many consumers realize the software is operating in the background only when they are deluged with pop-up advertising.

Making matters worse, "In some cases it's almost impossible to get rid of some of this ad software without uninstalling Explorer or Netscape," said Dan Martin, vice president of business development for HomeGain, a real estate Web site. While not singling out Gator, Martin referred to a number of ad programs that make consumers jump through numerous hoops to uninstall the technology.

Scott Eagle, chief marketing officer at Gator, said consumers can easily uninstall the software by accessing the "add/remove programs" in their settings. He added that consumers can opt out of receiving the program during downloads of partners' technology. A program called Ad-Aware, from LavaSoft, also helps consumers remove remnants of programs installed surreptitiously on their machines.

Keyword advertising consists mostly of selling trademark owners the rights to their own names--on a search engine, for example. But the reverse is true in many new application services such as Gator. And because the applications are downloaded with the consumer's consent, the companies say they are standing on firm legal ground, despite numerous complaints from marketing executives.

"It's one of the nuances of this medium; it's changing some of the parameters that we traditionally thought were sacrosanct," I-Traffic's Quinn said. "There's now this third party between you and a customer within the browser, and that's changed the rules. There's generally no third party between you and the TV. And a lot of people want to cry unfair."

Gator's Eagle said the proposition of reaching consumers when they are researching a product on a competitor's site is undoubtedly alluring because it can drive transactions. The ads can also garner click-through rates in the double digits.

"We're not whispering to 20 million people through a portal; we're directly reaching someone when they're interested," said Eagle, whose company's clients include Sears, Procter & Gamble, Chrysler, CS First Boston, Dell Computer, ESPN, MSN, Mazda and The New York Times Co.

"The promise of the Internet was always one-to-one marketing, but nothing has ever proven it out. We're proving it out," Eagle said.

Gator, which launched online in April 1999, was rated one of the top 25 Web properties in July by Nielsen/NetRatings. The company said it has about 7.5 million consumers.

Attracted and repelled
For their part, marketers appear both drawn to and repelled by the practice of "Gatoring." As the online advertising market has dried up, brand managers have been on the hunt for more effective ways to reach consumers at more cost-effective prices. Many ad executives say niche opportunities through services like Gator and Whenu.com, an online shopping service, deliver on those needs.

When a consumer is looking at a Honda minivan online, for example, an ad promoting the Dodge minivan typically draws interest because the shopper is in the market for this type of car.

"People who are looking at competitive companies are the right target at the right time," said Andrew Swinand, media director at Starcom IP, which plans and places advertising. "But if I was a VP of marketing and a competitor owned all my keywords, I'd be annoyed. That's why most of the books are called 'Marketing Warfare.'"

Such efforts could rekindle the debate over the role of keywords in Web advertising.

"It's never been conclusively established that you can't buy a competitor's name. Some search engines won't allow you to do it. But with the Gators of the world, if you own all the words, someone will eventually sue you," Quinn said.

Indeed, companies have brought suit against Web sites that use so-called metatags to list competitors' trademark names, resulting in additional traffic to their own sites. Metatags are essentially keywords that Web sites use to get top placement on some search engines.

In 1999, Playboy filed suit against Excite.com and Netscape in an attempt to prohibit them from delivering adult ads when visitors searched for the term "playboy." The suit charged that the alleged practice violated its trademark. Although the court dismissed the case earlier this year, Playboy has appealed the decision, and a hearing is scheduled in a Los Angeles federal district court in September.

A similar suit filed by Estee Lauder against Excite resulted in a settlement.

Ad executives also say it's a controversial strategy for Web businesses to sell keywords aimed at a company's competitor because they risk alienating the competitor. Pepsico, for example, might refuse to advertise on a site if that site were selling the Pepsi name to Coke.

"Back in the old days all the search engines did it, then they kind of backed off of it because they got the door slammed in their face," said Jim Nail, an analyst at Forrester Research.

As a result, many online search services say that advertisers are given first right to their company name and trademarks. Yahoo, for example, said that while it does sell advertising space related to trademark names, it "works hard to avoid conflicts" between competitors. Typically, the trademark owner buys rights to their own name on Yahoo and other sites.

A search on Yahoo for the name "Ford" yields an advertisement from the company itself. In contrast, on AltaVista, a search for "Ford" draws an ad for a Toyota truck.

Excite@Home sells advertising space "keyed" to trademark company names, but said "if there are objections (from owners of that name), we take the ad down," according to John Sullivan, associate general counsel at Excite@Home.

"It's definitely a controversial tactic, and we don't recommend it for all clients. It's a client call; we propose it as an opportunity," said Adam Gerber, media director for the DigitalEdge.

Many trademark infringement cases are filed by major businesses simply in an attempt to quash a competitor's marketing efforts, legal experts say. But unless the suit shows a legitimate case of consumer confusion between trademark names, it may not have much traction in court.

"A case can be brought by anyone who has $175 to pay the filing fee, but a case can be won by showing confusion in the minds of consumers as to the origin of goods or services," said Carl Oppedahl, a partner at the law firm Oppedahl & Larson.

Legal experts say that such tactics are similar to marketing in the offline world. "You can go to a grocery store and buy Post Raisin Bran, and when it's scanned at the checkout counter, the printer may spit out a coupon for Kellogg's Raisin Bran. Kellogg has paid the store to do that, and this sounds a lot like what Gator is doing," Oppedahl said.

Still, marketers may be tempted to threaten legal recourse.

"We get lots of angry calls; maybe even an attorney calls up because they're angry," said Gator's Eagle. "We explain it's the consumers' right because we're invited onto the desktop. We're not changing their content; we're popping up on the consumers' desktop. Don't they advertise on TV showing competitor comparisons? The only difference is that we're more effective.

"The next call we get is usually from the VP of sales, saying, 'We would like to work with you.'"

 

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