Bambi Francisco on Internet stocks' Adware exposure

by: David Jackson

Bambi Francisco, who covers Internet stocks for MarketWatch, published a column this morning about Internet companies' exposure to potential Adware/Spyware litigation. It's surprising that the issue has hit the mainstream financial literature so quickly - most sell-side analysts haven't yet acknowledged the risk to stocks. Perhaps this says a lot about the quality of Ms. Francisco's coverage. Key quotes from her article:

...Ask Jeeves (ticker: ASKJ) ... on Monday terminated an agreement with a marketing/distribution partner that uses drive-by downloads (a form of adware). The termination was prompted after I questioned Ask Jeeves about this partnership, which was uncovered by spyware sleuth Ben Edelman.

Adware is big business. It's estimated that ads worth $2 billion are served up via adware, according to a report being released Tuesday by Webroot. That's more than 20% of the estimated $9.6 billion in advertisements placed online last year.

"Intermix (ticker: MIX) is the only company sued at this point," said [Assistant NY Attorney General Justin] Brookman. Translation: Spitzer's team isn't stopping with Intermix.

"We're not ruling out in the future going after advertisers, or Overture (owned by Yahoo, ticker: YHOO)," said Brookman.

While Brookman believes there may be culpability on the part of advertisers, Spitzer's office hasn't drawn any conclusions.

Ask Jeeves is particularly worth noting since there have been a number of independent sources alleging that Ask Jeeves uses distributors of spyware.

As for (ticker: FWHT), Tom Wilde, senior vice president of primary traffic acquisition said that the company currently has a distribution agreement with Direct Revenue, but the revenue is "well under half a percent of total revenue."

ValueClick (ticker: VLCK) did not return calls seeking comment.

Full article here.