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An earlier post on The Internet Stock Blog provided a list of stocks at risk from Eliot Spitzer's attack on the Adware/Spyware industry. One group with potential exposure: providers of paid search and affiliate ads, including FindWhat (ticker: FWHT), Yahoo/Overture (ticker: YHOO), CGI Holding (ticker: THK), ValueClick (ticker: VCLK), 24/7 Media (ticker: TFSM), Think Partership (ticker: THK) and LinkShare (partially owned by Internet Capital Group, ticker: ICGE).

Now research by Spyware legal expert Ben Edelman has expanded the list to cover other publicly-traded companies. They are:

  • aQuantive (ticker: AQNT)
  • Doubleclick (ticker: DCLK)
  • Fastclick (ticker: FSTC)
  • Google (ticker: GOOG)

Ben's research is based on an analysis of the ads served by Adware company 180solutions. He writes:

I inventory the 88,000+ ads currently being shown by 180solutions.  (Recall that I've previously proven that their "adware" sometimes gets installed without any notice or consent.) It turns out that lots of 180's ads arrive courtesy of the biggest names in online advertising. 1,300+ ads from DoubleClick. 2,666 from Atlas DMT [owned by aQuantive].  And an astonishing 4,678 180 ads include Google AdSense ads, notwithstanding a Google policy specifically prohibiting this.

On the critical question of whether advertising intermediaries have liability for their products' use by spyware/adware companies, he says:

Are ad intermediaries responsible when their ads are shown by installation installed improperly? Marquette law professor Eric Goldman thinks not. But the New York Attorney General's office has repeatedly suggested they might be. My take: Advertiser and intermediary liability is an interesting question of law, well beyond my aspirations for this brief piece. But where ad intermediaries purport to certify or stand behind the quality of the venues where their ads are shown, I'm not receptive to their claims that they can't do what they've promised. Where ad intermediaries merely count advertisement clicks without even claiming to assure traffic quality, the case for blaming intermediaries for improper use of their tracking links may be somewhat weaker (though still cognizable).

Ben's entire article - Intermediaries' Role in the Spyware Mess - is required reading for anyone holding positions (long or short) in Internet advertising stocks or working in that industry.

One quick - but entirely tangential - comment:
The prevalence of Google pay-per-click contextual ads in Ben's findings is also a testament to their profitability. Companies like ValueClick, DoubleClick and aQuantive are already seeing increased competition in their core advertising businesses, but this data from 180solutions quantifies their loss of market share to Google. No doubt Yahoo's entry to the small-publisher contextual advertising market will further exacerbate the level of competition.

Full disclosure: at the time of writing I'm short VCLK.

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AQNT chart below.
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Source: The Spitzer Internet Danger List - an update (AQNT, GOOG)