The decision by adware leader Claria to postpone its initial public offering comes as the fast-growing business of advertising-supported software is increasingly coming under pressure.
For years, millions of people have acquired adware as the price of using free applications such as file-trading software from the likes of Kazaa. The adware, designed to track Web-surfing behaviour and deliver targeted ads like pop-ups, has become profitable enough to draw investors’ interest.
But adware remains a risky investment because of legal battles between Web publishers and advertisers, focusing on the right to control a consumers’ desktop experience. Pending federal legislation also aims to outlaw adware’s more nefarious cousin, spyware, and could exert more pressure on applications that collect data on Web-surfing habits for advertising purposes.
Technology solutions to rid PCs of such software are also growing popular, threatening the wide distribution that is required to make adware companies profitable.
“There continues to be controversy about how these companies are able to target people — questions remain about the implicit agreement the consumer has made in putting that adware on their machine,” said Rich Lefurgy, a partner at Walden VC, a venture capital firm.
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