Ad Group Says Gator.com Bites into Business

Baldwin Louie — Tue, 28 Aug 2001 15:00:00 -0700

It seems like a cool enough idea: Give Net surfers software that lets them cover Web site banner ads with others from competing companies.

The hitch? Online publishers aren't exactly going to cheer a technology that could cut the number of people who are seeing the ads placed by advertisers who have paid to be on their sites.

That's the dispute playing out now between Gator.com and the Interactive Advertising Bureau. Gator, which provides software to let people automatically fill in forms online, remember passwords and do comparison shopping, last week added a feature that places banner ads over the existing ones at a Web site. Earlier Tuesday, the advertising association fired a shot across Gator's bow, threatening to file a complaint soon with the Federal Trade Commission that the company's new service deceives consumers -- among other problems.

The spat is the latest in a series of clashes between Web site publishers and companies pushing technology that alters the way content and ads are presented at a site. Four years ago, for instance, The Washington Post and other large media companies sued Total News Network for taking their stories and framing them with its own ads and Web page, notes Nicole Wong, a partner at the law firm Perkins Coie, who is not involved in the current brouhaha surrounding Gator. The firms settled out of court, she adds.

Superimposing messages on top of a Web site isn't necessarily illegal. Virtually everyone who uses the Internet encounters pop-up ads on Yahoo, AOL and the other big portals, and most of these aren't raising legal objections. Problems could arise, however, if consumers are misled that Gator's superimposed ads are sanctioned by the Web sites.

"If the way Gator works would cause confusion for a consumer about the relationship between the advertiser and the Web site, there may be some interest on the part of the FTC," says Wong.

The Interactive Advertising Bureau, whose members include AOL Time Warner, Yahoo, CNET, The New York Times and The Wall Street Journal, issued its statement objecting to Gator's practice Tuesday morning. In addition to charging that Gator was engaged in "deceptive practices in violation of Federal laws," the group also described Gator's new service as "unfair competition" and infringing on its members' contract, trademark and copyright interests.

IAB president and CEO Robin Webster says: "Gator.com's practice of visually altering publishers' content and obscuring the advertisements of unsuspecting advertisers, without notice, substantially interferes with the contractual relationships between Web publishers and advertisers. In effect, Gator.com is falsely implying relationships that do not exist. Publishers and advertisers who have chosen to be associated with one another are having those relationships damaged and are suffering grave financial harm by losing business opportunities. Consumers are similarly being deceived by the company and are being denied the full experience of the Web sites as intended by the publishers."

Gator execs brushed aside such complaints as sour grapes. Jeff McFadden, Gator's CEO, says that the pop-up banner ads are all clearly branded with the Gator name. He notes that consumers can click the banner ads off the screen simply by hitting an "X" button. And many of the banners, he observes, are obviously from a rival company to the Website, encouraging the consumer to check the competitor's offerings and prices.

"One of the things that the Interactive Advertising Bureau is trying to do is to protect consumers from unauthorized content," McFadden says. "But who are they to decide what is authorized for consumers?"

Gator had anticipated the advertising association's threat, as the two groups have been in negotiations. In a bid to undercut the advertising association's statement, Gator announced Tuesday that it had filed a lawsuit the previous day against the association, seeking a court declaration that the advertising association’s claims against Gator are unfounded.

Despite Gator's indignation, the company had clearly expected that its new pop-up banner ads would raise a ruckus. When it began offering the technology last week, a release from the company described it as a "controversial program." McFadden added at the time that "sometimes one company's groundbreaking innovation can be another's controversial tactic." The release explains that customers who obtain Gator software give permission to have Gator’s banner ads superimposed over the Web sites' ads.

Still, the complaint from the Interactive Advertising Bureau is likely to be followed by other challenges. The association does not have standing to sue Gator in court, as it is not directly affected by the new service. Its members, however, are impacted, and it's likely that they will sue Gator for misappropriating their content. "Given how Web site publishers have reacted to similar practices in the past," says Wong, the attorney at Perkins Coie whose specialty is Internet law, "I think they will be very concerned if Gator is supplanting their advertising content."

Imagine the reaction if a magazine had all its ads torn out and discovered that a competitor had pasted its own ads in their place, Wong says. "It certainly shakes up how we traditionally thought the advertising market was supposed to work."

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Ad Group Says Gator.com Bites into Business