The Hidden Money Trail
Is Adware Spyware?
Are programs like the one that hit Smith's computer adware or spyware? Depending on who you ask, experts define the word spyware differently.
Some use the word to describe tools that steal passwords and other personal data. Others consider a program spyware if it installs itself without your clear knowledge and permission. So the same program could be considered spyware or adware, depending on the circumstances under which you got it.
It's surprising to find that nobody knows for certain how much money the adware industry takes in annually--estimates range from $200 million to $2 billion a year in revenue--but if investments are any indication, business is booming.
Venture capital firms are bullish on adware companies, including Direct Revenue, WhenU, and 180solutions. According to SEC filings, Technology Investment Capital invested $4.4 million in Direct Revenue, after giving them $6.7 million last year. Trident Capital committed $15 million to WhenU this past summer. And, last year, Spectrum Equity invested $40 million in 180solutions.
How do VCs explain giving money to companies who monitor users' Web browsing habits? "Adware is here to stay," says Venetia Kontogouris, a managing director at Trident Capital. "Privacy for the [Internet] consumer is a lost war."
Adware makers and their funders are only one part of this complex new industry; millions of dollars also come from advertisers, and from the ad brokers who work for them. These people in turn pay search engines (on which brokers place ads), software bundlers that distribute adware, and vast networks of affiliates and subaffiliates. (See "Following the Money: How Adware Gets on Your PC," for an illustration of the process.)