The 3-year-old company filed a lawsuit last week against the Interactive Advertising Bureau, contending that the chief trade group for online advertising made libelous statements in the press about Gator's ad-delivery software. Earlier, the IAB had described Gator's controversial new banner pop-ups, which deliberately obscure banners of the Web sites it represents, as illegal.
McFadden, 47, begs to differ. Because millions of consumers consent to run Gator's helper application and advertising software on their PCs, Gator is within its rights and on its way to transforming the Internet advertising industry, McFadden says.
The company, which employs about 110 people in Redwood City, Calif., was founded in 1998 and launched its first helper application in 1999. It was founded by Dennis Coleman, a co-founder at Symantec, and its investors include US Venture Partners, Technology Crossover Ventures, Investor Growth Capital and Crosslink Partners.
McFadden, a former vice president of business development at Excite, recently talked to CNET News.com after his action against the IAB.
Q: Briefly describe Gator's uses.
A: We offer consumers free software applications and we do that in exchange for a chance to show them some advertising. Our first application was the Gator Wallet with 8 million customers...It fills out forms and log-in screens and automatically compares prices when you shop online.
The form helper application popped up to help people over 100 million times last month at over 700,000 different Web sites. We deliver advertising messages in pop-up windows based on the Web sites a person visits, so it's personalized advertising. An example: A user that is buying flowers might see a coupon for flowers.
For the advertiser, this works 20 to 50 times better than the advertising they can buy at Web sites because it's personalized and relevant. The click-through rate on our pop-up advertising ranges from 6 (percent) to 26 percent--a great deal higher than conventional Internet advertising.
What about the banner pop-ups that have caused a stir in the industry?
Our new form of pop-up advertisements, and the one that's controversial, is the desktop banner pop-up--that is the same size as banner ads on Web sites and pop-ups over the top of a banner ad on a Web page. As any pop-up, it sits in a separate window and the user can drag it to another location on the screen or click the X to dismiss it. Like all of our pop-up advertisements it bears our branding.
Why, when response rates are so weak for banner ads, would Gator choose to sell ads that lay on top of other banner ads? Isn't that tearing down the industry more, and aren't you biting the hand that could feed you in the future?
All pop-up advertising covers up something...that's the nature of the Windows operating system, overlapping windows. This is not substantially different from our pop-up ads that we've been working with over the last year.
Yet the ads are more targeted?
The software sits on the consumer's PC and will observe when somebody is looking at a Ford Explorer on the Ford site, and it regards that as an interest in SUVs by that consumer. That will allow us to display advertising about SUVs over the next hour or days or weeks. That's the personalization and why the advertisers get such high click-through rates.
I've seen a Gator banner advertising a credit
card company's services pasted on top of another
credit card ad on Yahoo--how is that more targeted?
There are two answers to that question. First, we would display a credit card ad because we had some reason to believe that the consumer would be interested in a credit card offer. In terms of the banner, much like any other Windows application, we don't know exactly what's underneath one of our pop-up windows when it's displayed.
How do you respond to this analogy that Gator's
banner pop-ups are like pasting over an ad in Time
magazine. What's wrong with that analogy?
It depends on whether the consumer gave someone permission to put some advertising Post-it Notes inside of the magazine. The consumer is going to give permission if they get a valid return--something worthwhile.
Let me contrast that with somebody driving by and opening my mailbox and taking my magazine out and putting their ads in. In the first case, the consumer has given permission and in the second the consumer has not.
Why have you chosen to sue the IAB when they
haven't taken legal action against Gator?
Some IAB representatives made some egregious statements about the company--a little bit of name calling, but mainly telling people that they thought that our ad model was illegal. I spoke to the IAB and they said they weren't interested in retracting those statements. And that can have a pretty substantial impact on our business. We have 200 advertisers, many of them Fortune 500 and Fortune 50 companies, and I just can't have them saying that what they're buying from us is illegal. So we filed the action (last) Monday.
Let's turn the tables for a minute. Would it be
OK for another company to sell ads that are pasted
on top of the Gator banners or that simply block
Gator-pushed pop-up ads?
That's already happening. That's the point. I don't have any say in what happens. The consumer has a say in it, and the Windows operating system, in a way, has a say in how Windows are going to overlap. We very often see other windows popping up over Gator ads. ICQ, the instant chat application from AOL, is a good example of that. It'll pop up a screen with a big ad over ours.
What if Yahoo created a piece of software to
uninstall Gator--any problem with that?
That would be up to the consumer. The consumer is the one who ought to decide what the consumer wants to have running on their desktop. I don't have a say in that, nor does any other Web site.
Many consumers say they haven't given their
consent for the service because it's bundled with
It's hard for me to imagine the consumer wouldn't understand what's going on, even if they didn't read the screen when they gave us permission and the disclosures, etc...When somebody gets our software...for starters, Gator is going to pop up periodically to help them fill out forms and log in. The next thing that they're likely to see is that Gator is going to pop up over a Web page with a competing offer.
How does your company make money?
We sell advertising. That's the root of the contention with the IAB...Robin Webster, the CEO of the IAB, was quoted as saying that "Gator is a software company, not a media company, and they have no business selling advertising and we think it's unethical and illegal." Well, gosh, we're in the business of offering consumers free software applications that lots of people enjoy using...and it's archaic that the only company that can be in the advertising business are those that are IAB members.
But isn't your ad-delivery model undermining
the financial health of the Web sites you're
delivering ads to? And ultimately, couldn't that put
your business in jeopardy?
I can understand why Web site publishers don't like this advertising in its current form. It's only natural that they'd like to control what a Web visitor sees on their computer screen. But unlike TV, the consumer can run lots of programs on his PC at the same time, and unless the government starts passing some kind of laws against that there will be lots of things happening on the screen simultaneously.
Specifically to your point, the thing that's so new that we can do to revitalize the online advertising industry...is to use these anonymous profiles to understand and power other forms of advertising. One way that this might play out is that we could help major online publishers understand which of their users are interested in a minivan right now and help that publication show that consumer advertising about a minivan. Instead of popping up over some other advertisement, why don't we work together and just show the relevant advertisement to the consumer, right from the get-go?
How many downloads come from deals with other software suppliers such as Audiogalaxy and how many come from people venturing to your
Close to half download our software from our Web site and the other half are from bundling arrangements. Audiogalaxy is one of them, and we don't publish a list of the others. The advertising we're selling, we use that to pay our distributors. The arrangements are all different and all confidential.
Have some advertisers retreated from using
your service now that some publishers have criticized
We're concerned that that could happen, and that's why we took swift action. So far the response from advertisers has been very solid.
Many CNET News.com readers have said they were initially pleased with Gator software because it's helpful managing passwords and IDs. But
many now criticize the software for getting carried
away with pop-up ads and taking away from the value of the service. Is this true? Have you upped
sales of pop-ups?
There's a delicate balance between trying to figure out the amount of ads that balances the value that we are delivering with the software product. We're learning about that. I'm sure that there are some people that saw too many pop-ups from Gator and may have decided not to use the software. But the average number of pop-ups that users saw last month was between four and four and a half. The frequency is much lower than people imagine.
Isn't there a danger of alienating your users
with too much advertising?
The consumer is king here. And if they don't like Gator because we didn't fill out a form incorrectly or because they believe they're seeing too much advertising...they would pull the plug on that...But we don't need government agencies or the IAB to make decisions for the consumers on that point.
Many critics call Gator "spyware"--software that
tracks consumers across the Web and keeps a file on
them--and are suspicious about what Gator does behind the curtain. Is it linked with personally
identifiable information? And how is it shared with
We wait for certain kinds of events to take place like someone being interested in flowers, and we take small snippets of the click stream that our software is looking for on the consumer's PC, and it doesn't by any stretch take the consumer's click stream and send it back to Gator's servers en masse. Secondly, all of this is anonymous, and we feel strongly that we don't want to know who our users are.
But don't you have all that personally
identifiable information when users register, like
names and site passwords?
We made it clear to consumers from the beginning that all that information is stored on their PC and not on our servers, and that's an important distinction between Gator and Microsoft Passport service, for example.
Why is it so difficult to uninstall this program?
Well, it's not. You can uninstall Gator and Offer Companion just like you uninstall any other software on the PC by going to the add/remove programs facility that is present on any PC, and it takes about four clicks of the mouse. My 11-year-old can do this in 30 seconds. There are other software packages where people are trying to obscure the way to uninstall it, but that's certainly not the case with Gator.
Is it true that it's one install and then two
That depends. If the software came along with Audiogalaxy, there's a single install that installs Audiogalaxy, Gator and Offer Companion.
To be clear, you have to uninstall both
Offer Companion and Gator to be rid of both?
The consumer is able to uninstall either or both. They're independent.
What are your long-term plans for Gator?
Well, advertisers have been flocking to this and are very happy with the results, so we're going to be expanding our number of advertisers and users. Coming downstream, we're going to have other Gator applications that we think consumers are going to enjoy. There are other interesting applications that I can't preannounce.