More on Microsoft and Claria

This is a follow-up to my earlier post about the rumor that Microsoft is negotiating to buy Claria. Claria actually has five product lines:

• The GAIN advertising network, which serves pop-up ads.
• BehaviorLink, another advertising network which says it delivers ads that are “targeted based on consumer behavior.” These are not pop-ups but can include audio, animation, and Flash as well as HTML.
• Feedback Research, a marketing research company that claims to be able to produce “in-depth analytics of anonymous consumer Web usage patterns,” based on “actual behavior of tens of millions of anonymous Internet users across more than 60 million domains.”
• A software division that distributed a variety of utility programs, most of which are designed as vehicles to deliver GAIN Network ads to anyone who installs the free version of these programs.
• A handful of me-too Web properties: a search engine and two comparative services intended to help consumers find schools and compare prices.

The two ad networks are obviously profitable, but they’d be a toxic acquisition for Microsoft and would undo every bit of goodwill they’ve built up over the past few years. The security and privacy communities would have plenty to scream about. Feedback Research can at least stay behind the scenes, but the source of their data is ethically questionable, making it difficult to see how Microsoft could continue to gather it and still maintain that it was not a spyware vendor. Ben Edelman agrees:

A November 2003 eWeek article reported that Claria’s then-12.1 terabyte database was already the seventh largest in the world — bigger than Federal Express, and rivaling Amazon and Kmart. Claria recently told Release 1.0 its database is now 120 terabytes, the fifth-largest commercial Oracle database in the world. All very interesting, and perhaps troubling to those who worry about illicit use of such detailed data. But why would Microsoft invite this unnecessary privacy firestorm?

The most interesting asset, in my opinion, is the oldest one of all: the Gator eWallet program. This is actually a tremendously useful program (although I prefer RoboForm). The paid version of Gator works well and doesn’t serve any ads at all. If it were free and ad-free, it could be an excellent tool for helping Windows and Internet Explorer users navigate the maze of passwords and forms on Web sites and thereby increase the likelihood that people will choose secure passwords. But the MSN toolbar already has some form-filling capabilities, and adding Gator-like features to IE can’t be that difficult.

Ultimately, though, as Ben points out, the question comes down to the rumored $500 million price tag. What does Claria have that’s worth that much money and can’t be developed either in-house or through a less tainted source? Nothing. Which is why I seriously hope the deal will fall apart.