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Gator's Legal Feud Means Big Publicity
Betsy Schiffman, Forbes.com
08.29.01, 5:00 PM ET
NEW YORK - Crime typically goes up when the economy goes down.
In business, companies may not resort to criminal activity, but they do use
aggressive tactics that would never fly during economic high times.
About a month ago, Gator, a Redwood City, Calif.-based software
company, rolled out a software application, Gator Companion Popup Banner, that
issues popup ads based on users' surf patterns. This in itself is nothing extraordinary.
Companies like DoubleClick (nasdaq: DCLK - news - people) have served targeted
advertising based on individual Web usage patterns for a couple years now. For
example, consumers sniffing around at the Ford (nyse: F - news - people) Web
site could get served an ad for a local Ford dealership.
What is extraordinary, however, is the fact that Gator's popup ads actually
obscure the ads publishers have sold to other advertisers. Gator is essentially
hijacking valuable advertising space to serve ads it says are better suited
to individual users' tastes. Although Gator claims it serves ads consumers actually
want, publishers say Gator is stealing advertising real estate.
And although Gator claims consumers benefit from the ads it serves,
its greater purpose is really to serve advertisers. Gator uses guerilla warfare
that traditional media buyers aren't capable of--it serves popup ads on Web
sites that don't sell advertising. The example given on the Gator Web site shows
a graphic of the Home Depot (nyse: HD - news - people) Web site, and an ad for
Home Depot competitor Sears Home Central gracefully appearing in the corner
of the site.
The hitch is that Gator ads are never served on the actual site--they
are always popup ads that float over areas of a Web site where advertising is
traditionally served. And according to Gator, that makes the company's practices
perfectly legal. Also, Gator says its ads receive a 6% to 26% clickthrough rate--meaning
between 6% and 26% of its users click on the ads it serves--which is significantly
better than the less than 1% of users that click on traditional ads.
In the month the Gator companion has been available, 8 million
users have downloaded the application--which itself is a bewildering figure--and
the company has garnered about 200 advertisers paying a minimum of $25,000 each
for the Gator-placed ads, although Gator Chief Executive Jeff McFadden says
some advertisers are paying less for pilot programs and some are paying six
figures. The fact that Gator could charge those rates for advertising over real
estate it isn't producing is a slap in the face of traditional media companies.
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