Microsoft is in discussions to buy controversial adware maker Claria, sources say, in a move to own an advertising network to compete with rivals Google and Yahoo.
Whether a deal will happen is unclear, according to sources familiar with the talks. But in the event that it does, Microsoft would likely face guff from consumer watchdogs for buying a company known for tracking Web surfers and delivering annoying pop-ups. (Microsoft's MSN Internet arm stopped selling pop-ups more than a year ago.)
Representatives for Microsoft and Claria declined to comment on any talks.
Strategically, a buyout would give MSN several key assets. First, the Internet portal would acquire an advertising network that sells and targets promotions to people outside the MSN Network--holdings that rivals Google, Yahoo and America Online already own. As online ad sales grow by more than 30 percent annually, that is increasingly important.
"Like AOL buying Advertising.com (last year), MSN can use Claria to extend its existing advertising relationships," said Charlene Li, an analyst at Forrester Research.
Second, MSN would acquire technology to personalize advertisements--search ads, banners or pop-ups--as well as tailor content to Web surfers. Personalizing the consumer Web experience is an ambition of all of the major portals, including MSN, so that people grow more loyal to one service over another.
Finally, MSN would gain access to a system with in-depth knowledge of consumer behavior on the Internet. Claria's software is installed on an estimated 40 million desktops and is designed to monitor people's actions, behaviors, likes and dislikes in order to display targeted ads. The company also operates a research division that extrapolates consumer habits over the long term. The New York Times first reported the story.
Still, Claria, formerly Gator, has a sullied history with publishers, advertisers and Web surfers. Long equated with pop-up ads, the Redwood City, Calif.,-based company makes downloadable software that's often bundled with and supports free applications like peer-to-peer file-sharing network Kazaa. It monitors surfers' habits and displays ads as they traverse the Web.
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