Zango meets key notice and consent
standards announced today
Settlement establishes requirements to protect consumers; marks significant step forward for the online industry
BELLEVUE, Wash. – Nov. 3, 2006 – In announcing a settlement agreement with Zango, the Federal Trade Commission (FTC) today established standards for the online downloadable software industry and, most importantly, provided online consumers with a new and higher level of protection. Zango has met or exceeded the key notice and consent standards detailed in the FTC consent order since at least January 1, 2006.
Zango is an online media company that fulfills consumers’ growing demand for free, sought-after digital content, such as videos and games. The FTC, which initiated its investigation of Zango in September 2005, alleged that, in some circumstances in the past, the company’s desktop advertising software was inadequately disclosed to users and its installation and uninstall practices were unfair.
“Early in our business, and as we’ve acknowledged, we relied too heavily on our affiliates to enforce our consumer notice and consent policies. Unfortunately, this allowed deceptive third parties to exploit our system to the detriment of consumers, our advertisers and our publishing partners. We deeply regret and apologize for the resulting negative impact,” said Keith Smith, CEO of Zango. “The FTC’s leadership in providing clarity around best practices is a welcome and significant step forward for Zango and our industry. We embrace the new standards and will continue to create, abide by and strive for best practices that protect consumers.”
The “Agreement Containing Consent Order” is a settlement of the FTC’s investigation and explicitly “does not constitute an admission [by Zango] that the law has been violated.” Zango will pay a $3 million fine as part of the settlement.
Attorney Christine A. Varney, a partner with Hogan & Hartson and an FTC Commissioner from 1994 to 1997, represents Zango in this matter.
“Online consumers are better protected today because of the FTC’s efforts. Zango cooperated fully with the Commission, working closely with it for more than a year and providing more than 1.3 million documents to assist in its review,” said Varney. “The new standards outlined today by the FTC reflect Zango’s current business practices. The industry now has standards for the downloading of software and applications over the Internet, which it should adopt.”
January 1, 2006, a key date referenced in the FTC order, marked an important milestone in the history of Zango. As of that date, Zango retired its past products and required that all of its applications include an enhanced version of its proprietary Safe and Secure Search (S3) technology. This version of S3 features the Closed Loop System (CLS), a built-in software enhancement that enables quicker detection of unauthorized attempts to install the company’s desktop advertising software.
To provide an independent analysis, the company has engaged with Richard Purcell, CEO of the Corporate Privacy Group, to audit Zango’s compliance against each of the FTC’s requirements. Purcell is formerly the chief privacy officer at Microsoft and currently is the chairman of the Board of Directors for TRUSTe, the leading independent trust authority for privacy on the Web. He will report his findings within a month.
Every consumer downloading Zango’s desktop advertising software sees a fully and conspicuously disclosed, plain-language notice and consent process. These new users and the more than 20 million consumers already in the Zango network receive access to more than 100,000 pieces of digital content across the Web, in exchange for viewing targeted advertisements. Zango’s ever-increasing library of entertainment content includes videos, games, tools and utilities. In addition to content Zango created or aggregated, the company’s software makes available premium sections of thousands of Web sites through its network of direct contractual relationships with Web publishers. Zango users view video streams in the tens of millions every month, placing our network in the top 20 of all online video sites. Zango also offers hundreds of online games attracting millions of consumers, making it a top 15 casual gaming site.
Hundreds of Web publishers and content providers utilize Zango’s desktop advertising software to monetize their products online. Through the company’s proprietary automated technology, Web publishers can add videos, games, tools and utilities to their sites. Meanwhile, content providers can distribute their creative assets to thousands of Web sites through Zango’s syndication platform.
“Today, 200,000 consumers will knowingly and willingly download Zango’s desktop advertising software to gain free access to digital content in return for viewing relevant advertising when they are most likely to make a purchasing decision,” said Smith. “As the desktop advertising industry continues to evolve, we continue to strengthen our business practices and enhance our technology to both protect consumers and make the online economy increasingly valuable for consumers, advertisers, Web publishers and content providers.”
Developing industry best practices since July 2004
More than a year before the FTC began investigating Zango, the company had already started work to fix the problems stemming from its overreliance on partners to enforce Zango’s consumer notice and consent policies. Zango overhauled its distribution channel to completely eliminate third-party software delivery, developed and implemented its S3 technology platform and assembled an aggressive team of security professionals dedicated to real-time monitoring of the Zango software system.
Working to establish industry best practices over the past several years, Zango also:
• July 2004: Filed suit against two of its distributors and began terminating relationships with hundreds of Web publishers who were breaching or could not demonstrate they were compliant with the company’s strict Code of Conduct.
• August 2004: Hired Attorney Ken McGraw, formerly of Visio (now Microsoft) and WatchMark Corp (now Vallent), as executive vice president, general counsel and chief compliance officer.
• June 2005: Renotified each of its 20 million users that they had one of Zango’s applications installed on their desktop, that they may receive targeted ads in exchange for free content and provided a link to easy uninstall instructions for any user wanting to remove the software.
• August 2005: Filed suit against seven former distributors alleging that they surreptitiously installed Zango software without notice or consent.
• September 2005: Launched S3 technology designed to thwart the efforts of rogue distributors who use botnets, Windows® security holes and other illicit means to fraudulently install Zango’s software onto computers without notice and consent.
• October 2005: Completely eliminated third-party distribution, purposefully and fully transforming operations by cutting out the distributor and instead working directly with the Web publisher.
• November 2005: Announced proactive, ongoing working relationship with the Federal Bureau of Investigation (FBI) and assistance in securing the continued detention of an alleged notorious botnet crime ring based in the Netherlands. The FBI commended Zango for its assistance in the botnet case and other criminal investigations.
• December 2005: Introduced an enhanced version of its S3 technology featuring the Closed Loop System, retired all past products and required all Zango applications to include these enhancements.
Zango will host a conference call to discuss today’s FTC settlement at 10 a.m. Pacific/1 p.m. Eastern. Zango CEO Keith Smith, Zango Executive Vice President, General Counsel and Chief Compliance Officer Ken McGraw, and Hogan & Hartson Partner and former FTC Commissioner Christine A. Varney will participate in the call for Zango. Members of the media interested in joining the conference call must request call‑in details by contacting Colleen Kennedy of Infotech Strategies at 202.585.0201 or kennedy@itstrategies.com.
About Zango
A pioneer of what we call the Content Economy, Zango, an online media company, fulfills millions of consumers’ growing demand for free, sought-after online videos, games, music, tools and utilities, giving those consumers greater choice and control over when, where, and how they access that content. Zango’s vision enables content creators to monetize and distribute their content, provides publishers access to valuable and unique content as well as a way to make money from their web traffic, and delivers to advertisers industry-leading ROI through time-shifted ad delivery by engaging more than 20 million consumers precisely when they are most likely to make a purchasing decision. Committed to safe and ethical practices, Zango welcomes more than 200,000 new opt-in consumers every day. For more information, visit www.zango.com.