Reformed adware vendor still under fire

Smith said fewer than 1 percent of Zango installations today are unauthorized, but "we know that we are not going to be able to stop 100 percent of the hackers out there." If a user complains to the company about an unauthorized installation, it can cut off payment to the distributor responsible, tracing them by their affiliate number, he said.

Users are asked three days after the Zango software is installed if they want to remove it. But even if the user uninstalls Zango "the money has already been made," the former hacker said.

While Zango may be able to identify large-scale botnet installations, "if you mix legit installs with botnet installs, they never notice a thing," he said.

Ben Edelman, a malware researcher and doctoral candidate at Harvard University, created a video documenting an unauthorized installation in February. Edelman, a long-time Zango foe, said he no longer contacts the company when he finds instances of rogue installations.

"They're still doing business with bad guys who want to put the software on users' computers without the users agreeing," Edelman said. "So long as that's the case, the distributors have every incentive to hack the system to get paid."

The Center for Democracy and Technology (CDT) has a case pending before the U.S. Federal Trade Commission (FTC) to investigate Zango's business, alleging the company has engaged in deceptive practices to get users to download the software.

"It seems as though they are more concerned with getting installations than making sure people actually want their software," said Ari Schwartz, deputy director of the CDT.

Smith disagrees with the CDT. "We think in this particular case they're misunderstanding our software and our intentions in what we do," he said. "We are doing our best to educate them."

Criticism and investigation hasn't slowed Zango. The company acquired Hotbar.com, another adware maker based in Israel, in June. Smith seems buoyant about a business that supports what he calls the "content economy," enabling content creators and publishers to drive Web traffic and make money.

Smith won't disclose Zango's recent revenue. The company reported $53 million in revenue in 2004.

Zango recently sealed a deal for content with Warner Bros., an arrangement Smith said involved scrutiny of the company's business practices.

Meanwhile, the CDT has sought out advertisers and found many are unaware their ads were being served by adware due to complex chains in how ads are purchased, Schwartz said. The CDT is investigating the overall advertising sales structure in how adware is funded, and will soon publish a report, he said.

Advertisers, however, "say Zango is a great secret," Smith said. The software, he said, is "absolutely critical to the health and well-being and success of the Internet long-term."