Increasingly savvy surfers spur arms race with ad companies

It comes as little surprise whenever the settings on my 85-year-old grandmother's computer get funky. The fact that she can navigate her way around an e-mail program and web browser at all is impressive, but when something goes wrong, she calls in the experts: her grandkids. Although everything on her computer was installed and set by an Internet-savvy member of the family, she occasionally complains that things go awry. When I investigate, I find that her homepage has been hijacked, or her default search engine is no longer Google, or some mysterious toolbar has made its way onto her browser. Just like flashing banners and annoying pop-ups, these unwanted features come from a sector of companies that – though irritating– fuel a significant chunk of the Internet economy. Dozens of Israeli companies specialize in monetizing web pages and mobile apps, finding creative ways to direct traffic and get web surfers to view, click, or buy sponsored products. While my grandmother will likely never learn the nuances of tricky Internet spam, many other users will. As surfers become more savvy, the companies vying for their eyeballs, clicks, and purchases have to adjust their strategies. Perion, a company listed on the Tel Aviv Stock Exchange's TA-75, used to make money off installing toolbars onto people's browsers. “We killed toolbars because consumers hated it, so we moved to different ways to change search settings,” said Perion CEO Josef Mandelbaum. “The reputation wasn't exactly the best in the industry, so we're trying to make the monetization more connected to the product.” While many people consider such add-ons to programs they download or services they use to be a nuisance, Mandelbaum argues that they are the mechanisms by which users can enjoy so many free products. “We've trained consumers that the world around us is free, and it's not. It will just take time for people to get used to the fact that there's a price for 'free,'” he said. In the days of I Love Lucy, he said, people were outraged that they had to sit through commercials, but eventually adjusted. “I know it sounds self-serving to say this, but we help app developers innovate new products that consumers like, and if they couldn't make money, they wouldn't develop new products.” Indeed, Perion has recently rebranded itself, and is focusing on providing more tools for developers, especially in the mobile space. Just this week, Perion acquired US-based mobile advertising company Grow Mobile for $17 million. Instead of toolbars, Perion now adds easily adjusted “safe search” products that allow customers to pick a search engine, including the ones it promotes. It has recently partnered with Lenovo to preinstall software on their laptops, and is moving toward creating developer tools in the mobile app space. “Internet users are not expecting a company to bundle a lot of things they didn't sign up for with their product,” said Gilad de Vries, SVP for products, marketingm and strategy at Outbrain. “Perion is a great example of a company that understood that and is actually moving away from that model.” While early on, monetizing web products and content was a free-for-all, part of what has pushed customers away from over-the-top methods is competition. “In the beginning they were trying everything under the sun–pop-ups, punch the monkeys banners, things taking over your screen, automatically- starting videos–just to squeeze another penny from the fact that you're on their page consuming the content,” de Vries said. “With choice, customers have the luxury not to go to those sites that are exploiting their attention.” Rather than adjusting to savvy users, De Vries argued, much of the development has come from Internet giants such as Google and Yahoo! changing the rules of the game. When Google, for example, updated its search algorithm to help weed out spammers and bait-clickers, companies needed to update their methods in order to stay relevant. The user experience is a more and more important part of the strategy for how to turn free websites, content, and apps into cash cows. “Companies are starting to understand that the lifeline is trust, not customers. Short-term you may earn more, but long term, if you're losing that audience and hurting their trust, they're not coming back.”

Increasingly savvy surfers spur arms race with ad companies

Dozens of Israeli companies specialize in monetizing web pages and mobile apps, finding creative ways to direct traffic and get web surfers to view, click, or buy sponsored products.

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