Guerilla Ads on Mobiles Harm Innovation, Security Provider Says

Innovation in mobile applications may be hampered by clandestine advertising software that harms consumer trust, according to Lookout Inc., which provides security systems for networks and electronic devices.

Some of the software triggers ads that appear outside the application and may change browser settings, or access and pass on personal information including e-mail addresses or locations, said Kevin Mahaffey, co-founder and chief technology officer of the San Francisco-based company. About 1 in 20 free apps come with such software, equating to at least 80 million downloads to date, he said, citing a study published today.

Ads are “extremely important to the mobile ecosystem because they allow app developers to make money even with free applications,” thus promoting innovation, Mahaffey said in a phone interview on July 5. “There is a danger that if we don’t act as a mobile ecosystem to solve the question of what’s acceptable and what’s good and bad, we could end up in a situation where people don’t trust mobile apps.”

With mobile advertising growing as more consumers opt for Internet-capable smartphones, protecting privacy will be the focus of a U.S. Department of Commerce forum on July 12 in Washington. While mobile platforms aren’t as plagued by “adware” as desktop computers, the incentives for programmers and advertising sponsors are similar, said Jules Polonetsky, director of the Future of Privacy Forum.

“People hated pop-ups, but they worked and the industry became addicted to it, and although everyone knew that it was bad for user experience everyone was doing it,” said Polonetsky, formerly a privacy executive at America Online Inc. and consumer affairs commissioner for former New York Mayor Rudy Giuliani.

Responsible Practices

“It took the technology of pop-up blocker to push that back,” he said. “There needs to be additional guidance to prompt the market in the right direction.” The Future of Privacy Forum is an industry-sponsored group in the U.S. capital that favors “responsible data practices,” according to its website.

Mobile advertising network Jumptap Inc., a rival to Google Inc. (GOOG), said last week it raised $27.5 million and is eyeing an initial public offering after revenue grew 60 percent. Bank of America Merrill Lynch predicts the mobile advertising market will surge to $18.3 billion in 2015, from $3.6 billion in 2011.

Lookout has proposed guidelines for ad networks, including making privacy policies transparent to users, having opt-outs and linking ads to the application they were downloaded with.

To contact the reporter on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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