Harvard Prof Plans to Hit Blinkx With More Evidence of Fraud. But Who's Paying Him?
The blog post sent its stock tumbling 40%, a dive from which it has yet to recover. But since then, the post has been revised at least once as Mr. Edelman clarified a key detail which, when presented, made Blinkx look a bit less awful.
But that detail aside, Blinkx is questioning Mr. Edelman's motives. Mr. Edelman has a long history of hunting down suspicious practices in online advertising from his academic perch, but why was he so interested in the little known Blinkx?
His effort stemmed, in part, because he was paid by unnamed investors to do the research -- something he later revealed. What he won't reveal is who is paying for his damaging research on Blinkx.
The dispute, which has played out in the pages of the New York Times and the Telegraph, is showing no signs of dying down. Mr. Edelman says he's got more evidence about how "they get onto users' computers, about their effect on users' privacy, about the ways they overcharge advertisers." Blinkx is planning a lawsuit.
Mr. Edelman's initial post was rife with accusations pointing to shady behavior by Blinkx. He said the company's distributors were installing themselves via deceptive tactics; that its ads were engaged in "lead stealing" -- popping affiliate marketer websites over legitimate ecommerce sites to get paid on purchases -- that Blinkx was promising certain content to users but showing them different content.
The behavior was so ugly, it prompted Mr. Edelman to write: "If I traded in the companies I write about (I don't!), I'd be short Blinkx."
Blinkx disputed Mr. Edelman's findings and is quick to question his motives. The company provided Ad Age with an email with rebutting some of Mr. Edelman's points, but has yet to publicly post a point by point counterargument.
Blinkx had been accused of deceptive practices in the past, but this might have been the final straw. The stock plunged dramatically after Mr. Edelman's post came out, so if someone else did short the company, they would have done well for themselves.
But Mr. Edelman later needed to revise the post in a significant way. He clarified that one of the companies he said was using questionable methods to plant its browser extension on unsuspecting users' computers before delivering Blinkx ads was not owned by Blinkx (a detail he left open) but by an independent company.
"Local Weather is part of Blinkx," wrote Mr. Edelman in his original post. The blog post now reads: "Local Weather applications are powered by Blinkx and part of the Blinkx network."
The Zango dispute
Mr. Edelman said the Local Weather changes were of little importance because, whether the extension was owned by Blinkx or not, it was running a form of adware which the FTC declared its previous owner, Zango, needed to police. In a 2007 settlement with Zango, the FTC said the company needed to keep its distributors from deceptive practices, meaning that Local Weather's bad behavior would roll up to Blinkx -- which bought some of Zango's technology in 2009 -- if the settlement applied.
When asked, a Blinkx spokesman disputed the notion the company is held to Zango's FTC settlement: "Please remember that Blinkx acquired certain assets of the company (Zango) in a foreclosure sale. We had nothing to do with the company or its former practices. As a result, it is our belief that the FTC Consent Order does not apply to Blinkx."
"I would love to hear either Blinkx admit that they are bound by it, or deny that they are bound by it. And if they deny it, you might then call the FTC," said Mr. Edelman.
Blinkx told Ad Age it did call the FTC, through a lawyer, and found out it wasn't bound by Zango's settlement.
Mr. Edelman did present a strong circumstantial case that Local Weather was an independent company, and hinted he thought the company was shady:
"Tellingly, Blinkx takes considerable steps to distance itself from these deceptive practices. For example, nothing on Blinkx's site indicates that Weather Alerts is a Blinkx app. The Desktopweatheralerts.com site offers no name or address, even on its Contact Us form. Weather Alerts comes from a company called Local Weather LLC, an alter ego of Weather Notifications LLC, both of Minneapolis MN, with no stated affiliation with Blinkx. Weather Notifications' listed address is a one-bedroom one-bathroom apartment -- hardly a standard corporate office."
One problem: Mr. Edelman never called Blinkx to ask about Weather Alerts or anything else. When asked for comment on the changes, Blinkx provided the following statement: "The change is material - and it reflects just one of many factual inaccuracies and fundamental misunderstandings regarding the business that could have easily been clarified by a quick call to us."
Who's paying? And why?
This is hardly new ground for Mr. Edelman, who came under fire from Google after he accused them of search bias while a paid consultant for Microsoft.
For the record, Mr. Edelman said he doesn't feel at all bad about taking the money. "When investors call me with questions, actually they have to pay," he said. "I'm busy and they've got the money to pay, so it's just not a big deal."
As for the motivations of the investors who paid him to do the Blinkx research, Mr. Edelman says he doesn't know the root of their interest, and doesn't want to know.
"My standard approach is not to accept confidential information from anyone and that way I don't know anybody's secrets," he said. "And that is honest to God true."