Yahoo: Mistrust Is Popping Up


By Ben Elgin Yahoo! (YHOO) has been taking a beating in the blogosphere lately. On Sept. 6 came the revelation that it provided information that helped Beijing jail a journalist. Days earlier, a report said Yahoo was actively supporting the companies that spawn pop-up ads. Around the same time, bloggers started griping about new Yahoo software downloads that change the preferences on users' PCs.

Pretty soon, even a Yahoo employee was blogging about it. In early September, Yahoo engineer Jeremy D. Zawodny sounded off on his blog: "Do I like those [software installation] practices? Hell no. It's insulting and disrespectful."

Looks like Yahoo chief Terry S. Semel faces a potential problem. Sure, no one issue will turn off Yahoo users in droves. But add them up, and Yahoo risks tarnishing its reputation as a trustworthy Net player, even as rival Google (GOOG) holds itself up as a paragon of consumer friendliness. Trust is critical in the online world, where consumers are asked to hand over their most sensitive information and communications. Warns Forrester Research (FORR) analyst Charlene Li: "Enough of these pinpricks could hurt Yahoo's image."

NO CONSENT GRANTED. Yahoo Chief Operating Officer Daniel L. Rosensweig insists the company has the highest standards. "Users can put their trust in us because that is what we're built on," he says.

The most damning gripe about Yahoo concerns its involvement in the controversial adware biz. Adware is downloaded onto PCs -- often without a user's consent -- and spawns pop-ups based on where she goes online. Yahoo has been criticized for cutting deals with adware companies wherein ads by Yahoo clients appear in pop-ups; Yahoo then splits the revenue with the adware outfits.

The controversy flared anew on Aug. 31, when a report indicated that Yahoo continues to work closely with these companies. The report's author, Ben Edelman, an adware researcher and consultant, also noted that Yahoo is struggling to control which adware outfits showcase its clients' ads. His research shows Yahoo's ads are more likely to surface in unwanted pop-ups than were Google's. That's the last thing an image-conscious Net outfit needs.

SEARCH SURPRISES. To Yahoo's credit, it is leading industrywide discussions aimed at devising new practices for the adware companies. Yahoo also insists it does business only with adware companies that adhere to best practices and that its ongoing involvement in the industry has already boosted standards.

Since Yahoo says it's serious about reforming the adware industry, why not take the lead in another much-griped-about area: the widespread practice of forcing users to opt out from software downloads they didn't want in the first place. The company was blasted earlier this month when bloggers discovered that users downloading its instant messenger received other Yahoo products or found their default search pages changed to Yahoo if they didn't specifically opt out of those choices.

Yes, Yahoo is far from alone in this. And it bests rivals by offering a summary screen before the installation is complete, clearly outlining what the user is getting. Still, why not go yet a step further and be the only major Internet company to dump those pre-checked boxes? Allow users to opt in to things they do want rather than forcing them to opt out of those they don't. In the short term, Yahoo may lose some visitors, but it would earn goodwill -- and potentially force other companies to change their practices, too.

WHEN IN CHINA... While Yahoo has some control over adware and downloads, it can do little about the flap in China. All companies operating there face the same stark choice: Cooperate with the authorities or exit the world's fastest-growing market. Providing information leading to the conviction of a journalist horrifies human rights activists, but it's unlikely that Yahoo's biggest rival would do anything different. As a Google spokesperson admitted: "We adhere to the laws of the countries in which we operate."

Still, Yahoo's black eye in China probably won't be the last. All the more reason to keep its reputation spick-and-span everywhere else.

Elgin is a correspondent in BusinessWeek's Silicon Valley bureau


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