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Wednesday, June 7, 2006 - Page updated at 12:00 AM

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Merger to expand adware "library"

Seattle Times technology reporter

Bellevue-based 180solutions, which makes software commonly known as adware, has acquired Hotbar of New York for an undisclosed amount of money. As part of the announcement, 180solutions will be renamed after its consumer brand: Zango.

Adware is an application that users download to their computer to get free content. The application monitors what they are doing online to deliver relevant advertising. In the past, Zango and other companies have been lumped together with spyware, which works similarly, but is typically installed on a computer without permission.

180solutions declined to say how much it paid for Hotbar, which distributes electronic wallpaper, emoticons and other content by having users install a toolbar in their browser or e-mail application.

Zango said it will acquire 83 of the company's 140 employees. Roughly 20 people have been laid off from Hotbar's New York and Israeli offices, and the rest will remain employed at a company that Hotbar Chief Executive Oren Dobronsky is operating.

None of Zango's 150 employees is expected to be affected, said York Baur, Zango's executive vice president.

The merger is not about cost savings, Baur said, but "about growth and momentum. Together, we have a wonderful library of things we can monetize through advertising. What they do adds diversity and strength and skill to that."

Together, the two companies will be able to offer more than 100,000 pieces of free content to a base of more than 30 million users, Baur said. In addition, he said about 150,000 people sign up for the applications each day.

"We regard [merger and acquisition] activity as a key part of our growth strategy," Baur said.

"We're always and will continue to be on the lookout for good combination."

David Card, an analyst at Jupiter Research, said that, with the merger, Zango likely will be one of the largest adware providers.

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He said Claria, formerly known as The Gator Corp., also has a large base of users.

Card said the industry has made progress in cleaning up its reputation to create a business valuable to advertisers and fairly upfront with consumers.

"There's a lot of baggage they have to overcome, for a lot of companies [advertisers] to be comfortable with the model, but I have heard positive things," he said. Among other things, adware had been considered a nuisance and users often did not know that they had agreed to download the software or found it difficult to uninstall.

A private company, Zango said it had $50 million in revenue in 2004, the most recent year it released figures and that it has been profitable for 16 quarters.

Baur said the merger demonstrates that the business model is working, and that it can be translated into new areas.

"Through this merger, we are on path to continue expanding into other forms of content. There's no reason why there shouldn't be millions of items monetized by Zango," he said.

Tricia Duryee: 206-464-3283 or tduryee@seattletimes.com

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