The internet is the quintessential free lunch: in exchange for free software and free information, we get free viruses and free spyware. It is a high price to pay for a bargain.

But now the price of internet freedom has begun to fall: under pressure from legislators, regulators, internet civil liberties groups and Eliot Spitzer, scourge of Wall Street, internet advertisers are beginning to realise they can no longer extract such a high price for free stuff. Some of the worst offenders of the “badware” world – companies that litter our computers with annoying pop-up adverts and secret profiling software – have begun to clean up their act.

Litigation has a lot to do with that. Just last month, Mr Spitzer, New York attorney-general, sued Direct Revenue, one of the bad boys of internet advertising, producing voluminous evidence about the company and its department of the “dark arts” – part of what
Mr Spitzer alleges was an elaborate and profitable enterprise aimed at insinuating advertising spyware on to the computers of millions of Americans, often without their knowledge or consent.

Once infected with the stuff, users could not get rid of it, he alleges: even if they figured out how to uninstall it – no easy task, since the program hid on the hard drive – it would just reinstall itself when the user was not looking.

Mr Spitzer’s lawsuit is a fairy tale for the internet age: innocent netizen falls prey to cyber-villain and the techno-cops ride to the rescue. But the real story of how good is slowly triumphing over evil in the spyware world is more complicated. It involves not just cyber-police and technocrat legislators, but the ancient self-regulatory forces of the market.

It all starts with the fact that no one wants to pay for anything on the internet. But the people who make screensavers and toolbars and media players and all our other favourite cyber-toys know it costs money to give things away, so they turn to spyware companies to help pay for it. They package advertising software with all that free stuff – you cannot have one without the other. And the “adware” (spyware) that comes as part of the deal is responsible for those pesky pop-ups.

Mr Spitzer says Direct Revenue’s adware was often installed without warning users clearly about what was happening: the warning could only be accessed after negotiating a baffling series of links and legalisms. Sometimes the company engaged in “drive-by downloads”, where users got no notice and no clue as to how to undo the damage. Worst of all, the spyware sometimes reinstalled itself after being removed – the ultimate in creepy cyber-behaviour.

Or at least, that is how business was done in the bad old days, circa 2004, when the spyware crisis was at its worst. According to a study published late last year by AOL and the National Cyber Security Alliance, 80 per cent of US home computers were infected by spyware in 2004.

Since then, the adware industry has substantially changed. Direct Revenue says it has abandoned the main practices that attracted the Spitzer lawsuit: it now warns consumers clearly when they are downloading adware, and makes it easy to remove.

But the real leader of the clean adware movement is WhenU, which brought in a new chief executive in 2004 to prove that internet ads can be good, clean fun – and can help consumers rather than blighting their lives and their computers. Internet activists such as the Center for Democracy & Technology are turning up the heat on big companies whose brands end up in pop-up ads. Those companies need a legitimate alternative and WhenU aims to play that role; it is hoping that best practices make best profits.

Bill Day, the WhenU CEO, says he does not get paid unless consumers like his adverts enough to click on them. The holy grail is the really relevant one: the pop-up advert for cheaper flights on the same day to the same destination when you are booking a journey; or for the same digital camera, only cheaper than the one you have found; or for the very book you want, second-hand. Pop-up adverts do not have to be a nuisance: they can help us do what the internet does best – shop around.

This is the paradox at the heart of the internet’s future: as more and more people make more and more money there, they will be giving away more and more cool things for free, as a vehicle for lucrative advertising. That does not have to be bad news for the consumer: slowly we, the people, are taking control.

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