By Bambi Francisco, MarketWatch
Last Update: 2:13 PM ET June 15, 2005
LAGUNA BEACH, Calif. (MarketWatch) -- Even as youthful Internet users attending a conference here were singing the praises of a site owned by Intermix Media Inc., the company's chief executive was breathing a sigh of relief.
Intermix (MIX: news, chart, profile) reached a preliminary lawsuit settlement with the office of New York Attorney General Eliot Spitzer late Tuesday, removing a huge cloud hanging over the company.
The $7.5 million settlement won't affect the company's cash position, an elated Richard Rosenblatt told MarketWatch during an interview at the conference, hosted by the investment bank Piper Jaffray.
The company set aside a reserve of $6.9 million to pay for the settlement, according to a statement it released with its fiscal fourth-quarter earnings report late Tuesday.
The report also showed that Intermix had narrowed its loss and saw quarterly sales jump 68% from a year ago, giving its shares a boost after they were cut in half in the wake of Spitzer's suit. See full story.
At the end of April, Intermix was sued by the attorney general for allegedly distributing software programs known as spyware, which sit on users' computers and deliver targeted advertisements, often without their consent.
Although the practice has infuriated privacy groups and raised the hackles of those whose PCs are victimized, it has generated revenue for many Internet search firms.
The settlement amount represented the disgorgement of global advertising sales from the allegedly improper downloads, Rosenblatt said.
"It was a matter of negotiations," he said.
While the company did not admit to any wrongdoing, Rosenblatt said he is staying away from the download business because he's focused on creating social networks around user-generated content.
"For us, it's
not our core business... But we had to put that behind us."Asked if the adware problem was as large as the half a billion to $2 billion estimated by analysts, Rosenblatt said that he wasn't certain to the extent of the problem. He also noted that it's difficult to blame anyone when adware and spyware isn't clearly defined, nor are there any hard and set rules as to what are the appropriate disclosures.
"There was no solid definition," he said. "We weren't aware of exact definitions.. It'd be great for somebody -- congress or NAI (Network Advertising Initiative) -- to outline what is sufficient download disclosure."
Rosenblatt said that he's not taking this experience lightly. He joined the NAI, a trade group focused on setting best practices for the Internet media business, and he hired a chief privacy officer.
But he did say that what he's most proud of at Intermix and its properties is that his team is meeting what Internet media needs -- new content.
Said Rosenblatt: "It's a new generation of new content."
In fact, the Internet media company's MySpace.com social network site was referred to often as one of the more popular online hangouts among a panel of young adults during a session at the conference.
Even though the focus group was a small selection of relatively savvy teenagers and one 20 year old, they were a good sample set to gauge the interest of young adults and their use of the Internet.
As the teenagers explained it, MySpace.com was a place they could generate their own content, share their favorite songs and pictures, be known, be heard, be read and network. This type of user-generated content was the idea that CEO Richard Rosenblatt had in mind when he took over the company from previous management of then eUniverse.
Another site that Intermix has started by allowing users to create their own content is Grab.com. The site is focused on family entertainment with content that's mostly user generated, he said. For instance, users rate their pets, he said. About 1.5 million votes were cast to rate pets. The buzz, of course, motivated more people to put their pictures of their pets up on the site. "It's taking content and making it social," said Rosenblatt.
There are also new services that let users type in their interests and receive a list of others who have similar interests. Asked if users received a list based on geography, Rosenblatt said the service wasn't that specific just yet.
The popularity of MySpace.com and other newer properties, like Grab.com, were part of the reason Intermix was able to post the kind of quarterly results it did.
Intermix shares rose 48 cents, or nearly 8%, to $6.58 in midday trading.
Bambi Francisco is Internet editor for MarketWatch in San Francisco.
