Blinkx shares take a tumble after Harvard blog accusations

One of Britain's biggest technology success stories, Blinkx, saw its shares collapse by as much as 50 per cent yesterday after it was accused by a Harvard professor of "sneaking on to users' computers and defrauding advertisers".

In a blog post on his website, Benjamin Edelman, an associate professor at Harvard Business School, said he had "grave doubts" about the video advertising firm, due to the alleged "long-standing practices" of two businesses acquired by Blinkx. He claimed that Zango and AdOn are using "deceptive" techniques to install third-party advertising software on people's computers, which then target the user with unwanted pop-up ads.

He alleged that its "pop-ups perpetrate various advertising fraud, most notably 'lead stealing'" – which forces online retailers to pay commission on sales not generated by the pop-ups.

Mr Edelman also claimed that the business inflated its traffic by "forcing users to visit the Blinkx site" and questioned the quality of online traffic generated by portions of the business.

"I would not be surprised to see outsized short-term profits in adware, forced-visit traffic, and other black-hat practices of the sort used by some of the companies Blinkx has acquired," Mr Edelman said.

Blinkx, founded in Cambridge in 2004 but now headquartered in San Francisco, had a valuation of $1.2bn (£728m) at its height. The company connects advertisers to online viewers and is based on the world's most advanced video engine, based on technology conceived at Cambridge University".

It has media partnerships with ABC, NBC, Condé Nast and Bloomberg. The company reported half-year revenue of $112m in November, up 36 per cent year on year, while pre-tax profits jumped 335 per cent to $10.7m.

Shares in the AIM-listed company collapsed yesterday, knocking as much as £400m off the company's value, but recovered slightly after a note from Blinkx's joint house broker, Citigroup, called the sell-off a "significant over-reaction".

The broker said: "This is a company where general levels of understanding (and therefore comfort in) the business model are low. Our own view is that Blinkx's business model is no more unusual than that of many ad tech companies."

Blinkx said it "strongly refutes the assertions made and conclusions drawn in the blog" and stressed that "there has been no material change to the operational and financial performance or outlook for the business".

The company also claimed that Mr Edelman was "paid by unnamed third parties" to write the article. Mr Edelman told The Independent that he was paid to research Blinkx by a client, but was not paid to write his article, adding that he "negotiated for and received the right to tell others too. Having figured this out, I didn't want to keep it secret".

Blinkx's founder and current chief strategy officer Suranga Chandratillake was earlier this month appointed a partner at the London-based venture capital firm Balderton Capital. Balderton, whose previous investments include LoveFilm and Betfair, declined to comment on the allegations.

Blinkx was originally spun out of Autonomy, an enterprise software firm where Mr Chandratillake was chief technology officer.

Blinkx closed down 56.75p at 118.75p.

Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific