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
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Arts and Entertainment
This weekend's 'Big Hero 6' by Disney Animation Studios
arts + ents
News
i100
News
Budapest, 1989. Sleepware and panties.
newsDavid Hlynsky's images of Soviet Union shop windows shine a light on our consumerist culture
Arts and Entertainment
Eleanor Catton has hit back after being accused of 'treachery' for criticising the government.
books
News
In humans, the ability to regulate the expression of genes through thoughts alone could open up an entirely new avenue for medicine.
science
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: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee