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Zango, the adware distributor fined $3 million (£2 million) by the US Federal Trade Commission (FTC) in 2006 for sneaking software onto people's PCs, has closed its doors after being acquired by video search engine blinx.

Zango's former chief technology officer blamed the company's demise on several factors, but put at the top of the list the very practices that got it in hot water with the FTC, as well as with security analysts who had labelled the company's software spyware.

"So why did Zango ultimately fail? [Number] 1: Zango screwed up its distribution," Ken Smith, a co-founder who stepped down from his CTO spot last summer, said in a long entry on his personal blog Sunday.

"Back in 2003-2005, we partnered with some people that we should never have partnered with," Smith admitted. "During that time period, my best estimate is that something like 4 percent of our installs during that time period were completely silent ... the result of affiliates using browser security holes to install Zango's software with no knowledge or consent by the user."

In 2006, Zango settled FTC charges that it used unfair and deceptive practices to download software to users' PCs, and agreed to pay a $3 million fine. As late as May 2008, however, noted anti-spyware researcher Ben Edelman blasted Zango for providing sexually explicit material without labelling the content as such.

In August 2008, security researcher Chris Boyd, the director of malware research for FaceTime Communications, claimed Zango profited from pirated movies, including that year's blockbuster The Dark Knight.

Zango's Smith saw it differently. The bigger problem was that the vast majority of our installs received inadequate consent: the user technically had an opportunity to decline the install, but wasn't presented with enough information to make an informed choice," he said.

He also claimed that Zango had cleaned up its act long ago. "Well before the FTC ever came knocking on our door, we were working our asses off to fix it," he argued. "It's been years since the last inappropriate Zango install, and Zango's notification and consent is by any reasonable standard better than Yahoo's, better than Microsoft's, and better than Google's.

"But it was too late: the damage had been done."

Today, Edelman agreed that Zango's practices led to its doom. "Zango could never get over its history of non-consensual and deceptive installations," he said in an email. "Pay partners to install software without user consent or through all manner of deception, and it will be hard to later convince users to offer their trust or praise."

He questioned whether Smith had his timeline right. "I'm not sure it's actually true that all the deceptive installations stopped so long ago," Edelman said.

"Having a bad reputation as an Internet company is somewhat worse than having a bad reputation in high school," Smith said. "Instead of not getting invited to the cool parties, you find yourself unable to close deals with strategic partners, which is a lot worse."

That wasn't the only reason Zango crashed and burned, Edelman countered. "Zango never offered anything sufficient to compensate users for its substantial intrusion onto users' PCs," he said. "How much would a company have to pay you to get you to let them track your browsing [every page you visit] and to show you popup ads? Maybe if they gave me free cable/DSL, but even then that probably would not be enough."

Last June, Zango laid off 68 people, about a third of its workforce, in a move Smith said was tied to the introduction of new adware platform.

Zango did not respond to a request for comment Monday.

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