Unfair Competition and Abuse of Power

Last summer, rumors were abound that an employee of Tucows was using Tucows statistical information in order to determine which products produced the highest return on investment, with the intent to clone them and create competitive products. While not illegal, it is definitely questionable from an ethical standpoint. No real proof existed, so what can be said. It was nothing more than a rumor.

An article cannot be written based on rumors. What facts do we know? According to the State of Michigan corporate records Alto Software, Inc. is owned by a Tucows employee. Alto Software's two products Alto Block All and Alto Memory Booster were posted on Tucows. Both products have high download counts and held top download positions from November 2003 to February 2004. In order for Alto Software to maintain top positions throughout the holiday season they would had to have spent thousands of dollars in advertising dollars.

Abuse of Power
Abuse of power sounds pretty absolute, unfortunately that line isn't as clear as one would think. It appears that the ad spots held by Alto Software were provided free of charge. Free advertising, while possibly an employment perk, and not of itself bad, resulted in the cost per click to increase significantly for other developers in those categories. In order for Alto Software to maintain their top position, the cost per click was raised from $ .04 per click to more than $ .40 per click from November to January. Alto Software increased the cost per click, in order to maintain the top position, but were never required to pay for the clicks. This forced other developers wishing to remain in a top listing to pay significantly more for each click. The handful of developers bidding on keywords and categories were forced to spend significantly more money each month, in order to maintain their position and compete against Alto Software's products.

A software promotion company (softwarepromoting.com) that appears to be a subdivision of Alto Software, guaranteed listings on Tucows.com. Softwarepromoting.com's website even went so far to say, that software promoted using their services was exempt from the Tucows removal process. Competing submission services were unable to provide these guarantees. The legitimacy of Alto's promotion service also requires close scrutiny.

Alto Software clearly had an unfair advantage over their competitors. It would appear that a Tucows employee personally profited from their position at Tucows. There is a fine line between breaking ethical rules and using your unique position to make a profit. It appears that line was clearly crossed.

Lessons Learned
Developers need to track their advertising dollars and measure their return on investments. They should be aware of any rapid increases in spending. Developers, need to know who their competitors are.

The developers affected by this are in a very narrow market but it really could have happened to anyone.

Challenge
Apparently the upper-management of Tucows was unaware of what was occurring, while ignorance is not an excuse, it appears that Tucows has taken the first steps to resolve the problem. The employee is no longer employed by Tucows. As one of the developers I spoke to said "Tucows is bending over backwards to make things right." I personally hope that this is the case. I encourage Tucows to make an effort to reach out to all the developers that were effected, whether they are aware of the problem or not. The loss suffered by these developers is difficult to measure, not only did they pay excessive amounts for advertising, but they also lost a portion of sales to a competitor with an unfair advantage, during the holiday season.

Here is my challenge to Tucows, reachout to the smaller developers as well as those with deep pockets and make things right! The second part of the challenge is to put strict policies in place to prevent this from occurring the future.

The challenge to developers is to stay alert, and be aware that this can happen. There are a number of download sites owned by developers, the disclosure is usually obvious, developers need to pay attention. Spending advertising dollars on a competitor's site is probably not a good business decision. Clearly Tucows is held to a higher standard because of its stature in the industry. The fact that Tucows is a publicly traded company only emphasizes their accountability. It was not to Tucows benefit, for this to occur and it is likely that they will be taking radical steps to ensure that it does not happen again. If handled correctly, Tucows may become one of the safer places to advertise in the future.

About the Author

About the Author:
Sharon Housley manages marketing for NotePage, Inc. http://www.notepage.net a company specializing in alphanumeric paging, SMS and wireless messaging software solutions. Other sites by Sharon can be found at http://www.softwaremarketingresource.com , and http://www.small-business-software.net