Advertising software company Direct Revenue will bundle its product with the Kazaa peer-to-peer client, according to a statement posted on the Direct Revenue Web site.

Direct Revenue said it will offer the Kazaa P2P technology as a free software download to consumers who agree to view "a small number of relevant advertisements per day."

The statement, which was released without fanfare last week, is in line with Direct Revenue's declaration on Sept. 27 that it will stop distributing its software through affiliate Web sites and focus on distribution via advertising-supported software.

The company supplied examples of notification screens that Kazaa users will have to view prior to installing the P2P software.

Under a heading "What you agree to install," users are informed that Kazaa is a free download supported by advertising from a number of adware applications, including Direct Revenue's The Best Offers.

In a separate step, users must also click to acknowledge that they have read and agreed to the Best Offers Privacy Statement and License Agreement, which states that the software "will collect information about Web sites you access and will use that information to display ads [such as pop-ups, search results] on your computer while you surf the Web."

Direct Revenue posted the statement about its arrangement with Kazaa last week, but kept quiet about the deal at the insistence of Kazaa's maker, Sharman Networks, which faces lawsuits in Australia and the United States over its links to illegal file sharing using its technology, according to a source who asked to remain anonymous because of confidentiality concerns.

Direct Revenue has been castigated by consumer advocates such as Ben Edelman, a Harvard University Law School student and advertising software industry gadfly.

Edelman has frequently flagged what he claims are suspect bundling arrangements, and inadequate disclosure and installation practices, particularly from Web site operators who are part of Web site affiliate networks and are paid per installation.

On Tuesday, Direct Revenue said it will stop using affiliate networks and rely exclusively on bundling arrangements with "free advertising-supported software" to promote its software in the future.

Read more here about Direct Revenue dumping its affiliate networks.

In an e-mail to its distribution partners, the company said that it lost faith in its ability to track the disclosure and consent practices used to install Direct Revenue software from affiliate Web sites.

"Direct Revenue has had a real problem with stealth installs, and this looks like a move in the right direction," said Alex Eckelberry, President of Sunbelt Software Inc., an anti-spyware software vendor.

While it will take time to see how the new arrangement works out, Eckelberry said that Direct Revenue's bundling arrangement with Sharman puts the company in line with competitors like WhenU Software Inc.

It appears that DR is trying to go more toward the WhenU model—which distributes its advertising software in selected bundles with a small number of third-party companies and does not use third party affiliate networks.

Ari Schwartz, of the CDT (Center for Democracy and Technology), said Direct Revenue executives did not mention the deal with Sharman in a recent conversation they had, but said that they would distribute the Best Offers software mostly through new software products, and that the company was investing in research and development.

The Kazaa relationship "makes more sense," Schwartz said.

Schwartz, who heads up the CDT's Anti-Spyware Coalition, said that Direct Revenue is improving its practices.

But the company, which claims 20 million users, still needs to decide how it will handle those Direct Revenue installations that may have happened without adequate consent from users.

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