Is Microsoft Eyeing Claria?

Software giant Microsoft is reportedly discussing a possible acquisition of adware firm Claria. That’s according to separate articles in The New York Times and The Wall Street Journal that cite unnamed sources.

Though Claria’s capabilities in behavioral targeting have become increasingly attractive to agencies, both reports said concerns over Claria’s reputation could scuttle a possible purchase. Claria, and the adware space as a whole, has been dogged by privacy concerns, worries about consumer acceptance of pop-up ads, and myriad lawsuits.

Though Claria has taken steps to clean up its act — changing its name, hiring a well-regarded chief privacy officer, reducing its dependence on the pop-up format, and settling most of the lawsuits against it — concerns about its legitimacy linger.

Buying Claria would allow Microsoft to leverage its behavioral marketing technology across its own content sites, such as MSN. It would also let Microsoft sell behaviorally targeted ads that would be delivered to Claria’s 40 million users.

Despite its woes, Claria’s financial position would appear to be strong. Before withdrawing its plans for an initial public offering late last year, the company revealed it posted a $35 million profit on $90 million in revenue in 2003. The Times report valued the deal at around $500 million.

Neither Microsoft nor Claria would comment on possible acquisition talks.