The parent company of infidelity dating site Ashley Madison, hit by a devastating hack last year, is now the target of a US Federal Trade Commission (FTC) investigation, the new executives seeking to revive its credibility said.
The breach, which exposed the personal details of millions who signed up for the site with the slogan “Life is short. Have an affair,” cost Avid Life Media more than one-quarter of its revenue, chief executive Rob Segal and president James Millership said in an interview, the first by any senior executive since the incident.
“We are profoundly sorry,” Segal said, adding that more could perhaps have been spent on security.
The two executives, hired in April, said the closely held company is spending millions to improve security and looking at payment options that offer more privacy.
However, it faces a mountain of problems, including US and Canadian class action lawsuits filed on behalf of customers whose personal information was posted online, and allegations that it used fake profiles to manipulate customers.
The site’s male-to-female user ratio is five to one, the executives said.
An Ernst & Young report commissioned by Avid and shared with Reuters confirmed that Avid used computer programs, dubbed fembots, that impersonated real women, striking up conversations with paying male customers.
Avid shut down the fake profiles in the US, Canada and Australia in 2014, and by late last year in the rest of the world, but some US users had message exchanges with foreign fembots until late last year, according to the report.
Another dating site paid US$616,165 in redress for similar practices in an October 2014 settlement with the FTC.
Avid said it does not know the focus of its own FTC investigation.
Asked about the fembot messages sent to US customers, Segal said: “That’s a part of the ongoing process that we’re going through... It’s with the FTC right now.”
An FTC spokesman declined to comment.
Ashley Madison got plenty of media attention before the hack, taunting and celebrating politicians and celebrities accused of cheating.
Former chief executive Noel Biderman styled himself the “king of infidelity” and boasted of a US$1 billion valuation.
Segal said that the company is not worth that much and said Avid still does not know how the attack happened or who was responsible.
It has hired cybersecurity experts at Deloitte, and expects to reach the first level of Payment Card Industry compliance, an industry standard, by September.
“We had to basically reinvent their security posture,” said Robert Masse, who leads Deloitte’s incident response team.
His team, hired by the company in late September last year, found simple backdoors in Avid Life’s Linux-based servers.
Avid Life is on track to record about US$80 million in revenue this year, with margin on earnings before interest, taxation, depreciation and amortization of between 35 and 40 percent, Millership said.
Its revenue last year was US$109 million, with a 49 percent margin.
The executives said the Ashley Madison name would endure, though they are moving some focus away from infidelity.
“We certainly feel that the Ashley Madison brand can be repositioned,” Segal said, promising “a vastly different approach to how she is marketed.”
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