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New York, Connecticut May Ban Targeted Web Advertising

Ads help keep much of the Web's content free

Steven Titch
August 20, 2008

One of the great things about the World Wide Web is that much of the content is free. If you are a regular Web user, chances are that you used your Internet connection today to get something that only a few years back would have meant an out-of-pocket cost for you.

A trip to the news rack once would have set you back at least two quarters. Now you can read articles from not just about any newspaper in the U.S., but around the world.

Hulu.com delivers free movies. Network TV Web sites, like ABC.com or NBC.com, let you catch up on past television episodes of Lost, Heroes and The Office. Why rent the DVDs?

For pure utility, Google and MapQuest provide up-to-date local street maps and turn-by-turn directions, replacing those bulky foldout maps, which, at a couple of bucks a shot, always seemed to lack pertinent details like street names and cul de sacs.

Of course Web content isn't really free. Most of us pay a connection fee. And someone's bearing the cost of creating, storing and delivering all that valuable information. In most cases it is advertisers. And given the wealth of content we can get on the web, combined with early doubts about the viability of Web advertising as a business model, it's turning out to work quite well.

But recent legislative moves in the name of consumer protection threaten to end this consumer-business win-win. Earlier this year, New York State Assemblyman Richard Brodsky (D-Greenburgh-Mt. Pleasant) proposed a bill to outlaw the use of consumers' Web browser information to transmit and display (or "serve," as its called in Web circles) a specific advertisement based on that data. In Connecticut, the state assembly's General Law Committee has also introduced a bill to prohibit the practice, known as targeted Web advertising.

One of the concerns for consumers and Internet companies is that, given the borderless nature of the web, if a single state bans targeted advertisements it would amount to a total ban in many ways. Ad servers have no way of verifying where a computer is located. In order to assure they were compliant with a New York or Connecticut law, ad delivery companies would have to end targeting all together.

For all that politicians love to talk about Internet innovation, every time the Internet delivers something truly innovative, their first reaction is to ban it. It happened with Internet auto sales, wine retailing, poker, auctions and ticket sales. Now it's happening with online advertising business models.

Targeted Web advertising replaces an earlier advertising model that mimicked print ads. An advertiser paid for a "banner" or "button" that the publisher would place on its site, the same way an advertiser would buy a page in a magazine or newspaper. It was a two-party deal between the advertiser and web-based content provider.

Targeted advertising has only emerged in the last few years, but its growth coincided with the explosion of free media on the web. Third-party companies, including DoubleClick, 24/7 Media, Flycast and AdSmart now broker ad placement between advertisers and the millions of ad-supported sites that have exploded across the Internet.

Many would agree that at first blush targeted advertisements, pulling data from your browser, sounds a little invasive. But most fears of Big Brother dissipate once the process is fully understood.

It works like this: When you visit a Web site that works with one of these display ad providers, the site places a small data object called a tracking cookie, in your browser. A cookie is not spyware. Nor does it disrupt or change your PC operation in any way. Then, when you visit another client site, the cookie correlates your previous Web surfing patterns, reaches into a database of ads and chooses one that is based the themes of the sites you've visited.

That's why if you spend a half-hour searching for airfares on Expedia, Orbitz and Priceline, then go over to WashingtonPost.com, you might see a banner ad from the Virginia Tourism Authority.

The theory is that by serving users ads that are based on apparent interests, they are more likely to "clickthrough" - actually click on the ad. Since most advertisers compensate content providers on the basis of the number of clickthroughs, the hope is that more revenue can be generated by offering an ad for a product or service in which the user might actually be interested, as opposed to something random. And remember, advertising revenue allows the site to provide its content or service for free. Everybody benefits.

Yet lawmakers like Brodsky, out of a visceral and misguided reaction to the way the application works, believe that targeted ads are nothing short of criminal invasion of privacy. But there's a simple way to get rid of targeted ads that doesn't require the government or new legislation - with two or three mouse clicks, you can turn cookies off.

(Explorer users, look in the "Tools" pulldown menu, then click on the "Privacy" tab and make your choice. Firefox users, simply use the Tools pulldown and click "clear private data." There, cookies gone. No muss, no fuss.)

Browsers even let you elect to accept cookies from some sites while blocking cookies from others.

Targeted Web ads can be understood as an exercise in statistical correlation. It's a well-known marketing technique-if someone shows interest A, there's a good chance they might buy B.

Some complain that if you turn off cookies, Web browsing becomes more cumbersome. For instance, weather-related sites might require you to re-enter your zip code each time you visit. Map sites might not recall your frequent trips or your starting address.

It echoes the 'we-want-it-both-ways' whine we hear whenever legislators discuss regulating supermarket loyalty cards. The grocery store cards offer consumers discounts in exchange for tracking their purchases. Some feel this is too intrusive on their shopping habits. Fair enough. No one is forcing anyone to sign up for a card. But at the same time, lawmakers protest that some are being denied the discounts available to those who sign-up for the cards.

Loyalty cards and Web cookies offer a similar deal: If you allow me to collect some data about you so I can improve my business, I'll give you something back. To demand food discounts without shopping data, or a universe of free Web content without a means for optimal ad placement, replaces a voluntary commercial arrangement with a coercive demand. Unfortunately that's frequently what so-called consumer protection legislation does. Brodsky's bill is no different.

The New York and Connecticut bills are all the more egregious because targeted Web advertising works and there has been no demonstration of consumer harm. Consumers benefit from the free content and applications they enjoy, plus the delivery of advertisements for products and services they actually might want. Advertisers reach more customers. Web content providers do more business. Nothing can be more foolish than to make it illegal.



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