#10: Online Advertising Rolls with the Punches

This has been a dramatic couple of weeks for online advertising firms as lawmakers are starting to crack down on the online advertising aggressive tactics to mine user data, including companies such as Google, Yahoo, and Microsoft. Starting with states like New York and Connecticut, lawmakers are restricting the type of information that companies are allowed to glean from user's clicks and profiles on the Web. Reports the New York Times on March 20, 2008:

“A law like this essentially takes some of the gold away from marketers,” said Joseph Turow, a professor at the Annenberg School for Communication at the University of Pennsylvania. “But it’s the right thing to do. Consumers have no idea how much information is being collected about them, and the advertising industry should have to deal with that.”



Phorm meanwhile claims fo have a complete Open Internet Exchange (OIE) solution that manages to create a customer profile while protecting the security and privacy of the individual. Reports the New York Times (March 20, 2008):

"Phorm says its technology protects users’ privacy by creating a random number that is associated with a person’s Web surfing patterns, rather than using a person’s name or other information. Phorm puts a cookie, a small bit of computer code, on a person’s computer to tie his or her Web-surfing to the random number and then saves only that number in advertising categories like types of cars or clothing."

Google responded in kind, with a new tactic that more or less places a search window within a company's internal search such that the user ends up seeing Google ads from potentially - likely - competing companies. According to the New York Times (March 24, 2008):

"Analysts generally praise the feature as helping users save steps, but for Web publishers and retailers, there are trade-offs. While the service could help increase traffic, some users could be siphoned away as Google uses the prominence of the brands to sell ads, typically to competing companies.

“Google is showing a level of aggressiveness with this that’s just not needed,” said Alan Rimm-Kaufman, a former executive with the electronics retailer Crutchfield who is now an Internet consultant. Google’s aggressiveness, Mr. Rimm-Kaufman said, ignores a user’s desire to reach a specific destination and it costs those Web sites visitors."

Meanwhile, AOL bought out social network site Bebo, which has a large presence in the UK, for $850 million and Mashable finds it interesting that American Online should take on such a strategy outside of the United States of America. And the New York Times (March 19, 2008) reports that Yahoo and Microsoft may be entering a kind of gracious period of negotiations which resume this week, yet Yahoo released a 'rosy' forecast for the next year's revenue and profit growth ... while Yahoo's stock price is at $27 per share, below the $31 per share offer.

Back in May 2007 when Microsoft made by far the largest buyout in its history of $6 billion for aQuantive for the rather generous sum of $66.50 per share when their stock was at only $35.37 per share. This is nearly twice the amount Google paid for competitor DoubleClick which recently got clearance from the EU to go ahead with the buyout. To complement its aQuantive buyout, Microsoft bought out ad management and consultancy firm Rapt on March 14, 2008.

With all of the activity around online advertising and the connections to social networking sites and privacy issues, it will be interesting to see if this can hold out, or if we might just move to a mini-subscription model for traditionally 'free' online services -- including social network sites, widgets, email, and more ... I think I would be willing to pay some dollars per month to assure privacy, security, and the services that I need -- clutter free with only permitted advertising (perhaps with deductions for some advertising from the core per month bundled service fees).