One of the few financial bright spots for the newspaper industry this year has been the quick growth of online display advertising that is targeted to users based on what they read.
Lem Lloyd, who directs the Yahoo Newspaper Consortium
, by far the biggest and most lucrative of these advertising efforts, told me in a phone interview that certain changes would be crippling, such as requiring users to opt-in for customized ads rather than having the right to opt out.
“What we are seeing is that about 80 percent or more [of sales with partnering newspapers] are turning out to be behaviorally targeted,” Lloyd said. Flip to an opt-in model, he continued, “and you would look at a lot of companies not getting their revenue.” That, in turn, would hasten a switch to paid content or reduce the amount of content on news sites.
The consortium’s platform makes it easy to upload advertising, and the targeting supports higher rates. Some 60,000-circulation papers have taken advantage of theses features to sell $2 million of the consortium ads in two weeks, and some metros are getting a multimillion dollar boost, according to Lloyd.
Anne Toth, Yahoo’s head of privacy for 11 years, testified that the company considers clarity about privacy part of good customer relations [PDF]
, and that the big companies compete by steadily improving their privacy practices. Toth told me in an interview that most users accept that advertising supports the free content they enjoy and that they prefer ads related to their interests rather than generic pitches.
Six weeks after the congressional hearing, David Vladeck, head of the Federal Trade Commission’s Bureau of Consumer Protection, signaled that he intends to be more proactive in overseeing online ads. He told The New York Times that self-regulation isn’t working
and that some of the online tracking is “Orwellian.” He added that he doesn’t believe most consumers read privacy policies or understand them if they do.
Lloyd and Toth confirmed that my impressions reflect the situation at most sites. Yahoo and several interactive advertising associations are scrambling to get their newspaper partners and other clients to adopt newly developed, model privacy disclosures. But that’s a work in progress.
Even vigorous privacy advocates say they are not out to sabotage Internet advertising. But Toth said that the bill being readied in the House seems likely to distinguish between third-party use (such as Yahoo placements on newspaper sites) and first-party disclosure (to visitors to Yahoo’s own pages). That distinction could be troublesome for the consortium and similar efforts such as Google’s contextual AdSense product
Privacy issues resonate with voters. However, I suspect that Congress and regulators will not enact draconian restrictions of behavioral targeting — if only, as a BusinessWeek analysis pointed out
, the big Web companies have the clout to block highly restrictive rules.
I have also spoken twice to FTC staffers who are planning a series of workshops on the news media
starting December 1 and 2. They, like a number of sympathetic members of Congress, are sensitive to the industry’s business crisis. Shutting off a revenue lifeline such as behavioral ads wouldn’t help at all.
Thanks to Jay Hamilton, a Duke University professor and author of “All the News That’s Fit to Sell,” for a tip on this issue.