Targeted Advertising or Eavesdropping?

While targeted advertising certainly isn’t new, Pudding Media has its own spin. In September, the San Jose, Calif.-based startup launched a service that monitors Web-based phone calls and sends targeted ads, based on the topics discussed during the call, to the computer screens of the parties involved. While the service promises to enrich the caller experience, it also taps into a growing national concern for privacy.

Pudding Media uses speech recognition software to scan the contents of a phone call for keywords and selects relevant ads based on those words. The service enables carriers—Voice over Internet Protocol (VoIP), mobile, landlines, and Web publishers—to incorporate ad-supported calling plans into their offerings. They can also use the platform to provide related news, video clips, or photos.

The service mirrors Google’s Gmail, which scans email and places targeted ads in a sidebar by the message. The trade-off for consumers and their expectations of privacy is that Google—which hegemonically trademarked the term "content-targeted advertising"—does not charge for its service.

At DEMOfall 2007 in San Diego, Pudding Media cofounder and CEO Ariel Maislos showcased the service. While on stage, he called a colleague to discuss dinner plans. An ad then popped up on his monitor suggesting two restaurants, including Fresh[er]. "For what it’s worth," the ad noted, "Paris Hilton is a regular guest."

While Pudding Media takes a lighthearted approach to promoting the platform, the ongoing debate about reconciling privacy expectations with the value of targeted advertising is serious, and it’s gaining national attention. "There are ongoing complaints over people not being well-informed over what they’re giving up to get this advertiser- supported stuff," says Mark Cooper, director of research at the Consumer Federation of America, a Washington-based consumer rights organization. Cooper also maintains that Google’s success with Gmail does not necessarily indicate a trend that benefits users.

Pudding Media has certainly taken these concerns into account, having hired Microsoft’s former chief privacy officer in an advisory capacity. The trick was discovering what privacy meant to consumers. "Many people have trouble explaining that," says cofounder Eran Arbel. Pudding Media discovered that consumers simply don’t want enterprises to know about them. "They don’t want Google, Pudding, Yahoo!, to know what they’re searching, what their intentions are," Arbel continues. "To this extent, Pudding Media has taken privacy really to heart."

Arbel emphasizes that Pudding Media doesn’t know who its customers are when they log on. Additionally, it doesn’t send information to marketers; ads come from a preconfigured database with thousands of keywords that becomes active only when someone utters one of those words. "Nothing goes out of The Pudding," Arbel says, adding that his company’s service is "one of the most privacy-oriented technologies out there."

Some consumer advocates would love to see a blaring notice saying: Your communications will be monitored, but is that fair? Such explicit notice, emphasizing the Big Brother-ish aspects of the platform as opposed to the genuine value it might have for users, would undermine the service.

It’s also worth noting that while consumers might accept a household name like Google into their personal correspondence, it’s unknown whether they will be as accepting of a start-up like Pudding Media.

Cooper certainly has his doubts, citing studies that show a significant minority actively scrubbing cookies off their computers. "That indicates that if [people] know and have the means, they probably would opt out of having their calls monitored," he says. "They would opt out of having ads pop up."

The issue has become so complicated that the U.S. Federal Trade Commission, at the behest of consumer advocates, was due to host on November 1 and 2 a targeted advertising forum in Washington. The agency seeks a better understanding of the new practices and technologies used by enterprises and how to balance the benefits with the detriments.

"We’re actually now working on our expectation of what the right space is," Cooper says. "The process for defining this stuff has just begun. The tracking and profiling are fairly recent phenomena. This is an issue that’s being defined as we speak."

Still, the expectation of privacy in telecommunications is greater than in email. People are canny enough to realize that workplace missives are frequently monitored and even personal emails never fully vanish from a server. The same cannot be said for telephone communications.

Arbel disagrees. "This is going to take time for the public to understand that this is pretty much the same," he says, but ultimately concedes: "Time will tell."