SMALL PUBLISHERS UNITE!
YOU HAVE NOTHING TO SAVE BUT YOUR BUSINESS

If you are a Web publisher earning less than $1 million annually in advertising revenue and with five or fewer employees, you can help save the ad-supported Internet. I urge you to join the Interactive Advertising Bureau and become part of the small business army we are mobilizing to stop politicians from unfairly and inappropriately regulating digital advertising.

The threat is very real. As I have outlined in previous postings, forces arrayed in Washington and multiple state capitals are specifically targeting the business infrastructure that enables small Web sites to support themselves through advertising sales. Although these advocacy groups have provided no evidence of public harm, their efforts have resulted in a flurry of regulatory proposals which, if enacted, would severely hinder the ability of small publishers to support themselves with advertising sales, and impair the ability of small businesses to use interactive advertising to market themselves.

I believe these proposals have received little attention from marketers, media and publishers because they have been hidden on legislative calendars in Albany, Hartford, and Springfield, or been negotiated behind closed doors in Washington, away from our ecosystem's business leaders. Moreover, because the proposals state that they seek to control "behavioral marketing" or "third party networks" or "online preference marketing," publishers that do not engage in such practices or with such practitioners believe they are safe.

But in fact, these proposals are so broad, they will put virtually all interactive advertising practices -- and even many mainstream marketing practices -- under a strict regulatory regime. Business leaders need to start paying attention now, or the underpinnings of the "free" -- which is to say ad-supported -- Internet will come undone.

Undermining Advertising Research

Consider a bill that has been before the New York State Assembly, which aims to curtail “online preference marketing.” It defines “online preference marketing” as “a process used by entities whereby data is typically collected over time and across web pages to determine or predict consumer characteristics or preference for use in ad delivery, including the use of non-personally identifiable information.” But employing non-identifiable data to predict consumer preferences for use in ad delivery is, in fact, the very definition of advertising research. Were the New York bill to pass, a mainstay of business development for 120 years would, for the first time, fall under a strict regulatory regime – forcing small Web publishers and their advertisers to incur legal and lobbying expenses they cannot afford, and just for New York State.

Or look carefully at Connecticut General Assembly Bill 5765. It offers the same, sweeping definition of “online preference marketing,” and goes on to say that any publisher offering it through a “third-party advertising network” must additionally give consumers the opportunity to “opt out” from receiving it. This means consumers, for the first time, would be able to force advertisers to stop providing them ads – but only if those ads are relevant to their interests! Presumably, mass-distributed “spam” advertising would still be protected.

The Connecticut bill also would allow consumers to pull non-identifying data they generate out of the aggregated databases that are commonly used in market research to improve products, services, and marketing. To put this in perspective, this is the equivalent of allowing you, me, or anyone to demand that a grocer not use our anonymous checkout-counter scanner data to determine when to restock a product.

These state bills have been tabled -- for now. But consider the Federal Trade Commission’s recommendations for self-regulatory principles for “online behavioral advertising.” The FTC has been a good partner with the interactive media and marketing industries, and has encouraged us, for the most part beneficially, to develop an effective self-regulatory mechanism to guard consumers’ legitimate interests in identity protection and data security. Yet even the FTC has succumbed to the fear-mongering of anti-business advocacy groups, and HAS offered breathtakingly broad definitions that could severely hamper the activities of small publishers and marketers.

The FTC defines “behavioral advertising” as “the tracking of a consumer’s activities online,” and would give consumers the right “to choose whether or not to have their information collected for such a purpose,” apparently even if it is anonymous and non-identifying. Yet one such “tracking activity” is the measurement of Web site audience traffic – the central measure by which advertising prices are established. Another such “tracking activity” is the measurement of advertising delivery – the core determinant of whether the publisher gets paid by the marketer for running its ads! Thus, in its recommendations for the self-regulation of what it calls “behavioral advertising,” the commission has made suggestions that would break longstanding processes essential for the management of media companies in the U.S.

The most unfortunate aspect of these proposals is that they are utterly unnecessary. The IAB and its members vigorously support the principle of consumer control over their media consumption. Indeed, consumer control is one of the fundamental reasons interactive media have grown so quickly in popularity. And consumers have all the tools they need to control all forms of data collection in online media and advertising, built into their browsers and into security packages, many of them available free online.

Small Business Boon

As I told the House of Representatives Small Business Committee in Washington earlier today, such regulations would have a disproportionately negative effect on the small publishers and small marketers that are the backbone of the interactive media and marketing ecosystem.

Because so much attention in our industry recently has focused on multi-billion-dollar consolidation battles, it's easy to assume that we lives in a land of giants. But nothing could be further from the truth. Interactive media is a dynamic field suffused with small entrepreneurs with big dreams. When you think of IAB’s 375+ members, you may conjure up the great names of the online and offline media world – Google, Yahoo, AOL, MSN, The New York Times, Time Inc., CBS, and Walt Disney among them. But the majority of our members – 61 percent – are small businesses, earning from $0 to $8 million annually in advertising revenue.

Evidence that the Internet is a small-business engine abounds. For example, research done by the consulting firm Booz & Co. for the IAB, the Association of National Advertisers, and the American Association of Advertising Agencies shows that 40 percent of IAB members’ revenues comes from local businesses.

Interactive advertising revenues totaled more than $21 billion in 2007 and were estimated at nearly $5.8 billion in the first quarter of 2008, up 18 percent over the first three months of 2007. Of that total, search is about 40 percent. And small companies' share of online ad spending in search engines is more than double the share of medium or large companies, according to the research firm Outsell, Inc.

According to the Pew Internet & American Life Project, more than 32 million American adults have used online classified ads for selling or buying. eBay -- which is both an advertising vehicle and a retail mechanism for its sellers -- says 768,000 small businesses across the U.S. use this online marketplace as their primary or secondary marketing channel. Blog networks, supported by advertising, helped would-be media moguls generate 112 million blogs worldwide; in the U.S., as of July 2006, some 12 million American adults, about 8 percent of the American population, were publishing their own blogs, which were being read by 57 million others, according to Pew.

Publishing's Long Tail

Those blogs are part of the most remarkable communications phenomenon since the invention of the printing press: the explosion of small interactive publishing businesses, untold thousands of which support themselves through advertising sales.

While many of these businesses employ direct sales forces, I pointed out at Congress yesterday that an essential aid to them has been online advertising networks consisting of hundreds, thousands, even tens of thousands of sites. These online networks are the moral equivalent of the broadcast radio and television networks with which we grew up; they have technological infrastructures that can get contextual or behavioral advertising and ad revenue to these small sites, wherever they are located.

But there’s one crucial difference: Instead of delivering the same programming – and for the most part the same ads from the same giant marketers -- at the same time across groups of local affiliates, online networks allow myriad voices to flourish, serving myriad interests and needs, in the tiniest nooks and crannies of our culture.

No one knows how many of these "long tail" publishers are in the U.S., but here’s a sample gathered by the ThinkPanmure equity research firm. The 24/7 Real Media network sells and places ads for 1,000 Web sites. The Blue Lithium Network, owned by Yahoo, reaches 119 million unique U.S. users through 1,000 publisher sites. Burst Media has 4,200 ad-supported sites in its network. Tacoda, a network acquired last year by AOL, delivers behavioral ads to half the U.S. population, across 4,500 sites. The Adbrite auction-based ad marketplace represents 19,000 Web publishers.

How diverse are these publishers? We don’t have a census of the whole, so to prepare my Congressional testimony, I asked my IAB team and some of the networks among our membership for examples of their favorite small, ad-supported publishers. Interestingly, many of them are mothers who are using interactive tools and services to develop home-based businesses around their passions. Here are a few examples:

• Baristanet.com is a community site started by three local women for the area of northern New Jersey where I grew up. Its advertisers include a local hospital, Montclair Family Dentistry, and Dial Pest Control of Roseland.
• Dooce.com is a blog started by a stay-at-home mother in Salt Lake City, who was the valedictorian of the Class of 1993 at Bartlett High School in Memphis, Tennessee. She carries ads from the Disney Vacation Club and Verizon.
• Bakeorbreak.com is run by a woman in northeast Mississippi, who subtitles her Web publication “Adventures of an Amateur Baker.” It’s filled with recipes, sells cookbooks, and carries ads for M&M’s, Perdue chicken, and Bertolli olive oil. Some of those ads are sold by Martha Stewart Living Omnimedia, an example of the growing symbiosis between small and large publishers on the Web.
  
• Here are three political sites that cover the spectrum of opinion. Many of you know Dailykos.com, the famous liberal political blog; look closely, and you’ll see that it’s supported by ads, many of them placed by the Google Adsense network, from PBS, the online t-shirt maker Café Press, and others. Latino Issues, by contrast, is a conservative Latino blog, with some ads also sold by Google. Its advertisers include the dating service LatinoAmericanCupid.com. And Confederate Yankee is an ad-supported site, via the Pajama Network, that’s a hybrid of conservative and liberal, Northeast and Southeast sentiments and values: Advertisers include Omaha Steaks and FTD, the floral company.
• Womenslacrosse.com is the central meeting place for women who participate in the oldest American sport. It’s a family business run by Founder and CEO Cathy Samaras of Annapolis, Maryland, and its advertisers include the Kaplan test preparation company, and the Bowie Baysox Class AA minor league baseball team.
• Scienceblogs.com is a collection of 90 ad-supported science sites covering fields from neurophilosophy to quantum mechanics to tetrapod zoology. Its offices are in LA, Washington, New York, London, Munich, and Shanghai, but its bloggers come from all over: Iowa, Colorado, Massachusetts, New Jersey, and Virginia, among other places. Its advertisers include PerkinElmer and Dow Chemical.
• AfricanSisters.com was formed in 1999 in Garland, Texas by a group of black women to help women of color build businesses, increase employment and build revenue. Its advertisers include the iGourmet.com “tea-of-the-month club,” Crockpot cookery, and Kmart.

IAB Thinks Small

As the IAB team surveyed the regulatory landscape this past year, it occurred to us that few regulators or legislators are aware of this small business landscape, and how interactive media and advertising have served, in essence, is its railroad: the network that enables these tiny markets to exchange value within and among themselves. So we asked our Board of Directors and then our entire membership to approve a change in our bylaws, and allow small publishers to join the IAB at an advantaged price -- $500 in annual dues, or 1/20th the minimum dues tariff we charge General Members.

I'm pleased to say our membership approved this Small Publisher Membership category by an overwhelming majority last week. So if you think small (or work with publishers who do) please let them know about our offer. (I'm equally pleased to note that when we canvassed about a dozen of our network-oriented members and asked if they would help us market this new membership to their publisher affiliates, each and every one enthusiastically answered in the affirmative.)

IAB Small Publisher Members will have business insurance and services discounts; preferential pricing for IAB events; special webinars and seminars designed to teach small publishers the contours of the advertising and marketing industries; and membership in the IAB's new Small Publishers Committee. And, of course, there is representation by the IAB in Washington and across the U.S. Like our Associate Memberships, these will not carry voting rights -- but any Small Publisher Member that grows large enough (or otherwise wants advanced participation) is free to join IAB as a General Member at the normal dues rates.

Our first signup was Tim Carter, the founder and proprietor of Askthebuilder.com in Cincinatti, Ohio. I wrote about Tim -- and his remarkable development from a self-syndicated, hand-to-mouth newspaper columnist to an online media mogul earnings hundreds of thousands of dollars in ad income a year, thanks to network-based sales -- in an earlier "clog" posting. When I asked Tim (who also testified at the House hearings yesterday) why he was joining the IAB, here's what he said:

“I decided to join the IAB for any number of reasons. Primarily, I want to be connected with an organization that’s ahead of the curve, and gives me an enormous competitive edge in the marketplace. I also enjoy being surrounded by other successful people who help me to achieve goals I set for myself. I also love the fact that the IAB represents small digital publishers like myself in Washington. I don’t have the time nor resources to be heard, but politicians need to know the facts about what is happening in the Internet world I work in. The IAB delivers a fair and balanced perspective to these lawmakers."

I'm incredibly proud to have Tim Carter as a member of the Interactive Advertising Bureau. But we should aspire to make sure that hundreds of thousands, even millions, of Tim Carters can flourish in this country, building businesses through the communications, advertising, and services available online. We can do that by assembling together, to learn each others' best audience-building and marketing practices, and to ward off the ugly and unnecessary hand of anti-Internet regulation.

Put simply, IAB WANTS YOU!. Click here and join today.

GOVERNMENT’S WAR ON THE WEB

With barely an acknowledgement of the myriad ways in which the Internet has revolutionized economic development, information access, and communications diversity, an increasingly organized coalition of anti-business groups is mobilizing to get the Government to shut it down.

And the scary thing is: They are succeeding. I’ve detailed this “break-the-Web” effort in an article in yesterday’s Huffington Post. I urge you to print it out, circulate it, and oppose the forces that would force you under. (More on that later.)

Because virtually all of you reading this are scrambling to build your businesses in the face of a looming recession, you’ve probably been too busy to notice that a drive is underway to goad the Federal and State governments to regulate the core processes and technologies that underlie the operations of the Internet. The anti-Internet coalition’s proposals hide under the cover of very real, very legitimate concerns that citizens have over their personal privacy. But rather than focus on the real privacy dangers – loose data security policies, identity theft, Government intrusions into citizens’ phone and email records – these groups aim to shut down “advertising networks” and “third party entities,” including those central to the infrastructure of interactive media and advertising.

Hatred for Consumerism

If it were merely technological ignorance that’s driving them, it would be correctable. But even a casual read shows these groups are actually opposed to the consumer economy itself. And in their hatred for consumerism, they have drafted recommendations so breathtakingly broad that, if they stand, many sites will go under. Particularly vulnerable are the small, ad-supported sites that serve niche interests – the political blogs, ethnic dot-coms, and hobbyist Web sites that depend on ad networks to sell and place their ads. (I identified some of the potential victims in a Business Week article last week: Web communities like Disaboom.com, an ad-supported site for people with disabilities, run by Dr. Glen House, himself a quadriplegic.) Right behind them are the newspaper and magazine companies that are building vertical ad networks to extend their audience reach on the Web.

Here’s a sampling of some of the proposals gaining traction in Washington and State capitals:

• The Connecticut state assembly is likely to pass a bill that labels standard interactive advertising practices “unscrupulous,” and would, for the first time in the U.S., regulate the Web by creating inflexible controls on how any third party involved in Internet advertising collects and uses anonymized data.
• A New York State legislator has introduced a bill that would allow consumers to pull non-identifying information out of aggregated databases and regulate the companies that deliver 90 percent of the ads on the Web.
• Under the implicit threat of formal regulation, the Federal Trade Commission has issued guidelines that would prevent media, agencies, and marketers from using non-identifying data to make ads more relevant and products more effective for consumers. The FTC would require Web site operators to obtain permission from users for any changes in their privacy policies – paradoxically, even if the sites have no information identifying those users or means of getting in touch with them.
• In a signed editorial, The New York Times asked the Federal government to regulate the collection of the types of demographic information marketers have routinely gathered for decades, and recommended that all online data collection, including the measurement of Web traffic, be banned unless users explicitly provide permission.

Let’s be very, very clear: The IAB is utterly committed to protecting citizens’ privacy. Peoples’ names, addresses, Social Security numbers, financial and health records, and anything that can be associated with their identity ought to be under lock and seal, if that’s what they desire. All the major interactive media companies are equally unswerving in their commitment; they know (and have expressed repeatedly) that violating consumer privacy expectations is virtually an invitation to users to flee their sites for friendlier environments. We favor (and are working with other major marketing, media, and consumer associations toward) meaningful self-regulation of consumer privacy online.

But let’s be equally clear that these anti-consumerist efforts are not about protecting peoples’ identities. They are about shutting down consumer marketing – and limiting consumer choice in communications and consumption. Jeff Chester, the frequently quoted proprietor of the Center for Digital Democracy and one of the FTC’s favorite anti-Internet witnesses, has increasingly come clean on his real motivation. He opposes practices “to get individual consumers to behave or act in ways that favor or reflect the marketer’s goals,” he wrote in his blog on April 11. He went at it again this week, writing to Business Week that the Internet is “a commercial surveillance system that rivals the NSA… all so we can be encouraged to behave favorably to some marketing message.”

Aversion to Democracy

Underlying this “break-the-Internet” activism is an aversion to democracy – a fear that, left to their own devices, Americans will make bad choices for themselves, and so must be protected from forces that might lead them toward such choices. Joseph Turow, a University of Pennsylvania communications professor and another frequent FTC witness, has gone so far as to decry the very diversity of information, entertainment, and commercial options on the Web – a repeated underpinning of his arguments in favor of Internet regulation. He has written of the “mutual cooperation and togetherness” Americans exhibited from the 1940’s through the late 1960’s, and of the "society-making media," including the "three-network universe,” that helped forge such social cohesion.

“Having the option to share the same marketplace of goods and ideas has become a central proposition of equality in the United States,” Prof. Turow argues. By contrast, he has excoriated "segment-making media" that "search out and exploit differences between consumers." "The emerging marketplace will be far more an inciter of angst over social difference than a celebration of the American ‘salad bowl,” he writes. Eyeing with suspicion what he calls “a database-driven culture of suspicion,” Prof. Turow asks, rhetorically and paternalistically: “How should public policies respond to social divisions that are bound to grow as people envy the data files that enable their peers to get seemingly better prices, seemingly better service, or both?”

Repress the urge to suggest to him that public policies may be unnecessary, given the terabytes of relevant information available online to help people locate better prices or better service. Americans, he says, aren’t up to the task of choice-making. “You may try to jump from site to site to hunt for the best buy, but that's time-consuming,” Prof. Turow argues. “And there are comparative shopping sites such as Bizrate or Nextag, but these can be tough to navigate, and companies are learning quickly how to game the system.” The only solution, he suggests, is regulation.

Prompted by this opposition to consumerism, the pro-regulation forces are attempting to redefine the concept of “identity” so it extends far beyond the boundaries with which it has typically been delimited. Mr. Chester, for example, talks about “our information” and “our data” as if online media and advertising have the inherent ability to vacuum up any and every individual’s name, rank, and serial number. If that were the case, it would be subject for worry. Indeed, interactive media companies DO need to understand that many consumers have legitimate concerns -- "creeped out" is the phrase you hear most frequently -- about what sorts of information is collected from plain-vanilla Web-surfing, whether it's merged into direct-marketing databases, and what's sold by whom to whom, and for what purposes. Concerns needs to be allayed with facts, and when issues arise that require action, we, as an industry, must address them with complete transparency.

Redefining Identity

But rather than zero in on the real issues, the anti-Internet activists are exploiting these concerns to seek regulatory approval for a new property right over any behaviors, including those that are not associated even indirectly with an individual – even behaviors which cannot be observed.

“…In today’s digital marketing era,” Mr. Chester wrote this week on his blog, “the very tiny bits of personal behavior they [interactive media companies] have identified are parts of individual human identity. Our ‘virtual’ identities may be composed of discrete and disassembled bits of information about ourselves: —what we like to read, watch, buy; our problems and concerns (such as health or our children’s education) or our political interests— but they are very much living aspects of ourselves.”

While the metaphysical nature of identity is a fascinating subject for philosophy and classics majors (myself included), such breathtaking redefinitions of established norms can make for very bad policy – and horrifying economics. If businesses are required to institute consumer opt-in’s for all measurements of consumption behavior (as Mr. Chester, The Times, and others propose), then bar-code scanners could not be used to tell retailers whether they need to restock shelves. TiVo would not be able to let the television networks know which programs viewers are avoiding. Research companies such as R.L. Polk (which for decades has used state auto-registration data to provide insights to auto manufacturers) would have to stop telling Detroit how to be competitive with Japan. Social scientists who pore through consumption data to tell us whether we’re going green or wasting energy, eating nutriciously or ingesting fat, buying domestic goods or favoring imports would have to go back to guesswork.

And, needless to say, interactive retailers would not be allowed to suggest products or services to you based on your preferences, search engines would not be allowed to serve ads to you based on your queries, and publishers would not be allowed to measure site traffic or customize their home pages to your interests. All of these activities require “behavioral targeting” and “third parties,” as they currently are defined (with astonishing breadth) in the regulatory proposals floating around Washington, Hartford, Albany, and Manhattan.

I’ve already been tarred by the anti-Internet forces as an “online ad industry lobbyist.” (I am not.) Prof. Turow has complained that I’ve made “fundamental misrepresentations” of his work. (Read his books – here’s the Amazon link again.) But let me make a few other suggestions to those in the interactive media and marketing worlds who care about the future of our industries – and the future of communications diversity:

• Read the proposed regulations, and write their sponsors to oppose their loose language, over-reaching breadth, and the harm they would impose on media companies, small businesses, consumers and citizens. In particular, send the State legislators my Business Week, Huffington Post, or Wall Street Journal articles and ask them why they are proposing far-reaching, rigid regulation rather than working with the IAB, a dozen other industry groups, and the FTC to create meaningful, effective, and less destructive self-regulation.
  
• Visit your Congressman and State legislative representatives and offer to provide a tutorial about how interactive marketing and media work – and don’t work. The best weapon against ignorance is education.
• Write your own Op-Ed Pieces! Your local newspaper and your favorite blogs are terrific places to educate the public – and dispel myths – about interactive media and advertising. They can also help all of us pick up legitimate concerns, around which we can coalesce the industry to become a force for positive change.
  
• Contribute to the IAB’s Political Action Committee. Write to our association’s one actual lobbyist, Mike Zaneis, for information. Even small contributions will help us get our message across in Washington.
• Love your consumers. Don’t do anything you’re not willing to talk proudly about in public. And make sure your privacy policies are crystal clear, written in English (or whatever the preferred language of your audience is) and posted prominently.

Why Do-Not-Track Will Not Work

I love this Op-Ed piece in Business Week on the fatal flaws of the "do-not-track" proposal for interactive advertising and marketing. "Do-not-track" was proposed by a group self-styled "consumer advocates," and was much-discussed at the Federal Trade Commission's "Town Hall" on behavioral marketing two weeks ago. The proposal was riddled with ironies, not least of which was the group's recommendation that the Government start keeping lists of people -- by name -- who don't want anonymous surfing data utilized to improve the utility of online communications.

Christopher Wolf, a litigation partner in the Washington office of the Proskauer Rose law firm and the chair of its Privacy & Data Security Practice Group, recognizes the irony -- and also the extremist nature of the proposal. Here's what he wrote in Business Week:

"This would take privacy law to a new level, where protection is given not only to private data (names, addresses, account numbers, etc.) but also to anonymous data (e.g., data collected through cookie technology), which would be legally regulated. The complexity and enforcement problems with a 'do not track' law are enormous. Advocates liken it to the 'do not call' rules that pertain to telemarketers, but only the names are similar. Compiling and applying a list of those who do not want tailored advertising will be a technological nightmare. Compliance, to the extent it can occur at all, will be costly. Ultimately, consumers will suffer through increased costs passed on to them, and opportunities for more useful consumer information will be diminished."

You have to hand it to the extremist groups. By co-opting the tenor and feel of the telemarketing "do not call" concept, they have made a complex, radical idea -- one that would dramatically curtail marketers' and media's current ability to engage in advertising, marketing research, and information and entertainment delivery -- seem simple and benign. Fortunately, the FTC seemed to recognize this at the Town Hall: Commissioners repeatedly queried the anti-consumerist advocates, "Where's the harm?," and were met not with current information, but hypotheses about the future.

The real harm, as Mr. Wolf shows, will be if access to information is shut down. Prices will rise, and consumer choice will diminish.

The Contradictions of Anti-Advertising Advocacy

“Our every move is being tabulated, tracked and sold to the highest bidder,” Jeff Chester, the executive director of a Washington anti-advertising organization called the Center for Digital Democracy, said ominously at the opening of the FTC “town hall” on online behavioral targeting.

Yikes! Really?

As I sit through this FTC presentation, I’m reminded that American consumer culture – a backbone of U.S. economic growth from the beginnings of the nation – has long been paralleled by a smaller but quite vocal anti-consumerist tradition.

The first tendency is known to all of us, and has long been recognized. Alexis de Tocqueville, writing in the early 19th century, observed that “without exception, travelers to the United States found the most striking feature of the American character to be the obsession with business and wealth.” This obsession manifested itself in the acquisition of goods – “conspicuous consumption,” the sociologist Thorstein Veblen labeled it.

Desire to Acquire

This desire to advance, continually and publicly, has been a driver of U.S. economic growth. We acquire things because it shows off our personal growth, our success, our maturity. To acquire, we strive to make more money. To serve our desire to acquire, businesses innovate. And some of that innovation aims to make people feel richer than they are. “Among a democratic population all the intellectual faculties of the workman are directed to these two objects,” Tocqueville wrote. “He strives to invent methods that may enable him not only to work better, but more quickly and more cheaply; or if he cannot succeed in that, to diminish the intrinsic quality of the thing he makes, without rendering it wholly unfit for the use for which it is intended. When none but the wealthy had watches, they were almost all very good ones; few are now made that are worth much, but everybody has one in his pocket. Thus the democratic principle not only tends to direct the human mind to the useful arts, but it induces the artisan to produce with great rapidity many imperfect commodities, and the consumer to content himself with these commodities.”

But that consumerist impulse has made other Americans, a minority, to be sure, deeply unhappy.. “We are united by what we are being sold,” the writer Naomi Klein, author of No Logo and other books critical of consumerism and the latest darling of the anti-capitalists, has said, “There is no escape.” She follows an anti-consumerist line that stretches all the way back to Thomas Jefferson’s agrarian idealism, which stood in stark contrast to the rapacious mercantilism Jefferson perceived in John Adams’s Boston.

For some reason, and for several decades, such anti-growth reactionaries have aimed particular venom at advertising. Advertising is the public face of a capitalism they revile. Their arguments are, at times, contradictory. Advertising, in their formulation, is the generator of unnecessary mass wants and needs. Yet it also segments us in ways that subvert the American consensus.

The anti-consumerist tendency has been on display here at the FTC hearings on behavioral targeting -- and so have the contradictions. “Online marketers can eavesdrop on members of social networks,” Mr. Chester said. Yet he added that online advertising “has profound implications for the future of democracy, for whether or not we’re going to have a diverse array of voices.”

Ads Create Diversity

That latter comment was made without irony. Mr. Chester and other critics seem not to see that the diversity of voices links inexorably to the availability of online advertising. I noted in my first Clog posting from the FTC that the promise of online advertising has contributed to greater communications diversity and accessibility than ever in our history: 12 million Americans blogging; 1.3 million Americans supplementing their income by selling on eBay; 41 million resumes posted for free on Monster.com; 500 million free email accounts from Yahoo!, Google, and MSN alone.

While several of the anti-consumer advocates here today expressed admiration for the European Union’s stricter rules regarding online data use and privacy, those come at a significant cost they did not acknowledge – until Tacoda founder (and IAB board member) Dave Morgan noted it. “There’s dramatically less free content and services available to European consumers,” he said. “It’s not for lack of technology infrastructure. Rather, it’s they are being offered on a paid subscription basis.” Thus is the digital divide larger in Europe than in the U.S. “Online advertising and the capital investments companies are making to get it is a $20 billion, $30 billion subsidy paying for free content and free services,” Mr. Morgan said.

None of this is meant to imply that there are not serious issues relative to data retention and use. One FTC panelist, Kathryn C. Montgomery, a communications professor at the American University, has done important work helping to assure that advertising to children adheres to appropriate strictures. Yet even Prof. Montgomery revealed herself less as an opponent of bad actors, but as an opponent of online advertising generally. “Digital technologies enable companies to track every move, online and off, compiling elaborate personal profiles, and aggregating that data across different media,” she fretted.

But many of the concerns about behavioral targeting lie somewhere between diseconomic and mythical. Responding to Prof. Montgomery, Dave Morgan said here today, “I don’t know any companies that are behaviorally targeting ads at children. That’s the third rail, as we’d say in New York.”

"My Mother" Rules

“I use ‘my mother’ rules,” Mr. Morgan added. “If my mother would be uncomfortable with it, we shouldn’t do it.”

Equally important, of what concern is it, if the data collected are anonymous and aggregated and used to create more relevant – and thus more user-friendly – advertising? Another panelist here, Larry Ponemon, chairman of a research think tank, unveiled research indicating that more than half of Americans believe that an online ad that targets individuals’ preferences or interests improves or greatly improves their online experience. Fully 86 percent said they would prefer to accept relevant advertising, rather than pay for content. “There is an opportunity,” Dr. Ponemon said, “to educate people about internet economics.”

That is very true – and it’s moved beyond major opportunity to a must-do for our industry. We really have to continue to work,” said Ralph Terkowitz, a general partner at ABS Capital Partners, and a former CEO of the Washington Post’s electronic publishing subsidiary, “to drive transparency, to drive education, and to create policies to deal with those actors who are not interested in transparency, education and ease of use.”

Interactive Advertising, Innovation, and the American Dream

Today and tomorrow, the U.S. Federal Trade Commission is hosting a Town Hall entitled “Ehavioral Advertising: Tracking, Targeting, and Technology.” The FTC describes the event bringing together "consumer advocates, industry representatives, technology experts, and academics to address consumer protection issues raised by the practice of tracking consumers’ activities online to target advertising - or 'behavioral advertising.'" The Interactive Advertising Bureau sought and received permission to present our point-of-view about the centrality of interactive advertising to American competitiveness and to the diversity of voices available on the Web. The IAB will live blog from the hearings today and tomorrow at www.iab.net and www.randallrothenberg.com. What follows is the testimony I just delivered.

Good morning. On behalf of the Interactive Advertising Bureau, the trade association for advertising-supported interactive media in the United States, I thank the commission and its staff for the opportunity to participate in this important Town Hall discussion regarding online-behavioral advertising.

The IAB’s 350 member companies represent the present and the future of marketing and media in the United States. Among our members are the burgeoning new media brands that have entered American consciousness during the past decade, companies such as Google, Yahoo, AOL, MSN, and CNET. There are the major media companies that have made two-way communications a significant component of their offerings, from The New York Times to NBC Universal to Condé Nast to CNN. There are smaller, successful information companies serving market niches, such as Cars.com and WebMD. And there are platform specialists in areas such as digital video, online games, and social networking, with names like Brightcove, Wild Tangent, and Facebook.

Historians undoubtedly will look back on this period as the most dynamic and innovative in the history of American business. Central to this dynamism has been the promise of advertising support. A question before all of us today is: What is the best policy framework to maximize such innovation and competition, in order to produce the best products, services, and diversity for consumers?

Prudence and Self-Regulation

There is a clear answer, supported by copious evidence dating back at least to October 1994 – the date the Netscape Navigator Web browser was released, initiating the Interactive Era: The unprecedented proliferation of goods, services, and information diversity that characterize the Internet has been generated within a framework of industry self-regulation and market forces. It is incumbent on the business community to ensure that Interactive advertising, marketing, and data-use practices are responsible. At the same time, Government must be prudent in ensuring that no regulation is drawn that would curtail interactive advertising’s potential to continue to support this extraordinary pattern of innovation and consumer benefit.

Advertising is the economic foundation underlying the dynamism of the Interactive Era. With interactive media, it’s become a commonplace that marketing spend – one of the last redoubts of imprecision in American business – is becoming more accountable and more productive. This is possible because of the availability of mathematical and technological tools that enable the analysis of non-personally-identifiable data to detect patterns in peoples’ interests and consumption habits, and to allow the matching of advertisements to their needs. Other analytics tools allow for predictive modeling based on the responses to these well-targeted ads, enabling the development of even better-targeted ads. All of these advancements ultimately work to the benefit of consumers. They not only receive advertisements more relevant to and productive for them; they receive more and better free content and services online.

Because these advertising processes are largely automated, they are taking costs out of and improving the results from advertising. In addition, because the Internet allows the seamless aggregation of thousands of Web sites into online advertising networks, marketers can reach consumers in volumes that rival, even surpass, the audiences of broadcast television. Yet they can do this with a precision that no previous medium can match.

In such ways are interactive media contributing to the productivity revolution that is driving American competitiveness in the 21^st Century. For such reasons, interactive advertising spend in the U.S. this year likely will reach $20 billion, according to research by the IAB and PriceWaterhouseCoopers. That is nearly one-third the amount marketers spend on television – and a sum reached a mere 13 years after this medium’s invention.

Fabric of Communities

This revolution is reaching deep into the fabric of communities across the nation. Today, all of us, quite literally, own a press – and much, much more. The Internet has torn down barriers to entry in both content creation and distribution. It is now possible for an individual to publish a national “magazine,” even program a global television network, with the applications that come built into his or her laptop computer. Never has speech been more open, available and varied. As of July 2006, some 12 million American adults – about 8% of the American population – were publishing their own blogs, which were being read by 57 million others, according to the Pew Internet & American Life Project.

If any of the commissioners or commission staff want a tutorial on how to create your own national media outlet, the IAB would be glad to provide it – if you’ll promise in return to join the IAB once you begin to sell advertising!

For you most assuredly can use advertising, and build a business on the Web based on little more than your brain, passion, and energy. According to Pew, 32 million American adults have used online classified ads for selling or buying, and 35 million American adults have participated in an online auction. eBay, the best known auction site, says more than 768,000 small businesses across the U.S. use this online marketplace as their primary or secondary marketing channel. More than 1.3 million people supplement their income by selling materials on eBay.

Millions of other people are making their livings creating and operating media venues that house well-targeted advertisements. The 24/7 Real Media online advertising network partners with 950+ websites in six countries. Tacoda numbers more than 4,000 websites in its online ad network, which reach 122 million unique visitors per month. Advertising.com, another online ad network composed of thousands of small sites, has more than 150 million unique visitors in the U.S. each month.

These sites are the Mom & Pop grocery stores of the World Wide Web: Just as the local retailer anchors a geographic community, so these sites anchor communities of interest that span towns, cities, states, even nations. They do this with their content – and they finance their content through advertising.

Tim Carter's Story

Let me give you one example of just how small and just how successful these businesses can be: Tim Carter, the proprietor of Askthebuilder.com. Tim is a 55-year-old man with a wife and three children who lives in Cincinnati, Ohio. Askthebuilder.com lives on the computer screens of anyone anywhere who is interested in building a house, renovating a kitchen, or re-doing a bathroom.

Tim’s Web site is deep and rich – unsurprising, because, until about 15 years ago, he’d spent his life as a contractor, actually doing the work he writes about. He was darn good at it, too: In 1993, Remodeling magazine named him one of the top 50 remodelers in the nation.

Then disaster struck, in the form of three clients from hell. He’d battled the scourge of lowball contractors, the wear and tear on his body, only to be stiffed by his customers. He told his wife, Kathy, that he’d reached his limit, and wanted out. She suggested he take a book idea he’d had about home repair and renovation, and turn it into a newspaper column.

Tim is an energetic fellow. In short order, he’d persuaded the Cincinnati Enquirer to run a column by him. Within nine months, he self-syndicated his column to 30 other newspapers around the country. He quickly discovered that writing wouldn’t make him rich – his average take was $8.00 per thousand-word column.

But even though there was a Christmas or two when they didn’t exchange gifts, and evenings when dinner was Japanese ramen-in-a-cup, Tim Carter didn’t give up. “I was convinced that long term, it would work,” he told me a few weeks ago. He knew he was touching people: Certain topics – on deck sealing, for example – would draw as many as 1,000 letters in a week.

In 1995, Tim saw the Internet for the first time. “Instantly,” he said, “I knew I was going to be a publisher.” He taught himself rudimentary HTML programming. No longer constrained by newspaper schedules, he began writing like the Dickens – Charles Dickens, to be exact. He started hanging out at a local computer users forum, and an entrepreneurs forum, seeking to become better as a Web publisher.

In 2004, a member of his entrepreneurs group told him about Google’s Adsense Network. Like the ad networks run by Yahoo, Microsoft, AOL, and many other companies, Adsense is a collection of websites on which Google places well-targeted advertising – like the ads that run on the right side of the Google search-results page, but in this case, placed contextually on sites themselves. As Google describes it, “Google AdSense matches ads to your site's content, and you earn money whenever your visitors click on them.”

The colleague who told Tim Carter about Adsense strongly suggested that Tim log onto Google and sign up. “With your content,” this fellow entrepreneur told him, “you could easily make $500 a day.” This certainly piqued Tim’s interest: In his best year as a builder, he’d earned $80,000.

But the fellow was wrong -- by half. When I met Tim Carter in late 2005, Askthebuilder.com was finishing its first year as part of an online advertising network. Tim was to make $350,000 that year.

Here’s how large Tim Carter’s editorial staff is: One person, himself. With that staff of one, Askthebuilder.com draws more than 31,000 unique visitors a day. Here’s how large Tim’s sales staff is: Zero. Managing that nonexistent sales staff is Tim’s chief financial officer: his wife, Kathy. Now that online video advertising is evolving from promise to reality, he has a video editor working for him a few hours a week. As his online advertising tools have progressed, the benefits have similarly accrued to the visitors on Tim’s site, as they now enjoy richer, more educational content.

Tim Carter is the American dream. But he is not alone. Hundreds of thousands, perhaps millions of others, are supporting themselves and their families – and, in turn, aiding a burgeoning entrepreneurial economy in the United States – using interactive advertising. They are creating niche media on which well-targeted advertisements serve as bridges between niche marketers and niche audiences.

The revenues from these ads, in turn, support benefits to American consumers that are without parallel in number, quality, and availability. According to numbers released by the companies themselves, Google, Yahoo, and MSN together provide 500 million email accounts – for free. The research firm comScore reports that more than 200 million Americans age 15 or older conduct search-engine searches each month – for free. Also each month, some 20 million people search the top three online job-listings sites – Monster, Hotjobs, and CareerBuilder – for free. Just one of those sites, Monster.com, has 41 million resumes posted on it by job-seekers – for free.

Yet, as we all know, these services aren’t really free. Most of them are premised on the ability of the digital publisher, giant incumbent media companies and individual entrepreneurs alike, to sell advertising – to link marketers and consumers in a relationship of mutual interest, mutual advantage, and mutual satisfaction.

For those who want to understand the future of the media, I have one piece of advice: Go to Askthebuilder.com and see what Tim Carter did with his brain, energy, and passion – and with a global marketplace and a set of automated advertising tools. This is not the interactive future. This is the interactive present.