August 2008

Some Web Firms Say They Track Behavior Without Explicit Consent

Several Internet and broadband companies have acknowledged using targeted-advertising technology without explicitly informing customers, according to letters released yesterday by the House Commerce Committee. And Google, the leading online advertiser, stated that it has begun using Internet tracking technology that enables it to more precisely follow Web-surfing behavior across affiliated sites. The revelations came in response to a bipartisan inquiry of how more than 30 Internet companies might have gathered data to target customers. Some privacy advocates and lawmakers said the disclosures help build a case for an overarching online-privacy law. Ari Schwartz, vice president of the Center for Democracy and Technology, said lawmakers are beginning to understand the convergence across platforms. "People are starting to see: 'Oh, we have these different industries that are collecting the same types of information to profile individuals and the devices they use on the network," he said. "Internet. Cellphones. Cable. Any way you tap into the network, concerns are raised."

Crying Foul over Online Junk Food Marketing

Having successfully lobbied the government to place limits on junk food ads on TV, consumer and children's advocacy groups now target marketing to kids via the Web. "While there are some rules for TV, there are no rules when you move online," says Patti Miller, vice-president of children's advocacy group Children Now and a member of the Federal Communications Commission's Task Force on Media & Childhood Obesity. "We don't want to reduce junk food advertising to kids [on TV] and then find that it has just moved to another platform." The worry is that food companies are bombarding kids with ads for non-nutritious foods, fueling the obesity epidemic that, according to the Centers for Disease Control & Prevention, has increased the proportion of overweight kids under age 12 fivefold in the last generation and left almost 19% of kids between 6 and 11 overweight. A new report, commissioned by the Berkeley Media Studies Group, part of the Public Health Institute in Berkeley, Calif., focuses on methods of advertising food to kids that have become particularly popular during the past two years, such as spreading messages through social networks, and urges lawmakers to restrict junk food advertising to kids online. It will be presented to members of Congress and has been shown to officials at the European Union. "With social networking, marketers are getting the kids to create the ads and share them with their friends," says Kathryn Montgomery, an author of the report and an American University communications professor. "It is incredibly sticky and it is viral. Regulators need to understand that."

Malone eyes swap for AOL dial-up arm

Liberty Media is considering swapping its shareholding in Time Warner for the dial-up business of AOL, John Malone said on Monday, raising the unexpected prospect of a competitive auction for the declining Internet access operation. Malone, whose group encompasses wholly owned businesses such as the QVC home shopping channel and stakes in DirecTV, Expedia and Sprint Nextel, said swapping the Time Warner holding for a cash-generating asset would be "attractive". Liberty Media's 103m-shareholding in Time Warner was valued at $1.64bn last night, slightly above analysts' $1.5bn valuation of AOL's access business.

Digital Crossroads: Painful as slander may be, don't turn service providers into speech police

[Commentary] Although the Supreme Court struck down most of the Communications Decency Act of 1996, the Court let stand Section 230, which immunizes Internet service providers from being held liable for what their members post by stating that "no provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider." The section was designed to protect service providers -- at the time mostly dial-up services like AOL and Prodigy -- from prosecution under CDA for distributing content posted by their members. It's analogous to holding phone companies harmless for obscene phone calls made by their customers or shielding the post office from liability for illicit material sent through the mail. But Section 230 has also been used to protect social-networking companies and other Web sites with user-generated content whose business plans weren't even on the drawing board when the law was written back in the mid-'90s.

Broadband growth plummets in 2Q, cable stronger

The number of new broadband Internet subscribers in the United States fell in the second quarter to the lowest level in at least seven years. The 20 largest cable and telephone companies added a net 887,000 high-speed Internet subscribers in the three months ending June 30. The number of new customers is half that of the second quarter of 2007. Saturation of the marketplace, along with the slowing economy, are likely reasons for the slowdown. Leichtman Research believes the decline in new customers was likely exacerbated by decisions at the two largest phone companies, AT&T and Verizon, to emphasize faster, more expensive services over entry-level DSL. Cable companies did much better than phone companies in the quarter. While the two industries have usually divided new broadband customers evenly between them, 76 percent of the new business went to cable companies in the quarter.

Lawmakers urge FCC to move forward with 'free' plan

Last week, Reps Anna Eshoo (D-CA) and Ed Markey (D-MA) wrote Federal Communications Commission Chairman Kevin Martin saying, "We are concerned that incumbent wireless carriers are seeking unnecessary and unprecedented testing delays to prevent new innovative competitors from entering the market." At issue is a proposal from Chairman Martin to auction a 25MHz piece of spectrum in the 2155MHz band and require the winner to use a specified amount of spectrum for free wireless Internet access. Although the FCC first floated the idea last September, mobile operators have asked the commission to delay the vote to give them more time to consider technical issues. Reps Eshoo and Markey pointed out that tests performed by Ofcom, the UK's equivalent of the FCC, that showed no substantial interference from the type of technical plan the FCC is proposing. "We are concerned that unnecessary interference testing would needlessly delay this auction and that this constitutes the very rationale to kill this effort totally. We urge you to carefully consider the existing precedent before making your determination," they wrote. The International Telecommunication Union and other groups have also done tests, and they all come up with essentially the same results, said John Muleta, CEO of M2Z Networks, a company that backs the FCC's plan. The tests show that some interference is possible in certain, somewhat rare situations, a result that is typically considered acceptable, he said. In some countries, operators have already been allowed to offer services on the basis of those tests, he said.

Usage-Based Broadband Billing vs "Channels"

[Commentary] The usage-based broadband billing model seem reasonable enough, but it is destined to fail for a number of reasons: 1) Consumers don't understand it, 2) Bills could get really big, 3) ISPs would be changing price without improving service, and 4) even wireless carriers are moving away from the model.

The good news is that hidden within the Federal Communications Commission's recent Comcast slap down is a path forward for broadband operators yielding superior traffic management while also enhancing revenue opportunities. FCC Chairman Kevin Martin specifically states that "We do not tell providers how to manage their networks. They might choose, for instance, to prioritize voice-over-IP calls." The Order clearly opens the door for service providers to promote certain traffic classes in order to obtain the service quality necessary to satisfy consumer expectations. As a result, many broadband service providers are experimenting with service models wherein subscribers may optionally purchase quality of service (QOS) -specific "channels" that operate over basic broadband Internet access. Channels could be tailored to applications such as video, VOIP, gaming, or corporate VPNs. Channels shouldn't be thought of as merely prioritization, rather they are specific allocations of bandwidth.

In some ways QOS-specific channels are actually a form of usage-based billing but the metric is expressed in such a way that subscribers can more readily understand what they're getting. It is also a compelling improvement in the service and therefore more palatable to consumers. This model has the potential to please all parties. Net socialists get a basic broadband service in which all packets are treated the same. Broadband operators get better engineered networks and new revenue opportunities. Consumers can purchase service bundles that best reflect their needs. And, best of all, regulators have blessed this approach.

(Kevin Walsh is vice president of marketing at Zeugma Systems.)

Obama vs Clinton Again?

For the eighth time in nine weeks, Sen Barack Obama substantially outdistanced Sen John McCain in the competition for exposure, according to PEJ's Campaign Coverage Index. Obama was a significant or dominant factor in 78% of the campaign coverage from August 4-10 compared with 53% for McCain. That is almost identical to the 79% to 54% lead in quantity of coverage Obama has accumulated since the general election campaign began in early June. Last week, the major story lines turned more to issues -- particularly energy policy -- discord among Democrats and the search for vice-presidents. Indeed, even as Obama regained a comfortable lead in the quantity of coverage, certainly some of it was ominous for the Illinois Senator's campaign. Hillary and Bill Clinton resurfaced in campaign news last week -- combining as significant or dominant factors in 23% of the coverage -- and with them, so, too, did the festering subject of party unity. By week's end, the Clintons' role and the issue of a divided Democratic party had accounted for 12% of the campaign coverage studied. There were two major components of the narrative about discord. One was Bill Clinton's interview with ABC, in which he appeared to betray residual bitterness about the primaries and Obama. At the same time, new questions surfaced about whether Hillary Clinton supporters want a convention roll call.

Political Spots Now a Bargain

In the annals of political advertising, the unthinkable is happening: TV spots are getting cheaper as the November election approaches. Faced with a recession as well as advertising cutbacks by automakers and financial services providers, TV stations have sliced the price of political spots, political ad buyers say. In some markets, prices are as much as 15% to 20% lower than two years ago. Reductions aren't hitting every station or every market, and it's difficult to say whether prices will rebound.

What Obama Campaign Teaches About Millennial Marketing

The unabashed embrace of select brands by millennials, from technology to beverages to fashion, has made this decade a true golden era of marketing for those who know what they're doing. And when it comes to marketing, the Barack Obama campaign knows what it's doing. Obama's brand management, unprecedented in presidential politics, shows pitch-perfect understanding of the keys to appealing to the youngest voters. Obama's packaging might discomfit older generations, who may think of themselves as immune to mass marketing. But it is "no problem" for millennials. John McCain's early-August success in erasing Mr. Obama's lead, with a campaign that directly attacks the Obama brand by mocking his celebrity status, shows that branding can cut both ways.