2005 Annual Report - Online Economics

One of the challenges for news sites is how to take advantage of one of the Web's economic capabilities - target marketing - while fulfilling the sense of serving the public interest.

Web sites are able to track users as they come and go, and to follow what they read. Coupled with information drawn from registration, sites can use this information with marketers to deliver ads specific to the user. Unlike a newspaper, where everyone sees the same ads, different online users will see different ads based on their demographics and reading habits and interests. This supposedly makes the ads more effective, and more attractive.

The first step in target marketing is to require registration. Following the trend of recent years, a number of newspaper Web sites moved to registration in 2004, including The Philadelphia Inquirer and The Atlanta Journal-Constitution. Others, such as The Washington Post, made their registration process more substantial. Most often, registration does not cost the visitor anything, and many in the industry view the process as a fair exchange for free content.

A number of users, though, are wary of what the sites do with their information. A survey of 1,074 consumers by the Ponemon Institute, Chapell & Associates, a research and consulting firm based in San Francisco, and Revenue Science, a U.S. company that offers behavioral targeting services, shows that 66% of users would find banner ads less annoying if they were more relevant, but 55% said they didn't want Websites to collect such personal information as addresses or phone numbers.³¹

Moreover, privacy policies are often vague documents written in legalese. Registration may be a particularly difficult tactic for news organizations, part of whose credibility comes from their supposed dedication to the public interest.

In any event, some users resist registration, and some give false information. When it moved to registering users, for example, The Philadelphia Inquirer found that 10% to 15% of e-mail addresses put in by users registering did not work.³²

If a user does not want to give up personal information, another option is to get a password from BugMeNot.com.³³ In February 2005, the Australian-based Web site boasted passwords for over 54,000 sites globally. BugMeNot.com does not allow postings of passwords to paid-content sites. Some operators of news sites have shown consternation at seeing people avoid registering for otherwise free content, but the impact has been pretty small. And most sites would rather have users share a password and provide no registration information - than pass on false information.

It seems for now that customization and targeting through the collection of personal information are the key to online advertising revenues in the future. The limitation may lie in the uneasiness of users about surrendering their personal information, even to read the paper online free.

One way to target ads while still protecting the privacy of individuals is a network developed by Tacoda, an online marketing company. Rather than providing the personal demographic information online advertisers have traditionally sought, users who surf through the different Web sites affiliated with Tacoda's AudienceMatch Network (AMN) are not required to provide any such identifiable information, and publishers do not share any data. Instead, AMN is able to identify the reader as a part of a larger audience segment - such as business travelers or auto buyers - based on the pages the reader visits. That information is then sold to online advertisers who distribute the targeted ads, but only on the Web pages within AMN. Users do have the opportunity to decline receiving AMN ads.

Tacoda will launch AMN on a limited scale and then gradually expand. Tacoda Web sites reach over 80% of the North American Web audience and include USA Today and The New York Times.³⁴