<http://www.nytimes.com/2007/09/24/business/media/24adcol.html?ei=5053&en=5822f6a724575488&%20ex=1191297600&partner=NYTHEADLINES_BIZ&pagewanted=print> The New York Times September 24, 2007 Company Will Monitor Phone Calls to Tailor Ads By LOUISE STORY Companies like Google scan their e-mail users' in-boxes to deliver ads related to those messages. Will people be as willing to let a company listen in on their phone conversations to do the same? Pudding Media, a start-up based in San Jose, Calif., is introducing an Internet phone service today that will be supported by advertising related to what people are talking about in their calls. The Web-based phone service is similar to Skype's online service - consumers plug a headset and a microphone into their computers, dial any phone number and chat away. But unlike Internet phone services that charge by the length of the calls, Pudding Media offers calling without any toll charges. The trade-off is that Pudding Media is eavesdropping on phone calls in order to display ads on the screen that are related to the conversation. Voice recognition software monitors the calls, selects ads based on what it hears and pushes the ads to the subscriber's computer screen while he or she is still talking. A conversation about movies, for example, will elicit movie reviews and ads for new films that the caller will see during the conversation. Pudding Media is working on a way to e-mail the ads and other content to the person on the other end of the call, or to show it on that person's cellphone screen. "We saw that when people are speaking on the phone, typically they were doing something else," said Ariel Maislos, chief executive of Pudding Media. "They had a lot of other action, either doodling or surfing or something else like that. So we said, 'Let's use that' and actually present them with things that are relevant to the conversation while it's happening." The company's model, of course, raises questions about the line between target advertising and violation of privacy. Consumer-brand companies are increasingly trying to use data about people to deliver different ads to them based on their demographics and behavior online. Pudding Media executives said that scanning the words used in phone calls was not substantially different from what Google does with e-mail. Still, even some advertising executives were wary of the concept. "We can never obtain too much information from the targets, and I would love to get my hands on that information," said Jonathan Sackett, chief digital officer for Arnold Worldwide, a unit of the advertising company Havas. "Still, it makes me caution myself and caution all of us as marketers. We really have to look at the situation, because we're getting more intrusive with each passing technology." Mr. Maislos said that Pudding Media had considered the privacy question carefully. The company is not keeping recordings or logs of the content of any phone calls, he said, so advertisements only relate to current calls, not past ones, and will only arrive during the call itself. Besides, Mr. Maislos said, he thought that young people, the group his company is focusing on with the call service, are less concerned with maintaining privacy than older people are. "The trade-off of getting personalized content versus privacy is a concept that is accepted in the world," he said. Mr. Maislos founded Pudding Media with his brother, Ruben. Each had spent several years doing intelligence work for the Israeli military. Before Pudding Media, Ariel Maislos ran a broadband company called Passave, which he sold in May 2006 to PMC-Sierra, a maker of computer chips for telecommunications equipment, for $300 million. Richard Purcell, a former chief privacy officer at Microsoft, is an adviser to Pudding Media, Ariel Maislos said. To give the ads greater accuracy, Pudding Media asks users for their sex, age range, native language and ZIP code when they sign up. For now, the company is running ads that are sold by a third-party network, but Pudding Media plans to also sell its own ads in a few months. Advertisers pay based on how often a user click on their ads, and a spokeswoman said the rates were similar to the cost-per-click prices in Google's AdSense network. Pudding Media plans to add other payment models, like charging for each ad impression or by the number of calls an ad generates to the advertiser. As the company's software listens in on conversations, it filters out explicit words in determining which ads to select, so that content and ads will not be shown with those inappropriate words. Pudding Media would not elaborate, beyond saying that these were "keywords with profanity and things you wouldn't want a 13-year-old to hear." While the calling service only works through computers for now, Mr. Maislos said he saw the potential to use it with cellphones. The company is offering the technology to cellphone carriers to allow their customers to enjoy free calls in exchange for simultaneously watching contextually relevant ads on their screens. Callers can try Pudding Media at www.thepudding.com, dialing any number in North America. Because the service has so far been in a quiet beta test, the company would not say how many people have tried it so far. Pudding Media is also trying to sell the technology to Web publishers and media companies that would like to offer readers free calls and content related to those calls. A news site, for example, could show only its own articles and ads to people as they talked to friends. Mr. Maislos said that during tests he noticed that the content had a tendency to determine conversations. "The conversation was actually changing based on what was on the screen," he said. "Our ability to influence the conversation was remarkable." -- ----------------- R. A. Hettinga <mailto: rah@ibuc.com> The Internet Bearer Underwriting Corporation <http://www.ibuc.com/> 44 Farquhar Street, Boston, MA 02131 USA "... however it may deserve respect for its usefulness and antiquity, [predicting the end of the world] has not been found agreeable to experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'