Company Will Monitor Phone Calls to Tailor Ads

[R.A. Hettinga]

<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."

-- 
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R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
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