Back and Forth on Behavioral Targeting

Behavioral Targeting is the next opportunity for advertisers to reach potential clients.

Behavioral Targeting is spying.

That is the essence of the discussion. The comments section of the NY Times article about Charter Communications plans is an excellent example of this back and forth.

Behavioral targeting, is, of course, the next great opportunity for advertisers to reach audiences. That is without a doubt. The big question then is whether it is spying or not. My response would be that, no, it is not. The reason I believe this is because everything we do on the Internet is already being logged, tracked and potentially watched and shared. Behavioral targeting takes advantage of this data but does not worsen the situation.

Let's start with the basics. Any URL we type in the address bar is logged by the ISP. Any email sent or received via Gmail is read by a machine; it is also stored. Any blog written is indexed by the search engines. Any status update on Facebook or Twitter message is logged by those services. Amazon and Ebay know the purchases you have made and your delivery address, credit card data and reputation. The ISP knows your address, your name and potentially your credit card number. My point is again that there is no such thing as privacy on the Internet.

In the NY Times article mentioned above, several commenters claimed that since the data is drawn from the network it could be tied with user data such as name, address, etc. to make for a more personal, more invasive, profile of the individual. There were also comments that the ISP is a utility and that it should act as such, just like the water company. First, yes those risks exist and as Facebook found out with Beacon, if the service is not architected and executed properly, it can have serious negative consequences. It is up to the user to be diligent in protecting his privacy and it is up to the ISP to act in good faith and within the laws to not violate those privacy norms.

Now, there are several business models that ISPs can pursue, one is the utility model and the other is a service provider model. There is more money in the service provider model and as publicly traded companies, these ISPs have a fiduciary duty to maximize value for their share holders. By leveraging data that they already have and own to create a new line of business is not itself problematic, again, as long as they operate within cultural and societal norms regarding privacy.

Now, in full disclosure, I am about to start working at a behavioral targeting start-up and have just completed 7+ years at a telco.

Look for Behavioral Targeting and its enabling technologies to be a big part of the advertising discussion in 2008 and 2009 with ISPs dipping their toes into the water.

Ctrl + Alt + Del

Reset. Reboot. Start again. That is what I am doing and it is a good feeling. After 7+ years working for a major international telecommunications company, I have decided to take the plunge into the start-up world. This is going to be great. A complete culture change and new job function.

I am moving from product development into business development. I have accepted an offer from and will be joining Adzilla next week as the Director of Business Development for ISP's. I am looking to hit the ground running as fast as I can while knowing that there is a lot that I do not know.

In an era of increased concerns about privacy and increased need for good data and analysis to make advertising really work on the internet, Adzilla and its competitors sit at the intersection of opportunity and risk. Telcos, MSOs and other pipe providers "see" much of the traffic on the internet but are not very good at analyzing it and making use of it profitably while managing privacy concerns and perceptions. The opportunity to mine this data, filter it and analyze it is one that has been spotted and acted on by several companies.

Time will tell if the macro opportunity pans out but with some estimates showing behavioral marketing growing from $575 million in 20007 to $3.8 billion in 2011 and with telcos and cablecos wanting to get a piece of the action, we can assume that there will be plenty of movement in the coming years.

I am looking forward to getting started, to say the least.

Strength of Boards of Directors

There is plenty to read about Microsoft's offer for Yahoo! at TechCrunch, Silicon Alley Insider and elsewhere so I want to focus on the decision making process itself and one possible reason that Yahoo! even finds itself in this position.

After 8 straight quarters of declining profit, the Panama roll-out, several acquisitions, a change in CEO and the announcement of lay-offs, Yahoo! still finds itself in the position of a not-yet hostile but un-invited takeover bid from Microsoft. Why?

It is the roll of the Board of Directors to give guidance to the executive management team as to how to steer the company strategically and assist it in the decision making needed to get there. It is, I think, plainly obvious that Yahoo's Board has either not done this or not done it well. If we take a look at the members of those competing Boards (see below) it is clear that Google's Board is laden with talent from the Silicon Valley, Technology and Business related to how it operates. Board members range from Genentech, Kleiner Perkins, Intel and Stanford University. It is a Board that has functioned well (from the outside) and is well positioned to continue moving Google forward.

Yahoo's Board does have some very talented people including new chairman Roy Bostock. Roy has 38 years of experience in advertising and media but is also Chairman of Northwest Airlines. I wonder if he has the time to dedicate to the task at hand for Yahoo! In addition other Board members hail from diverse businesses such as telecommunications, publishing, peer-to-peer and gaming. It is a diverse bunch in a time when there is a need for coherence, strategic strength and insight into technology, advertising and finance.

Google's Board of Directors

Eric Schmidt Chairman of the Executive Committee and CEO, Google Inc. Director since March 2001	Arthur D. Levinson Genentech Director since April 2004
Sergey Brin President of Technology and Assistant Secretary, Google Inc. Director since Sept. 1998	Ann Mather Director since Nov. 2005
Larry Page President of Products and Assistant Secretary, Google Inc. Director since Sept. 1998	Paul S. Otellini Intel Director since April 2004
L. John Doerr Kleiner Perkins Caulfield & Byers Director since May 1999	K. Ram Shriram Sherpalo Director since Sept. 1998
John L. Hennessy Stanford University Director since April 2004	Shirley M. Tilghman Director since Oct. 2005

Yahoo's Board of Directors

Roy Bostock Chairman, Yahoo! Inc. Print Biography Roy Bostock has served as a member of the board of directors since May 2003 and as Chairman of the Board since January 2008. Mr. Bostock served as Chairman of BCom3 Group, Inc., a global advertising agency group, from January 2000 to mid-2001. From July 1990 to January 2000, Mr. Bostock served as Chairman and Chief Executive Officer of D'Arcy Masius Benton & Bowles and its successor company, The MacManus Group, Inc., an advertising and marketing services firm. Mr. Bostock is Chairman of the Partnership for a Drug-Free America; he also serves on the board of Morgan Stanley and is currently the chairman of the board of directors of Northwest Airlines Corporation. Mr. Bostock holds a Bachelor's degree from Duke University and an M.B.A. from Harvard University.	Ron Burkle Founder and Managing Partner, The Yucaipa Companies Print Biography Ron Burkle has served as a member of the board of directors since November 2001. Mr. Burkle is managing partner of The Yucaipa Companies, a private investment firm, which he co-founded in 1986. Mr. Burkle also serves as a director of Yucaipa Equity Partners, L.P., Occidental Petroleum Corp. and KB Home Corporation.
Eric Hippeau Managing Partner, SOFTBANK Capital Print Biography A Yahoo! board member since 1996, Eric Hippeau is managing partner of Softbank Capital Partners, a technology oriented venture capital firm. Before joining SOFTBANK Capital Partners, from 1993-2000, Mr. Hippeau served as Chairman and CEO of Ziff-Davis, Inc., an integrated media & marketing services company serving the technology community. Mr. Hippeau joined Ziff-Davis in 1989 as Publisher of PC Magazine, was named executive vice president of Ziff-Davis in 1990 and chief operating officer in 1991. During his career at Ziff-Davis, Mr. Hippeau established himself as a true visionary, recognizing the trend toward the Internet long before others. Prior to joining Ziff-Davis, Mr. Hippeau held a number of positions with IDG, including vice president of computer publications in Latin America and publisher of IDG's InfoWorld magazine. In addition to Yahoo!, Mr. Hippeau sits on a number of Boards of Directors, including Starwood Hotels and Resorts Worldwide, Inc.	Vyomesh Joshi Executive Vice President, Imaging and Printing Group, Hewlett Packard Print Biography Vyomesh Joshi has served as a member of the board of directors since July 2005. Mr. Joshi was elected Executive Vice President of the Imaging and Printing Group at Hewlett-Packard in 2002 after serving as Vice President since January 2001. Mr. Joshi also served as Chairman of Phogenix Imaging LLC, a joint venture between HP and Kodak, from 2000 until May 2003. Prior to that Mr. Joshi was Vice President and General Manager of Inkjet Systems. Mr. Joshi holds a master's degree in electrical engineering from Ohio State University.
Arthur Kern Founder and Chairman, American Media Print Biography Arthur Kern has served as a member of the board of directors since January 1996. Mr. Kern is an investor in several media and marketing companies. Prior to that, Mr. Kern was co-founder and Chief Executive Officer of American Media, a group owner of commercial radio stations sold to AMFM (now part of Clear Channel Communications, Inc.) in October 1994. Mr. Kern is a graduate of Yale University.	Robert Kotick Chairman and Chief Executive Officer of Activision, Inc. Print Biography Robert Kotick has been a member of the board since March 2003. Since February 1991, Mr. Kotick has been the Chairman and Chief Executive Officer of Activision, Inc., a publisher of interactive entertainment software products.
Ed Kozel Chairman, Skyrider, Inc. Print Biography Edward Kozel has served as a member of the board of directors since October 2000. He has served as the chairman of Skyrider, Inc. since December 2007, and was its Chief Executive Officer from March 2006 until December 2007. Mr. Kozel was also a managing member of Open Range Ventures, a venture capital firm, from January 2000 until December 2006. Between January 2004 and December 2004, Mr. Kozel was a managing director of Integrated Finance, Ltd., a private advisory services firm. Until 2002 he was a member of the Board of Directors of Cisco Systems, Inc., where he worked for 11 years in a variety of roles, including chief technology officer and senior vice president of business development. During his tenure at Cisco, he founded the business development group which, under his direction, was responsible for more than 22 technology acquisitions and 25 minority investments. Mr. Kozel is an industry innovator who previously worked at Boeing, McDonnell Douglas and SRI International, where he participated in the early design and development of the Internetwork Protocol (IP) model and TCP/IP, packet radio networks and highly distributed information systems. In addition to Yahoo!, Mr. Kozel served as a director of Reuters Group PLC from March 2000 to April 2007 and is currently a director of Network Appliance, Inc." He graduated from the University of California, Davis with a degree in electrical engineering.	Gary Wilson Chairman Emeritus, Northwest Airlines Corporation Print Biography Gary Wilson has served as a member of the board of directors since November 2001. Mr. Wilson also served as Chairman of the board of directors of Northwest Airlines Corporation, the parent of Northwest Airlines, Inc. from 1997 - 2007. Mr. Wilson also serves as a director of CB Richard Ellis Group, Inc. Mr. Wilson holds a Bachelor's degree from Duke University and an M.B.A. from Wharton Graduate School of Business.
Jerry Yang CEO and Chief Yahoo! Print Biography Jerry Yang, a Taiwanese native raised in San Jose, Calif., co-created the Yahoo! Internet navigational guide in April 1994 with David Filo and co-founded Yahoo! Inc. in April 1995. He was appointed chief executive officer of the company in June 2007. Mr. Yang, a leading force in the Internet media industry, has been instrumental in building Yahoo! into the world's most highly trafficked Web site and one of the world's most recognized brands. Since the company's founding, Mr. Yang has been a key member of the executive management team. His focus at Yahoo! over the years has included corporate strategy, Yahoo!'s technology vision, strategic business partnerships and international joint ventures, and recruiting key talent. In addition to serving on the Yahoo! Board of Directors, Mr. Yang currently serves on the board of directors of Cisco Systems, Yahoo! Japan, and Alibaba, and is also on the Stanford University Board of Trustees. Mr. Yang holds B.S. and M.S. degrees in electrical engineering from Stanford University and is currently on a leave of absence from Stanford's electrical engineering Ph.D. program.	Maggie Wilderotter Chairman and Chief Executive Officer, Citizens Communications Company

Did you know...

Great video on YouTube by the "Shift Happens" group. You can find them at shifthappens.wikispaces.com. Awesome video that presents very well the case that the education system needs to continue to evolve to meet the demands of a society that is increasingly high-tech and increasingly connected to every other society. Enjoy.

Hulu

In a previous post I mentioned that I thought 2008 would be the year that content rights owners got it right and actually did something interesting for their users. I specifically mentioned Hulu as being that opportunity.

Having now tested the service, I can say that I like it a lot, though it has a way to go. It is definitely a step in the right direction for the majors and one that provides a compelling service to users interested in high quality premium content. I venture that there is a large part of the population that likes this content and that they are also not always in front of their television sets. TiVo and its competitors have been addressing this issue for some years by allowing users to time shift. YouTube is the dominant player in the web video space but it needs to be careful legally since they do not own the content or have any distribution rights.

Hulu, on the other hand, is a JV between Fox and NBC so they own the distribution rights. The content on the site is then necessarily limited to their content but if successful, we can imagine others coming on board. The site functions much like YouTube and others in that the content can be viewed, can be viewed in full screen, it can be emailed to friends, can be embedded on third party sites (see below) and users can comment and rate the videos.

Two features that I would like to see that I currently do not are; (1) the ability to push this content to my TiVo or other STB. Yahoo and TiVo have a deal like this. (2) I would like to be able to also push this content to my mobile device like I can from a Sling box.

Finally, it should be noted that the quality of this video is much better than that of YouTube, Daily Motion or any of the others and it streams just fine with minimal breaks for buffering on a WiFi connection.

Expectations for 2008

Many people make lists, I make them incessantly. It is how I think and how I stay organized. In that vein, I will make some "predictions" for 2008. I know lots of bloggers do this but as I said, i like lists.

SMS will evolve as a universal platform for the integration of web 2.0 and mobile web services.
The ability to use commands inside SMS to invoke a web service and a voice call increase its usefulness significantly. Funding in this space will tick up noticeably in 2008 and we may even see an acquisition. Check out LimeJuice.mobi and Kadoink.com

Advertising will become intrusive to the point that users will turn it off and tune it out in greater numbers . As mobile devices deliver better browsing experiences, advertising will creep on to the mobile phone. As social networks know more about each of us and our habits, the advertisements will become more targeted and more engaging. As network operators seize the opportunity to sell higher value real estate because they know what we do across the internet, advertising will become more tuned. The good news is that the advertising should be more relevant to the users specific needs. The bad news is that it will necessarily be more pervasive and more intrusive.

The content empire will strike back in a way that may actually be interesting to the consumer.
CBS's acquisition of Last.FM and the NBC Universal, Fox joint venture, Hulu show that the Old Media space is waking up to the opportunities that lie before them. With their sizeable budgets, lock on content rights and the infusion of new media entrepreneurs into their ranks means these companies will be providing compelling new content services in 2008 that will attract consumers' attention.

The emergence of the open mobile network and the open mobile device as embodied by Verizon and Android from Google will fundamentally alter the telecommunications and internet landscape in ways that will only be somewhat obvious in 2008. The web has seen phenomenal growth since 1994 due to this openness. If the iPhone with its full browser experience was the mobile webs 1994 Mosaic moment, then the mobile web and its integration into the larger web will have its 1997 Netscape IPO moment this year.

The Social Graph - mobile style

Last evening I had the good fortune to be invited to an event debuting a new mobile social networking service that works best in venue, in context. The event was a success in terms of number of people in attendance, number of people engaged in the product trial and certainly the amount of fun people were having. I will not say too much about the service here as it is not officially launched, but the event did get me thinking about mobile social networking and specifically; where are the mobile carriers and what is the role of the mobile address book?

It is hard to say where the mobile carriers are in this space as I do not have inside information but I will hazard a few educated guesses. First, it is still a largely unproven space in terms of actual usage and business models. Part of the model of course is SMS / Text messaging. However, as plans increasingly include all you can eat text messaging or at least large buckets of messages, the growth curve of this model is somewhat limited. In terms of usage, it is not a rich experience as it is on the PC browser and therefore the use case is more limited. It is likely limited to keeping up with your messages, the "feed" of activity and maybe some point to point communications. In that vein, the issue is the same on the business model, data plans are moving toward all you can eat faster than text messaging plans. Finally, devices are a a key part of the equation. The high end devices like the blackberry, iPhone and others can do more but most phones can not and therefore rely on SMS or a WAP app of some sort. The user experience is not the most compelling in those cases.

So, as much as it is fashionable within the techno-digerati to think, nay believe, that big companies and telco's in particular have no idea what they are doing, this is simply not the case. Big companies are big for a reason, they know how to make business in a changing environment and bring value to their users and shareholders. So, we can be sure that the mobile carriers know what is going on and we can then assume they are taking a very close look at the space and trying to decide how to act. They can provision short codes and support the entire space, they can go it alone and lock others out, they can buy their way into the space or they can do all three. I believe that is the most likely scenario. Again, if we take AT&T CEO Randall Stephenson at his word, that (a) the mobile decision is very personal and that (b) AT&T is a company that moves 1's and O's, we can deduce that they will be active in building and launching services in this space while at the same time making it available to third parties. In either case, this space is an interesting one to watch over the next few months.

I will address the mobile address book in a coming post.