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Online Ad Regulation a Threat to Journalism?

WASHINGTON -- As lawmakers move toward another effort to enact privacy legislation that would restrict how much information Web sites and advertisers can collect about their users, opponents of such a bill staged an event this afternoon seeking to highlight the connection between targeted ads and high-quality online content.

"For the last 10 years, the online advertising industry has been operating under a system of self-regulation," said Berin Szoka, a senior fellow at the Progress and Freedom Foundation, a nonprofit group that generally advocates for deregulatory policies. "But there have been many concerns and proposals for either having the FTC do more or having some action in Congress."

Szoka argued that the discussion of privacy and online advertising has been a largely one-sided debate, dominated by the advocacy groups who fret over the emergence of a digital surveillance state.

"There's been little conversation about the benefits of online advertising," Szoka said.

Those benefits could include a lifeline for news and media publishers, particularly newspapers, that have been buffeted by the rush to the Web, where advertising is cheap and inventory is plentiful.

"The content online is sort of free-riding on the offline content," said Howard Beales, a public policy professor at George Washington University. Beales estimated that newspapers selling a print display ad might rake in about $5.50 for every thousand readers of the newspaper. But for every thousand times an ad is displayed on the newspaper's Web site, the same newspaper typically nets less than one dollar.

"That doesn't support the same kind of newspaper. That doesn't support the same content," Beales said.

So what's the answer? Smarter tracking mechanisms that lead to better targeted, more relevant and effective ads, which advertisers would naturally be willing to pay more for, according to the experts at today's event.

But when words like "tracking" and "targeting" come into play, the words "privacy" and "creepy" aren't too far behind. Such has been the long-running policy debate that is again coming to a head in Congress, with the chairman of a key House subcommittee widely expected to introduce a privacy bill that would set some restrictions for online advertising before the end of the year.

Opponents of regulation worry that such a bill could overstep, barring publishers from adopting the sorts of smart ad-targeting technologies that some hope could revive the ailing newspaper industry, itself a subject of recent concern among lawmakers.

Behavioral targeting, the practice of collecting data about people's Internet habits in order to serve ads that match their interests, has been the subject of a longstanding congressional inquiry as lawmakers weigh the economic benefits of better advertising with the privacy concerns expressed by many advocacy groups.

The panelists at today's event described behavioral targeting, provided it respects sensitive personal information, as a healthy method for leveling the playing field. Large publishers such as CNN.com or ESPN.com can command high ad rates by virtue of the strength of their brands and reach, whereas smaller sites are at a disadvantage without being able to slice and dice information about their audiences.

"It's very hard to convince an advertiser unless you can do something to track and identify what these people are interested in," Beales said. "If you can't convince the advertiser that this is an audience that's likely to be interest in your product, you're not going to be able to sell that ad for very much."

Beales contended that most Americans fall into a category of what he calls "privacy pragmatists," those who are willing to submit to some forms of benign tracking in exchange for access to free, high-quality content and services.

However, if the consent dynamic were flipped so that users would have to proactively opt in before they could be tracked, as many privacy advocates are hoping, advertisers could lose access to much of the profile data they have been collecting to serve more effective ads.

That brings the opponents of legislating behavioral targeting back to the idea of education. They have argued that if consumers better understood how their information was being used, they wouldn't feel the need to opt out, but if Web sites' default privacy setting were mandated to be opt-in, most consumers wouldn't bother to take an extra step to provide proactive consent.

"What's key here is that users are able to make privacy decisions that are best for them," said Mark Adams, a visiting fellow at the Progress and Freedom Foundation. "The problem here of course is that defaults matter."

He added, "Whether we have opt-in or we have opt-out, we've got to pay for the content somehow."