• by Erik Sass  @eriksass1, June 14, 2011

While the controversy over behavioral tracking and ad targeting has generally seen lawmakers taking a skeptical or outright hostile stance given privacy concerns, a recent report from the FCC reminded Congress that behavioral targeting may hold real promise for an unexpected beneficiary: small-town newspapers struggling to make ends meet.

According to The Hill, part of the FCC report highlighted the potential synergy between local online advertising and behavioral targeting, which could boost ad revenues for beleaguered local news organizations. "Ad targeting, since it commands higher prices, offers one possible way for local content creators to build sustainable business models that can help finance local journalism," it noted.

The FCC report went on: "When considering privacy rules, the policymakers should, therefore, also consider the positive benefits of ad targeting for local news and journalism operations."

Local news outfits, including small-town newspapers and radio stations, stand to benefit from a projected boom in local online ad spending -- provided they can offer advertisers the right model for reaching local audiences.

As it stands now, their share of local online ad dollars remains fairly modest: Borrell Associates estimated that local online media (of all types) took in about $13.5 billion in local online ad dollars in 2010, or just 14.9% of all local ad spending.

Behavioral targeting could plausibly provide the magic ingredient to make their advertising models more attractive to advertisers, but as noted, the discipline remains embroiled in controversy.

In recent months, advertisers have hurried to establish agreements providing for industry self-regulation. But this may not be sufficient to head off legal regulations brewing on Capitol Hill -- especially following a series of high-profile online privacy breaches over the last few weeks.