Can online behavioral targeting save newspapers? Microsoft lawyer Mike Hintze says the answer might be yes.
Speaking this a.m. at the Computers, Freedom and Privacy conference in Washington,
D.C., Hintze floated the theory that behavioral targeting could provide revenue to fund reporting on policy issues that don't lend themselves to contextual ads.
"In some cases, we can know the
fact that a person reading this in-depth article about our relationship with North Korea happens to have an interest in sports, and so we can show an ad that might be effective," Hintze said.
His remarks were in response to a question posed by Federal Trade Commission's Jessica Rich. Making the reasonable point that policymakers need to know whether the potential benefits of targeting
outweigh the targeting risks, Rich asked for evidence that personalized ads are more effective than generic ones.
Hintze instead focused on the revenue that personalized ads bring in -- which
he said ranges from four to 10 times that of non-targeted ads. But that statistic doesn't address whether the ads are effective with consumers or whether marketers are paying more because they assume
that such ads must be worth the extra cost.
Still, Hintze isn't the first person to tie the plight of newspapers to questions about behavioral targeting. The FTC itself said recently it will
examine whether behavioral targeting can help the struggling newspaper industry.
But it's hard to see how online behavioral targeting will offset lost revenues for newspapers, given that the
total revenue associated with such targeting is still quite low. RBC Capital Markets Corp. estimated this week that behavioral targeting could account for 15% to 20% of the online display marketplace,
which it pegs at $9 billion. That would come to $1.8 billion at most. As things now stand, that's nowhere near enough to compensate for the newspaper industry's lost ad revenues, which, according to
Alan Mutter, fell from a high of almost $50 billion in 2005 to around $38 billion last year.