April II 2008

17 April 2008

Fredric Morris, Editor-In-Chief, Connect-World
Fredric Morris
Editor-In-Chief
Connect-World

Content rules? Rules for ads, Big Brother and nerds

Content is king – or so they say. Still, notes here and there in the international press, blogs, newsletters and chats with friends make one wonder where content’s kingdom is – in the UK or Nepal. I would bet on Nepal.

I have long had doubts about the revenues most content can generate. The problem is not content; it is the willingness, the ability, of enough people to pay for it on a regular basis.

There is enough content produced to drown in, but much of it – look at YouTube – is free. It’s hard to compete with free; the price is right and it sets a mark that all other content competes with. Content costs money and consumers don’t like to pay.

There is a time-tested remedy for situations such as these – advertising. Advertisers are learning to love audiences they can target precisely – and that is what online service providers can offer.

To target ads, advertisers accumulate data about visits made to the sites of third-party advertising network members, and correlate consumers’ surfing habits with their personal product tastes and the likelihood that certain types of advertising will appeal to them. The same data, though, can also let advertisers draw conclusions about a wide range of personal behaviours that many consumers would not like others to know about – conclusions that can be embarrassing, erroneous, dead wrong, or even dangerous. Data gatherers are often guilty – intentionally or not – of outrageous invasion of privacy.

What are advertisers to do? What are the ethical ramifications? What do advertisers know about you that you wish they didn’t? What if this information is misused or falls into the wrong hands?

A press release last week from the NAI speaks to these issues. From a different point of view, these are some of the same issues I spoke of in my eLetter at the end of March – about some of the risks inherent in the growth of Internet access and the Information Society.

The NAI addresses the problem of dealing with the sensitive personal data that Web sites and advertising networks gather by tracking visitors to their sites.

The NAI, the Network Advertising Initiative, which counts Google’s DoubleClick, Yahoo’s BlueLithium, AOL’s Advertising.com and Tacoda among its members, is a “cooperative of online marketing and analytics companies committed to building consumer awareness and establishing responsible business and data management practices and standards”. They published a draft (open for public comment until June 12 – http://www.networkadvertising.org/networks/NAI_Principles_2008_Draft_for_Public.pdf) of a “Self-Regulatory Code of Conduct for Online Behavioral Advertising“. The draft is the NAI’s response to proposals made by the U.S. Federal Trade Commission’s last year.

The NAI’s aims to protect the consumer’s privacy, to control the abuse of OBA (Third-Party Online Behavioural Advertising), provide consumers with safeguards that inform them when OBA is being used, and allow them to opt out – to deny permission for its use.

Few people that are not involved in online marketing are aware of the systems in place for third-party online behavioural advertising. The systems come in a variety of flavours, but the principles are the same. Online advertisers often take part in advertising networks. The networks maintain databases of all the users that visit the sites of any of their members. They use cookies and other technologies that let them identify Web surfers that have visited any of the sites of a given network’s members.

Typically, when users visit the site of a member of a third-party marketing network they are automatically linked to a third-party ad server site. The ad server identifies the visiting computer and sends it a ‘cookie’ – a bit of text that is saved by the computer in a cookie file. The ad server then records the user’s access in its database. Every time a consumer accesses the site of one of the advertising network’s members, the ad server records the visit. In time, ad servers can collect a sizeable amount of data concerning the consumer’s habits, so whenever the ad server detects one of its own cookies in a visiting computer, it will check its files and send back banner adds most likely to be of interest to the consumer. The advertising network site currently visited by the consumer will then display the banner.

It all sounds very innocent and, in truth, most often is – advertisers can narrowly target their ads at the consumers most likely to be interested. On the other hand, when the information that is gathered goes beyond normal marketing needs it invades the consumer’s privacy. The NAI’s proposed guidelines sets forth an ethical framework for dealing with information gathered from members of, as they call them, ‘restricted’ and ‘sensitive’ consumer segments.

The NAI prohibits members from targeting online behavioural advertising to sensitive consumer segments and to children less than 13 years of age. “Restricted and Sensitive Consumer Segments” include, but are not limited to:
1. Certain medical/health conditions–
A. HIV/ AIDS status
B. Sexually-related conditions (e.g., sexually transmitted diseases, erectile dysfunction)
C. Psychiatric conditions
D. Cancer status
E. Abortion-related

2. Certain personal life information–
A. Sexual behaviour/orientation/identity (i.e., Lesbian/Gay/Bisexual/Transgender)
B. Criminal victim status (e.g., rape victim status)

There is another list of “potentially restricted” consumers. These are not automatically excluded, but NAI members are expected to evaluate this data within the context it will be used. This category includes – but, once again, is not limited to data regarding: age /birth date, addictions (e.g., drugs, alcohol, gambling), alien status or nationality, criminal history, death, disability, ethnic affiliation, marital status, philosophical beliefs, political affiliation or opinions, pregnancy, racial identification, religious affiliation or lack thereof and trade union membership.

This is an explosive list of personal characteristics, but it is far from exhaustive. It is great as far as it goes, but it only goes as far as a handful of NAI members – and I am certain there is a longer list of equally explosive characteristics that can be data mined that are not even covered.

Some of NAI’s members are gigantic; even so, they cover only a small percentage of the consumers on the Web. Then too, the rules depend upon a great deal of case-by-case judgement by the members and the temptation to interpret the rules leniently, loosely, is as great as the potential rewards for doing so. Some of these ‘sensitive’ markets – racial groups, sexual preference groups – are enormous and highly lucrative.

I suspect that, at best, the NAI rules will prevent only the crassest misuse of data – its greatest strength will come from the consumer ‘opt-out’ and the disclosure procedures to which members must adhere. I am certain that much of the online behavioural advertising will just skim the line between the ordinarily tasteless and downright bad taste – sanctimoniously defended by their rigid adherence to the most liberal possible interpretations of the rules.

The NAI rules are a step in the right direction, but without legally enforced adherence by all online behavioural advertisers to a comprehensive set of broadly debated rules, Big Brother is an ad agency nerd fondling a database.

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Our next Connect-World Europe Issue will be published later this month. This edition of Connect-World will be widely distributed to our reader base and, as well, at shows where we are one of the main media sponsors such as: Sviaz / Expo Comm (14-18 May, Moscow), FT Mobile Media Conference (15-16 May, London), Wimax World Europe (29-31 May, Vienna), and Von Europe (11-14 June, Stockholm).

The theme for this issue will be, The evolving ‘Net’ – Rising to the challenge of rising use.

When speaking of networks, conventional wisdom and traditional business models no longer work as they did. The lines are blurring in the fixed, mobile and even broadcasting markets. Wired networks now handle traffic once thought suitable only for wireless and wireless is substituting wired in a broad range of applications. Seamless handoffs between wired and wireless networks –and, indeed, mergers, partnerships and consolidations bringing together networks and players of all sorts – further confuse the once prettily organised networking landscape.

This issue will examine what these changes in technologies and the market mean for the sector. How can the residential and business consumer best be served? What does the future hold for network operators of all types?

Europe II 2008 Media Pack; Click here


April I 2008

3 April 2008

Fredric Morris, Editor-In-Chief, Connect-World
Fredric Morris
Editor-In-Chief
Connect-World

WWW (World Wide Web) and WWA (World Wide Auction)

Going! Going! Growing! Growing! – Groan!

The Web is becoming an auction arena and I am not talking about eBay – it is the World Wide Auction. The rise of international collaboration, of outsourcing and insourcing has created a global auction for services and products. The global auction, let’s call it the WWA, is squeezing the slack and inefficiencies out of markets, raising the competitive ante, dropping costs and prices for services, pumping up economies that never had much of a chance before and forcing ever-larger scale dislocations in the developed economies of the world.

Digitally supercharged collaboration is the driver. The rise of search engines that lets one find services and products the world over, the rise of digital communications superhighways and low-cost almost cost-free data communications has given a boost to developing economies such as India.

The philosophy of digital collaboration is simple, work (collaborate) with whoever does the job best and most cheaply, wherever you find them. By collaborating with other companies throughout the world, new companies can jumpstart their operations without a long and costly start-up effort. Existing companies can outsource many of their needs to cut costs and remain competitive in the global market. You don’t need to be big to have a big infrastructure, just outsource – or insource – what you need from specialists. Want to look big to impress your clients? Just hire an out-sized, outsourced, shadow operation.

Companies looking for ways to reduce their costs need only search the Web to easily find a product they need or a service provider with an abundant supply of highly educated, low cost talent who can provide any sort of service – even if it requires a PhD. The secret – the magic sauce that really makes collaboration cook – is Google.

This has had a powerful levelling effect upon the global economy. Work once restricted to certain developed countries is now exported to wherever the service can be had with the best quality at the lowest price. Economists from Adam Smith and Ricardo to Marx all have noted and applauded the efficient workings of free markets (Marx, considered capitalist free markets to be the most efficient way to break down national and institutional barriers in preparation for the eventual victory of labour). One of the consequences of such markets is the flow of work and value towards the producer with the best cost-benefit ratio.

Given the speed with which the digital market place works, and the ruthlessly efficient functioning of market forces, many jobs are quickly shifting around the world and many other jobs are not created in their traditional homes. The juice or the fat is being squeezed out of markets throughout the world. We are seeing the development of an international Wal-Mart model for collaborative business arrangements. Prices are falling and jobs are shifting – often to developing regions of the world.

Historically, these shifts are hard on labour and jobs in the short-term, but the developing nations that cut into traditional markets soon become big customers of and, paradoxically, big creators of other sorts of jobs in the very same developed countries they took jobs from. The key to survival in these times is constant re-training, lifelong education, and a flexibility regarding career choices.

Working together – collaboration – is not what it used to be. Once, not so very long ago, it meant sitting down with a colleague in the same room and working together on the same project. Collaboration is now a worldwide, digitally assisted, phenomenon; it is old style working together raised to the nth degree and ‘n’ is the number of nodes, collaborators, information sources – what have you – available on the Internet. Collaboration is big business, for some it is their only business, for others it provides a lifeline, a way to survive in the global economy.

Collaboration, digital collaboration, comes in many flavours. It may be some sort of internal collaboration software that lets people in your company, in a variety of locations, share documents and ideas in real time to coordinate their efforts, plan a project, build a new device or solve a problem that just occurred. More sophisticated versions of this sort of workflow software let engineers in the United States, Western Europe, Russia, China, and any number of other countries keep the work going 24 hours per day, they pass the tasks along; if the sun goes down at one office it is coming up in another. They design cars, airplanes and chips, do back office tasks and just about anything else you can imagine; it is a long list and the tasks higher-level and more sophisticated every day.

Connectivity – the Internet – is the main enabler, but managing the flow of work, goods, time, cash and going with the flow, is the key concept. Managing the flow, more than managing it – working through it – is collaboration; it is the future.

I thought of this while watching a TV report about the inauguration and operational meltdown of the new Heathrow terminal – T5. It got me thinking about the collaboration needed to make this and similar tremendously complex operations function.

The automated baggage handling systems – it will take a while, but they will get it right – reminded me of some of the stories I have read during the last few years about RFID, radio frequency identification tags, that many companies, Wal-Mart especially, expect will greatly simplify important parts of their supply chain management systems. Supply chaining is the über-logistics management, the über-collaboration, that gets goods from all over the world and distributes them at the lowest cost, with the smallest delays, the fewest errors and the lowest inventory levels possible. A smooth running supply-chain calls for vastly complicated collaboration between the buyers – retailers like Wal-Mart, Carrefour, Target, Zara, manufactures like Boeing, Honda, Dell, Nokia – their suppliers, transport companies, designers, engineers all moderated by a constant flow of information, feedback, from the market.

Some of this has been possible for several years, but as time goes by, as connectivity improves and the electronics and systems get better, collaboration gets exponentially better. The growth of collaboration is somewhat like the growth of a child; as its brain and nervous system develop, its muscles get stronger and its communications – language – matures its control over its life and its environment grow in leaps and bounds. And this child has been growing.

Collaboration is the guiding principle in both the widely reported outsourcing phenomenon and the less well known, but increasingly important, insourcing services.

Insourcing has several definitions. In one sense, it is the opposite of outsourcing – it involves transferring internal production, functions and processes to a specialised outside company that performs the same tasks – but within the contracting enterprise.

The first experience with insourcing I remember goes back to the early 1980s. Of course, I immediately – only a quarter of a century later while writing this – recognised it for the collaborative breakthrough it was and understood its significance. A client of mine, a rather large multinational, used to take care of my travel arrangements whenever I visited one of their installations; their internal travel department negotiated with the airlines, car rental companies, hotel chains and the like. One day, though, I went to the travel office and, instead of a company department, I found a rather well-known travel agency. The people working there were mostly the same ones I had always dealt with, but now they worked for the agency that had convinced my client they could spend less and get better service by insourcing – if, indeed, the term existed then – their department.

Insourcing and outsourcing are two sides of the same coin – it all depends upon which side of the deal you are on. Insourcers also use outsourcers – its part of the game.

Collaboration takes many other forms, even instant messaging is a form of collaboration. The open source software development community relies upon the collaboration of its widespread participants. Conferencing tools such as Live Meeting, the Internet itself, Wikipedia, BitTorrent and services based upon peer-to-peer networking in general, Facebook, YouTube and social networking are all, each in its own way, as much a part of the collaboration phenomenon as insourcing and outsourcing.

Whatever the form collaboration takes, it is shaping up into a real revolution. The Industrial revolution became the Information Revolution; it might be the next revolution will centre upon the changes that collaboration is bringing. The Digital Collaboration Revolution does not sound terribly exciting – sorry, it’s the best I can do at the moment. A self-respecting revolution needs a far better name than that; it will certainly get one someday soon.

Collaboration and the WWA (World Wide Auction) is on the move and growing – it will, like all past revolutions, displace much we hold dear. Businesses and job categories will rise and fall – the harness makers will give way to automotive workers of the new age – and cultures will merge and change. As with all major social revolutions, in the short and medium term the WWA will bring both progress and pain. Going! Going! Growing! Growing! – Groan!

____________________________________________________

Our next Connect-World Europe Issue will be published later this month. This edition of Connect-World will be widely distributed to our reader base and, as well, at shows where we are one of the main media sponsors such as: Sviaz / Expo Comm (14-18 May, Moscow), FT Mobile Media Conference (15-16 May, London), Wimax World Europe (29-31 May, Vienna), and Von Europe (11-14 June, Stockholm).

The theme for this issue will be, The evolving ‘Net’ – Rising to the challenge of rising use.

When speaking of networks, conventional wisdom and traditional business models no longer work as they did. The lines are blurring in the fixed, mobile and even broadcasting markets. Wired networks now handle traffic once thought suitable only for wireless and wireless is substituting wired in a broad range of applications. Seamless handoffs between wired and wireless networks –and,  indeed, mergers, partnerships and consolidations bringing together networks and players of all sorts – further confuse the once prettily organised networking landscape.

This issue will examine what these changes in technologies and the market mean for the sector. How can the residential and business consumer best be served? What does the future hold for network operators of all types?

Europe II 2008 Media Pack; Click here