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Commentary: "Free" Web services tap sophisticated advertising

Meta Group believes a backlash is brewing among site subscribers and others, driven by the level of invasiveness of new messages and advertisements.

With Wall Street refusing to invest in Web services that do not show signs of making a profit, so-called free e-mail and news sites are adopting more sophisticated advertising techniques.

Not only are free e-mail sites selling "opt in" plans to advertisers--enabling them to bypass the system's anti-spam software to send ads to e-mail subscribers--but other types of sites, such as news services, are also becoming more sophisticated about their advertising.

See news story:
Spam filters may feed Web marketing
For example, this week CNET Networks (the publisher of CNET News.com) unveiled a major change in its advertising approach, allowing large ads to be prominently placed in the middle of articles. These ads can use advanced technology such as Shockwave, making them difficult for readers to ignore. As information providers become more sophisticated at this, they could match ads with specific types of stories--for instance, networking companies could pay to have their ads embedded in networking stories.

The question is how the public will react to these sophisticated targeting and advertising techniques. For instance, if readers on one site find that they get inundated with targeted e-mail advertisements, or it takes a long time to open stories because of the embedded ads, will they switch to a competing site that does not have these types of ads?

Site performance must also match user expectations, or the site can suffer a user backlash. For instance, if a free e-mail site offers advertisers an opt-in program to advertisers, then it must warn its e-mail users of that. If it promises them that it will block all spam but sells access to advertisers, eventually customers will figure out what is happening, and many may be angry enough to switch services. These new marketing techniques are not raising switching costs. In fact, the result may be that we find out just how low these switching costs are.

As advertisers become more sophisticated about tracking people around the Web, people may in turn start associating visiting specific sites with getting large amounts of annoying spam. That could also discourage use of some sites and lead to increased privacy concerns.

A backlash in the making
We believe a backlash is brewing among site subscribers and other users, driven by the level of invasiveness of these messages and advertisements. Governments, particularly European ones where privacy is already a huge concern, will use privacy issues as an excuse both to protect their citizens and, too often, also their national companies. Individuals will become increasingly annoyed. Sites need to make money on advertising while not getting so annoying that they drive people away.

In the e-mail arena, this may create a market for premium-priced sites that protect subscribers from spam--if they can. America Online, for instance, has been unable to completely block spam despite both technical and legal efforts to do so. The question will be how much people will be willing to pay for this protection.

Organizations need to be concerned about junk mail reaching their employees through the corporate e-mail systems for several reasons. First, it adds to the traffic on their networks, taking up bandwidth that the companies could better use for business-oriented communications. Second, in some cases, this e-mail could be offensive to some recipients, and that can create workplace harassment issues when those messages reach the offended users through a company e-mail system. It also takes away from the time people spend doing what they are getting paid for, so productivity gets affected.

Companies also need to establish clear policies about their own Web sites. Do they want to capture the e-mail addresses of people who access their site? Do they then want to send unsolicited ads for their company to those people? Do they want to sell those lists to third parties? We recommend that companies consider a firm policy of not sending any unsolicited communications to persons who access their Web sites.

Meta Group analysts Peter Burris, Val Sribar, Dale Kutnick and William Zachmann contributed to this article.

Visit Metagroup.com for more analysis of key IT and e-business issues.

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