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Intel ad subsidies raising eyebrows

An advertising program based around Pentium II performance is heating up the debate on where journalism ends and advertising begins on the Web.

A multimillion-dollar advertising program from Intel (INTC) is heating up the debate on where journalism ends and advertising begins on the Web.

At the center of the debate is the "Intel Inside Optimized Content" program, a four-month-old campaign that essentially provides additional revenues to Web publishers that create special pages touting the performance benefit of the Pentium II processor.

The problem, critics say, is that it opens up news organizations to conflicts of interest. To receive the maximum amount of the program's funds, publishers have to create a Web page with content that promotes the Pentium II processor and feature a front-page link to a Pentium II demonstration.

Some critics, including the American Society of Magazine Editors, charge that the program begins to blur the line between advertising and editorial content because the pages in question are integrated into the Web site itself and not typically separated out as advertisements. The financial relationship is also not disclosed on these sites.

CNET: The Computer Network, the publisher of NEWS.COM, is not currently participating in the program but will. Intel is an investor in the company.

Chris Barr, CNET's editor in chief, said the Pentium II pages will be more clearly differentiated from news stories. "We will probably do it as an 'advertorial,'" he said, referring to a special advertising section.

Supporters claim that the program does not differ from any other type of advertising relationship.

"We chose our stories without regard to advertisers," said Mark Bernstein, vice president and general manger of CNN Interactive. "It's not like it's the front-page story."

CNN and Ziff-Davis currently receive funds under the program while computer publisher International Data Group has declined participation, claiming conflicts of interest.

Since beginning only a few years ago, the "Intel Inside" program has spent about $3.4 billion in promoting the ubiquitous logo and, of course, Intel's microprocessors.

While Intel spends money directly on television spots and other advertising, a substantial portion of the Intel Inside money is spent through its partners. Computer manufacturers such as Compaq receive Intel Inside funds as reimbursement for running ads touting their own computers as well as Intel processors.

The practice is widespread in the industry and explains why advertisements touting computers will also feature slugs for Intel or Microsoft.

In September, Intel began to allocate reimbursement funds for Web advertising. Intel said it would reimburse computer advertisers up to 50 percent of its Web advertising costs on selected, approved sites. "It has to be in good taste," explained Adam Grossberg, an Intel spokesman.

Intel said it would offer an additional 25 percent reimbursement if ads were placed on a site that featured the benefits of the Pentium II. These pages must be approved by Intel, perform better with a Pentium II, and bear a notice saying the pages run better with the processor.

Critics raise concerns that these Pentium II pages constitute forms of advertising but are not labeled as such.

But CNN's Bernstein points out that other technology companies provide similar funds. Further, the pages subject to the program do not affect news coverage. Earlier, MSNBC contained a feature that would not allow readers to view certain news stories in their full glory unless the reader was using Internet Explorer. "We're not doing anything like that," Bernstein said.

How advertisers feature these Pentium II enhanced pages so far has varied. CNN has created a three-dimensional globe that, when clicked, locates political unrest around the world. Ziff-Davis's Pentium II-powered pages act as a 3D site map that complements the regular iteration. While both companies include the explanation that the particular pages will run better with the Pentium II, the advertising relationship is not disclosed.