By Brett Winterford
Thursday, November 20 2008 10:44 AM
URL: http://www.zdnetasia.com/news/communications/0,39044192,62048440,00.htm

The leaders of two of Australia's largest ISPs see a viable business model in offering free or discounted broadband connectivity, sponsored by advertisements targeted according to a user's Web surfing habits.

Privacy advocates have been rallying against the attempts of online advertising vehicles such as U.K. start-up Phorm to track Web surfer's habits at ISP-level to deliver them targeted advertising.

But neither Justin Milne, group managing director of Telstra Media or Simon Hackett, managing director of Adelaide-based ISP Internode, have a problem with the concept. Both see a future where advertising might pay for broadband in much the same way as Google delivers targeted advertising to the users of its free Gmail Webmail service.

"I don't have a problem with the notion of targeted advertising at an ISP level as long--as it's a choice our customers have got rather than a mandate," Hackett told ZDNet Asia sister site ZDNet Australia in a recent video interview. "I think that's one of the ways you'll possibly see us head in the future. So picture a world where you can choose to be shown targeted ads and pay less money, maybe even pay nothing, or just pay for the experience directly and not have the ads."

Hackett and Milne both see the advertising models used by traditional media giants (such as free-to-air television stations) as fundamentally flawed in today's Internet-connected world. Internet technologies, they argue, offer far more viable models for advertising--to the point where ads actually become desirable to users.

"The problem with conventional advertising is in fact sheer waste," explains Hackett. "The fact that you throw a generic ad out about a sports car to people who don't give a flying anything about a sports car--[with the Internet] you could spend ten times the money getting ten times the result."

"Picture a world where you might have an IP equivalent of a TV station and the ads actually tune themselves over time to what you said you wanted to see. You get the content free as long as you're prepared to watch the ads."

Milne says ISPs and Web developers have already been using behavioral targeting, albeit on an anonymous level, via the use of cookies. It is not a stretch, he suggests, that similar technology may be used to "make advertising more useful to customers and therefore more useful to advertisers".

Milne would like to see Web-surfing data used with information from other service providers to take the premise even further. Telstra Media, he says, is in a unique position to bring some of those sources of data together. Telstra might in the future, for example, be able to take advantage of a mix of both data about mobile phone use and data about Web-surfing habits to serve targeted ads.

Mobile phones, Milne said, have unique identifiers about who is using the device and can also easily be tracked according to location.

"One example is, anonymously perhaps or with your permission, we notice that you've surfed a bunch of different car sites, so you must be in the market for a car," says Milne. "And we've done a deal with BMW, who are advertising with us, and now we notice that you happen to be standing right outside a BMW dealership."

"So we send you a message or punt you an ad, or send you an SMS and say: turn around, walk into the [car] dealer behind you and you can get a discount off the price of the car. Now if you as a user are really in the business of buying a car, suddenly car ads become not ads, but information."

Not everybody is keen on the idea, however. Michael Malone, CEO of Australia's third-largest ISP iiNet, has some privacy concerns.

"I haven't heard about the example you give of Phorm, which is utilizing advertising directed at customers based upon what they are browsing," he said. "But my first reaction to it is that it's probably taking things a little bit too far."

"The ISP, I believe, is providing the plumbing for the customer into their household, and largely we should be passive in terms of the data the client is downloading and getting access to. We require the minimum required logs, for instance, of what our customers are doing, and we don't interfere with the data in any way without police interception requests."

"So my first reaction to what you're saying is [that] it's probably stepping a bit too far into invading a customer's privacy."