Charter Delays Plan for Targeted Web Ads

Charter Communications decided to hold off on plans to offer targeted advertising opportunities based on data about its customers' Web-browsing behavior after some customers expressed privacy concerns.

In May, Charter, the country's fourth-largest cable operator by subscribers began sending letters to some customers saying that it would be partnering with ad-targeting company NebuAd. Charter planned a test in four markets, where it would sell data about its customers' Internet-surfing habits to NebuAd, which would use it to serve up targeted ads.

The course change was in response not only to customer complaints but also to the reaction from some members of congress including Rep. Ed Markey (D., Mass.) and Rep. Joe Barton (R., Texas). Both congressmen urged the company to drop its plan.

Charter's decision is the latest complication for cable operators as they make a push to bring in more advertising revenue. With vast amounts of information about their customers, including detailed profiles of their Web habits, cable companies would seem to be among the best-positioned to emerge as major players in the fast-growing market of targeted advertising.

Also, because cable operators often provide customers with both Internet and TV service, the potential to use intelligence about customers across different platforms -- by, for example, targeting television ads based on Web-surfing behavior -- has enormous potential, analysts say.

But it also sets off some alarm bells. "It requires crossing a whole series of Rubicons regarding customer privacy," says Craig Moffett, an analyst at Sanford C. Bernstein.

Charter's decision comes at a time when the cable operators are gearing up to make a big push into the advertising market. This month, Canoe Ventures -- a joint venture between the country's largest operators to create a nationwide advertising platform -- officially launched. Cable companies are looking to advertising as a major driver of growth over the next five years, says Mr. Moffett.

Given the importance of the new revenue stream to cable operators, Charter's cold feet are likely to send operators looking for some new approaches -- but not back off entirely. "They are going to do this, so it's a matter of when and not if," Mr. Moffett says. "They will find structures that are acceptable and will allow them to extract this value."

Rep. Markey, who met with representatives of Charter in June to dissuade them from moving forward, issued a statement supporting Charter's decision to hold off on the program.

"I urge other broadband companies considering similar user-profiling programs to similarly hold off on implementation while these important privacy concerns can be addressed," he said.

--Vishesh Kumar