Presentation providing overview of developments in Online Advertising.in 2008

2. What about it?

3. TV
36.8%
NEWSPAPERS
Surpass in 11 25.1%
MAGAZINES
Surpass in 10 12.8%
ONLINE
10.9%
RADIO
Surpassed in 07 10.2%
Surpassed in 06 OUTDOOR
3.8%
CINEMA
Surpassed in 97

4. Who Advertises
Online

5. Who Advertises
Offline

6. Online ad revenue
$20.2 Billion (2007)
$25.9 Billion (2008)
$62.4 Billion (2012)
$147 Billion
(2012) (global)

7. And Who Doesn’t
•Political Ad
Revenue Up 155%
from 2004
•But only 2.5% of
$3 billion market

8. Uncertain
Times
• Barclay’s
– US ad revenue to fall approx
9% over next two years
– Online ad revenue will
continue to grow at a slower
double digit pace
• IAB
– Q2 Report - $11.5B revenue
(up 15.2%)

9. • Behavioral
Targeting
• Key Word
Search
• CAN-SPAM
Update
• FTC and State
Enforcement

10. Seattle Beacon October 14, 2008 PAGE TWO
TELESCOPE SALES
BOOM IN ALASKA
ANCHORAGE. Alaska telescope retailers have reported a
huge spike in telescope sales in September. According to
store owner Joe Monegan, local foreign policy experts are
buying the telescopes to watch Russia in light of its recent
34
invasion of Georgia. (More on Page 4)
SEATTLE’S SOGGY SODS
Got Sun? CITY BREAKS RECORD FOR
CONSECUTIVE RAINY DAYS
SEATTLE. Forget Spain, the rain falls mainly in
Seattle as the Emerald City “enjoyed” its 34th
consecutive day of rain breaking the 1953
record. Sonny Smith, President of the Visitors
and Convention Bureau was quick to point out
that even with the record, the city still gets far
less total rain than cities such as Miami. In fact,
Seattle is not even among the top 101 cities for
We got plenty in Palm Springs total rainfall. So remember, it could be worse –
you could be in Miami.
www.sunsunsun.com

11. Seattle Beacon October 14, 2008 PAGE TWO
TELESCOPE SALES
BOOM IN ALASKA
ANCHORAGE. Alaska telescope retailers have reported a
huge spike in telescope sales in September. According to
store owner Joe Monegan, local foreign policy experts are
buying the telescopes to watch Russia in light of its recent
34
invasion of Georgia. (More on Page 4)
SEATTLE’S SOGGY SODS
Got CLE? CITY BREAKS RECORD FOR
CONSECUTIVE RAINY DAYS
SEATTLE. Forget Spain, the rain falls mainly in
Seattle as the Emerald City “enjoyed” its 34th
consecutive day of rain breaking the 1953
record. Sonny Smith, President of the Visitors
and Convention Bureau was quick to point out
that even with the record, the city still gets far
less total rain than cities such as Miami. In fact,
Seattle is not even among the top 101 cities for
total rainfall. So remember, it could be worse –
you could be in Miami.

12. Seattle Beacon October 14, 2008 PAGE TWO
TELESCOPE SALES
BOOM IN ALASKA
ANCHORAGE. Alaska telescope retailers have reported a
huge spike in telescope sales in September. According to
store owner Joe Monegan, local foreign policy experts are
buying the telescopes to watch Russia in light of its recent
34
invasion of Georgia. (More on Page 4)
SEATTLE’S SOGGY SODS
Got Elvis? CITY BREAKS RECORD FOR
CONSECUTIVE RAINY DAYS
20TH ANNUAL CRUSHED VELVET
SEATTLE. Forget Spain, the rain falls mainly in
ELVIS ART SHOW Seattle as the Emerald City “enjoyed” its 34th
consecutive day of rain breaking the 1953
Who needs Picasso when you can record. Sonny Smith, President of the Visitors
have the King?. and Convention Bureau was quick to point out
that even with the record, the city still gets far
TICKETS ON SALE NOW less total rain than cities such as Miami. In fact,
Seattle is not even among the top 101 cities for
total rainfall. So remember, it could be worse –
you could be in Miami.

13. BT 1.0
User Tracked by
• Website
• Adware Program
• Ad Network BT 2.0
User Tracked by ISP
(“Deep Packet Inspection”)

14. BT 1.0
Response
• 40% to 111%
increased response
due to BT (Boston.com)
Revenue
• 2008: $775 MM
(3% of online ad spending)
• 2012: $4.4 BB
(8.6% of online ad spending)

15. 2007: A Year in the Limelight
Merger Mania
Other News
• AOL Accidental Release of User Search Histories
(2006)
• Google Reveals Search History Kept Indefinitely
• Facebook’s Beacon program
• FTC Workshop on Behavioral Targeting
• Consumer Groups Call for “Do Not Track” Registry

16. Washington Responds
Self-
FTC Proposed Self-Regulatory Principles
• Notice: A consumer-friendly and prominent notice
that data is used for BT
• Choice: Give consumers the ability to opt-out
• Security: Must provide reasonable security and
retain only as long as needed
• Sensitive Data: Express consent for use in BT
Congressional Investigations
• Privacy Implications of Google-DoubleClick Merger
• Potential Microsoft-Yahoo deal

18. BT 2.0
Is it legal? Probably. Do I think it's
a good idea and it makes sense?
No. I don't think it passes the
creepy factor, and this market
isn't ready for stuff that doesn't
pass the creepy factor. We are
not in a place where we can do
dumb things and stupid things
like that, even if they're effective.
-- Dave Morgan
Tacoda Founder and former CEO

19. Congress Responds
• Incredible leap into the breaching of the
privacy of Americans – Rep. Markey
• Isn't that just wiretapping – Sen. Dorgan
• Contemptible – Rep. Greene
• Senior House members send letters to over 30
ISPs: has your company at any time tailored . . .
Internet advertising based on consumers’ Internet
search, surfing, or other uses?

20. • ISP Response
– Cancel NebuAd
tests
– Will provide opt-
out mechanism
• NebuAd
– Shelves BT 2.0
– Other 2.0
companies may
not survive

21. But aren’t we
forgetting
something?

22. What about the offline world?
Reported Data Breaches Q4-07
14%
28% Brick & Mortar
GENERIC FOODS
GENERIC FOODS
E-Commerce
for you and on you
We got the goods
We got the goods
Government
Education
26%
4% Medical & Other
28%
Average American has
4.3 loyalty cards

23. Coming to a C-SPAN Near You in 2009

25. Search is the largest
segment of online
advertising . . . .
IAB/PWC 2007 Revenue Report
because it produces
results.
Case study: Provenance Hotels
experienced an increase ROI of
2,700% through SEO and paid
search.

27. Lanham Act
Section 43
Any person who, on or in connection with any goods or
Civil Liability services, or any container for goods, uses in commerce
any word, term, name, symbol, or device, or any
combination thereof . . . which
is likely to cause confusion . . . as to the
affiliation . . . the origin, sponsorship . . .
of his or her goods . . . by another person
in commercial advertising . . . misrepresents the
nature, characteristics, qualities, or geographic origin
of [the] goods
is likely to cause dilution by blurring or . . .
tarnishment of the famous mark, regardless of the
presence or absence of actual or likely confusion

28. [A] mark shall be deemed to be
in use in commerce—
(1) on goods when . . . placed in any
manner on the goods or their
containers or the displays
associated therewith or on the tags
or labels affixed thereto, or if the
nature of the goods makes such
placement impracticable, then on
documents associated with the
goods or their sale…
(2) on services when it is used or
displayed in the sale or advertising
of services and the services are
rendered in commerce…
ONE VIEW: Keyword bidding not use in commerce since it “is
strictly internal, and, because such use is not communicated to
the public, the use does not indicate source or origin of the mark”

29. Use in Commerce
Only the Second
Circuit has found
that an $8.6
billion industry You Are Here
is not involved in
commerce.

30. Does Bidding on Competitor’s
Trademark Constitute
Infringement?
Likelihood of confusion
among judges

31. Initial Interest Confusion
Use of another trademark
“in a manner calculated
to capture initial
consumer attention, even
though no actual sale is
finally completed as a
result of the confusion.” B Tal
Brookfield Communications Inc. v. West
Coast Entertainment Corp., 174 F.3d 1036
(9th Cir. 1999).

32. Rationale
• Improperly Benefits From
Goodwill of Trademark
• False Detour From Information
Super-highway
– Analogy to false detour sign directing
consumers to take wrong exit. “Unable to
locate West Coast, but seeing the
Blockbuster store right by the highway
entrance, they may simply rent there..”
Brookfield Communications, Inc. v. West Coast
Entertainment Corp., 174 F.3d 1036, 1062 (9th
Cir. 1999)
• Bait and Switch
– “Initial interest confusion can be viewed
as a variation on the practice of ‘bait and
switch.’” 3 J. Thomas McCarthy, McCarthy on
Trademarks & Unfair Competition § 23:26 (4th ed. 2003).

33. “The initial
interest
confusion
doctrine is a
mess."

34. Counterpoint
• Not a Detour, Merely a Lane Change
– Web surfers are accustomed to false starts
and are unlikely to be dissuaded when they
end up at the wrong site. Chatam Int'l v.
Bodum, Inc., 157 F.Supp.2d 549, 559 ED
PA 2001).
• No different than supermarket placing
products.
store brand next to branded products
– FragranceNet.com, Inc. v. FragranceX.com,
et al. No. 06-CV-2225 (JFB)(ART)(E.D.N.Y.,
June 12, 2007)
• Legally Significant Confusion?
– “The [District] court’s refusal to enter the
‘initial interest confusion’ thicket is well
taken given the unlikelihood of ‘legally
significant’ confusion.” Hasbro Inc. v. Clue
Computing, Inc., 232 F.3d 1, 2 (1st Cir.
2000).

35. Non-Doctrine Standard
• No Liability If Trademark
Not Displayed
– Keyword advertising is a
“use in commerce,” but
cannot confuse
consumers if the ultimate
search results do not
display plaintiff’s
trademarks. J.G. Wentworth
SSC Ltd v. Settlement Funding
LLC, No. 06-0597 (E.D. Pa. Jan.
4, 2007).

36. CAN-SPAM Act of 2003
CAN-SPAM IS . . . CAN-SPAM DOES NOT . . .
• An anti-fraud and • “Can Spam” – except for
disclosure statute wireless spam
• Applies to an email • Include a “Do Not Email
where the “primary Registry”
purpose” is commercial
advertisement or • Impose an “ADV”
promotion of a product labeling requirement
or service
• Create a general private
right of action
• Have a volume
requirement

37. CAN-SPAM Principal Requirements
From line must
identify initiator
Subject line must not be deceptive.
Adult Messages must provide notice.
UCE must be
identified
as
“advertisement”
Requires Working Opt-Out Postal Address for Advertiser
Mechanism for Advertiser

38. Regulatory Timeline
2004: FTC Final Rule on Adult Labeling
FCC CAN-SPAM Rules
2005: FTC (1) Final Rule on Primary Purpose
of Email; and (2) Proposed Discretionary Rules
2006:
2007:
2008: FTC Final Discretionary Rules

39. Discretionary Regs
Definition of Valid Physical Address
• Accurately registered P.O. Box allowed
Opt-Out Requests Conditions or Expiration
• Cannot impose any conditions on opt-out requests
– (e.g, fee or provide information)
• Abandons proposal to reduce processing time to 3 days
• Rejects call for expiration period for opt-out requests

40. Designated Sender Rule
Must Be a
• Name must be in the “From” Sender Under
Line CAN-SPAM
• Must be Responsible for Cannot designate
CAN-SPAM compliance Non-Sender
• Dropped requirement that
Designated Sender be in
control of the content or the
mailing list used

41. “Sender” Liability
• FTC unsuccessful in
seeking strict liability
• Advertiser liable if
“actual knowledge, or by
consciously avoiding
knowing” about affiliate
violations
– Hypertouch v. Kennedy-
Western University
Strict anti-spam policies
and policing of affiliates
defeated allegation of
intent.
– ASIS Internet Services v.
Opt-In Global, Inc.
No duty to investigate

42. CAN-SPAM Plaintiffs
• FTC
• State AGs
• Internet Access Service
Provider (IASP)
– Adversely Effected by
Violation
• No Consumer Private
Right of Action

43. Is the IASP Remedy a Trojan Horse?
Kennedy-
Hypertouch v. Kennedy-Western
University
• Small, free service can qualify.
.
• Concern that Hypertouch is a
professional plaintiff can only be
addressed by Congress
• Opens door to litigation by anti-
spam activists as faux-IASPs
Hypertouch and its principal have filed approx.
40 cases under CAN-SPAM and/or California law

44. Is Gordon a Proper Plaintiff?
• Gordon v. Virtumundo
– Continued to use other people's e-mail
addresses to collect spam . . . for
generating lawsuit-fueled revenue
– No harm related to
• Bandwidth
• Hardware
• Internet connectivity, network integrity
• Overhead, staffing or equipment costs

45. No!
• Not Plaintiff Congress
had in mind – must Followed in Cal
demonstrate Federal Court
substantial harm ASIS Internet Services v.
OPTIN Global
• Awards Defendant (N.D. Cal. 2008)
Attorneys’ Fees – suit
“ill-motivated,
unreasonable, and
frivolous”

46. CAN-SPAM PREEMPTS ALL STATE
REGULATION OF EMAIL EXCEPT
STATE LAWS
• Regulating falsity or deception in email
• Not specific to email, including State trespass,
contract, or tort law; or
• Other State laws to the extent that those laws
relate to acts of fraud or computer crime

47. • Misrepresentation must be
material
State Preemption • States cannot dictate form
of from line
Case Law – Cannot prohibit use of multiple
domains.
– Not misleading to use non-
corporate address where domain
may be checked using “Who Is”
• State regulation must be
based on traditional notions
of fraud
• First Amendment requires
that it not impinge non-
commercial email

48. Preemption’s Back Door?
• Utah/Michigan
Child Registry Laws
– Makes sending prohibited email a
“computer crime”
– Free Speech Coalition, Inc. v. Shurtleff,
Utah Federal Court refused to enjoin law
finding it fell within exception for
computer crime
• DOJ filed brief supporting this position
• New Colorado Spam Law
– Makes violation of CAN-SPAM a violation
of state deceptive practices and
computer fraud laws
– Is this a backdoor to creating private
right of action under CAN-SPAM?

49. AB 2950
• Pushed by anti-spam activists who
have filed over 100 suits
• Wish list
– Advertiser liability
– Prohibiting use of multiple domains
– Tactics to evade email filters
– Expand Plaintiffs to include District &
City Attorneys
– Venue
– Restore Statute of Limitations to 3 Years

50. AB 2950
• Pushed by anti-spam activists who
have filed over 100 suits
• Wish list
– Advertiser liability
– Prohibiting use of multiple domains
– Tactics to evade email filters
– Expand Plaintiffs to include District &
City Attorneys
– Venue
– Restore Statute of Limitations to 3 Years

51. www ≠ Wild West West

52. Increased State Enforcement
The Majors
New York
Continues to be activist post-Spitzer
under Andrew Cuomo
Texas
80 Arrests First Three Years
Washington
Five spyware lawsuits since 2005
New Kids on the Block
Florida
Established in 2007. Investigating 10
companies over “Free ” promotions
Kansas
Launched in September 2007

53. FTC & State Enforcement
•Deceptive Advertising
– The High Cost of “Free”
•Unfair Practices
– Data Security – will impose
sanctions if security not
adequate for type and volume
of data collected
– Drive by Downloads

54. FTC Consent Decrees
QUALIFICATIONS TO “FREE” OFFERS
MUST:
• Be in the same color, font, and
color,
size and within close proximity
• Disclose if purchase required
• Disclose all monetary and non-
monetary (e.g., credit card
application) obligations a consumer
is likely to incur to obtain the
advertised gift.

56. Florida 3 Zone Standard
• All zones must be “above the fold” / visible to
consumer w/o scrolling
• All font types must conform to Web Standard
size equivalencies
• W3C Color Contrast standard applies to all
disclosures in all zones (125 min.)
• All disclosures must be visible at all times
throughout the order path

58. Tallahassee Three Step
• Zone 1 – Price and 2-
Zone 2- Types of Content
Term ($9.99 per (Ringtones and Other Text
month) Services)
• Must be disclosed entirely • Must be disclosed no greater
within 125 pixels in any than 20 pixels from the Offer
direction from the cell Description (Get 10 Bonus
submit field and the P.I.N. Ringtones)
code submit field.
• 12pt. minimum font size • Other Text Services can be no
smaller than 50% of the font size
• Must be disclosed in of the Offer
numerical format 0-9 and
include $ and without any • Description (Get 10 Bonus
other text except Ringtones) Minimum font size is
price/term 20pt.
Zone 3 – Age / Other T’s and
C’s
• Age description must be above
T’s and C’s. Minimum 12pt. font
size.

59. Online Gambling
US: Online gambling/ads are illegal
• Google, Microsoft & Yahoo:
$31.5 million settlement with DOJ
(Dec. 2007)
• DotNet sites are illegal unless
– There are no web links to an online
gambling site; and
– Home page has disclaimer stating the
site is purely educational
Online Gambling Liberalization in Europe
• Still highly regulated

60. Antigua v. United States
WTO Battle over Online Gambling
• WTO: To the extent online gambling was allowed
within the U.S. (some states permit online
gambling for horse racing), foreign companies
were entitled to equal access to this market
• Awarded $21MM/yr in damages which may be
recouped by suspending IP protection for US
goods
– US-Antigua negotiations ongoing
• EU may bring similar claim
– Damages in billions
– Decision expected by end of the year

61. Selected Cases I
Keyword Advertising
Use In Commerce
• NO: Rescuecom Corp. v. Google, Inc., 456 F.Supp.2d
393 (N.D.N.Y., September 28, 2006)
• YES: Playboy Enterprises, Inc. v. Netscape
Communications Corp.. 354 F.3d 1020 (9th Cir., Jan.
14, 2004)
Initial Interest Confusion Doctrine
• Brookfield Communications Inc. v. West Coast
Entertainment Corp., 174 F.3d 1036 (9th Cir. 1999).
Questioned by
• Chatam Int'l v. Bodum, Inc., 157 F.Supp.2d 549, 559 (ED PA 2001).
• FragranceNet.com, Inc. v. FragranceX.com, et al. No. 06-CV-2225 (JFB)(ART)(E.D.N.Y.,
June 12, 2007)
• Hasbro Inc. v. Clue Computing, Inc., 232 F.3d 1, 2 (1st Cir. 2000).

62. Selected Cases II
CAN-
CAN-SPAM ACT
Preemption
• Omega World Travel, Inc. v. Mummagraphics, Inc.,
469 F.3d 348 (4th Cir. 2006)
• Kleffman v. Vonage Holding Corp., Case No. CV
07-2406GAFJWJX (C.D. Cal. May 23, 2007)
• Gordon v. Virtumundo, Inc., Case No. 06-0204-JCC
(W.D. Wash. May 15, 2007)
• Virginia v. Jaynes, No. 062388 (Va. September 12,
2008)
IASP Standing
• ASIS Internet Services, v. Optin Global, Inc., 2008 WL 1902217 (N.D. Cal. March 27, 2008 )
• Hypertouch v. Kennedy-Western University, 2006 WL 648688 (N.D. Cal. 2006)
No Strict Liability
• US v. Impulse Marketing, No. CV05-1285RSL (W.D. Wash. June 8, 2007)
• US v. Cyberheat, 2007 U.S. Dist. LEXIS 15448 (N.D. Ariz. 2007)

63. Selected Cases III
Online Gambling
• United States – Measures Affecting The Cross-border
Supply Of Gambling And Betting Services. Recourse to
Article 21.5 of the DSU by Antigua and Barbuda, Report
of the Panel, World Trade Organization, WT/DS285/RW
(07-1209), March 30, 2007.
FTC Guidelines
• Dot Com Disclosures: Information About Online
Advertising
• Advertising and Marketing on the Internet: The
Rules of the Road
• FTC Policy Statement Regarding Advertising
Substantiation
• FTC Guides Against Deceptive Pricing

64. Bennet Kelley
Bennet Kelley is founder of the Internet Law Center in Santa
Monica where he helps clients navigate the challenges of the digital
economy. He has been active in many of the hottest Internet issues
over the past decade including cyber squatting, internet marketing
and promotions, online gambling, net neutrality, privacy and spam.
Bennet is the Vice-Chair of the California State Bar's Cyberspace
Committee and is a regular contributor to the Journal of Internet
Law. Bennet worked in-house with companies such as ETM
Entertainment Network, SpeedyClick.com and ValueClick prior to
launching the Internet Law Center.
www.InternetLawCenter.net The Internet Law Center’s newsletter, Monday Memo, recently was
named one of the top 100 Internet Law resources.
.
Contact: Internet Law Center
100 Wilshire Blvd, Suite 950
Santa Monica, CA 90401
310-452-0401
bkelley@internetlawcenter.net