Privacy for free online calls

(Business 2.0 Magazine) -- What's more creepily brilliant than ads that follow you around the Web? How about a Skype-like online phone service that listens in on your conversations and serves up ads based on what you say?

A San Jose startup called Pudding has developed technology that can pick up on tens of thousands of keywords uttered during calls (everything from "vacation" to "PlayStation" to "doughnut"). Use your laptop to call a buddy and talk about dinner plans, for example, and within a few seconds you'll see a Pizza Hut banner or promotional video on your screen. In exchange for the eavesdropping, your calls come free of charge.

1. A user logs on to a VOIP service and places a call. 2. Pudding's software eavesdrops. 3. Ads matching keywords are served up on user's screen.

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"Think of us as the Google AdSense of voice," says Ariel Maislos, chief executive and co-founder (with brother Ruben) of Pudding, whose service is currently in beta testing. Rather than competing with Skype-like services, Maislos says the greater opportunity is to license Pudding's ad technology to them.

Pudding could be a godsend to the VOIP industry, which has been hurt by price wars and a decline in the pace of customer acquisitions. "Free calls are going to have to happen," Maislos says. "We're providing a platform for the providers to monetize their services."

That is, if users don't rebel against the Big Brother factor. "People could get very upset if they felt they were being monitored," says Stan Schatt, a VP at New York-based ABI Research, although Schatt agrees with Maislos that the industry is desperate enough for new business models.

To its credit, Pudding's system doesn't actually record conversations; it does its voice recognition and ad matching on the fly using technology created in Kfar Saba, Israel, where the company's developers and linguists are adding several hundred more words to the system's vocabulary every week.

If successful, Maislos wants to enable contextual ads on cell phones as well. They would not appear during the call, but minutes or hours later, while you're accessing e-mail on your handset, say. In the meantime, though, VOIP is a fairly rich market for Pudding to tap. Skype alone now has 220 million users worldwide - up 94 percent in the past year.

So will a significant percentage be freaked out by Maislos's service? "I would have to see some focus groups and surveys showing that the public wouldn't find it all overtly intrusive," says ABI's Schatt. Proof, in other words, may soon be found in Pudding.