[House Hearing, 110 Congress]
[From the U.S. Government Printing Office]


 
                      SUBCOMMITTEE HEARING ON THE 
                      IMPACT OF ONLINE ADVERTISING 
                             ON SMALL FIRMS 

=======================================================================

           SUBCOMMITTEE ON REGULATIONS, HEALTH CARE AND TRADE
                      COMMITTEE ON SMALL BUSINESS
                 UNITED STATES HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 25, 2008

                               __________

                         Serial Number 110-102

                               __________

         Printed for the use of the Committee on Small Business


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house
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                   HOUSE COMMITTEE ON SMALL BUSINESS

                NYDIA M. VELAZQUEZ, New York, Chairwoman


HEATH SHULER, North Carolina         STEVE CHABOT, Ohio, Ranking Member
CHARLIE GONZALEZ, Texas              ROSCOE BARTLETT, Maryland
RICK LARSEN, Washington              SAM GRAVES, Missouri
RAUL GRIJALVA, Arizona               TODD AKIN, Missouri
MICHAEL MICHAUD, Maine               BILL SHUSTER, Pennsylvania
MELISSA BEAN, Illinois               MARILYN MUSGRAVE, Colorado
HENRY CUELLAR, Texas                 STEVE KING, Iowa
DAN LIPINSKI, Illinois               JEFF FORTENBERRY, Nebraska
GWEN MOORE, Wisconsin                LYNN WESTMORELAND, Georgia
JASON ALTMIRE, Pennsylvania          LOUIE GOHMERT, Texas
BRUCE BRALEY, Iowa                   DAVID DAVIS, Tennessee
YVETTE CLARKE, New York              MARY FALLIN, Oklahoma
BRAD ELLSWORTH, Indiana              VERN BUCHANAN, Florida
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania
BRIAN HIGGINS, New York
MAZIE HIRONO, Hawaii

                  Michael Day, Majority Staff Director

                 Adam Minehardt, Deputy Staff Director

                      Tim Slattery, Chief Counsel

               Kevin Fitzpatrick, Minority Staff Director

                                 ______

           Subcommittee on Regulations, Health Care and Trade

                   CHARLES GONZALEZ, Texas, Chairman


RICK LARSEN, Washington              LYNN WESTMORELAND, Georgia, 
DAN LIPINSKI, Illinois               Ranking
MELISSA BEAN, Illinois               BILL SHUSTER, Pennsylvania
GWEN MOORE, Wisconsin                STEVE KING, Iowa
JASON ALTMIRE, Pennsylvania          MARILYN MUSGRAVE, Colorado
JOE SESTAK, Pennsylvania             MARY FALLIN, Oklahoma
                                     VERN BUCHANAN, Florida

                                  (ii)

  

























                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page

Gonzalez, Hon. Charles...........................................     1
Westmoreland, Hon. Lynn..........................................     3

                               WITNESSES


PANEL I:
Carter, Mr. Tim, Founder, Askthebuilder.com, Cincinnati, OH......     5
Sanar, Mr. Paul, Founder & CEO, SkyFacet.com, New York, NY.......     7
Snell, Mr. Rob, Co-owner, GunDogSupply.com, Starkville, MS.......     8
Rothenberg, Mr. Randall, President & CEO, Interactive Advertising 
  Bureau, New York, NY...........................................    10
Lent, Mr. Richard, Founder and CEO, AgencyNet, New York, NY......    12

                                APPENDIX


Prepared Statements:
Gonzalez, Hon. Charles...........................................    40
Westmoreland, Hon. Lynn..........................................    42
Carter, Mr. Tim, Founder, Askthebuilder.com, Cincinnati, OH......    43
Sanar, Mr. Paul, Founder & CEO, SkyFacet.com, New York, NY.......    49
Snell, Mr. Rob, Co-owner, GunDogSupply.com, Starkville, MS.......    50
Rothenberg, Mr. Randall, President & CEO, Interactive Advertising 
  Bureau, New York, NY...........................................    58
Lent, Mr. Richard, Founder and CEO, AgencyNet, New York, NY......    66

                                 (iii)

  


                   SUBCOMMITTEE HEARING ON THE IMPACT
                  OF ONLINE ADVERTISING ON SMALL FIRMS

                              ----------                              


                        Wednesday, June 25, 2008

                     U.S. House of Representatives,
                               Committee on Small Business,
                                                    Washington, DC.
    The Subcommittee met, pursuant to call, at 10:03 a.m., in 
Room 1539, Longworth House Office Building, Hon. Charlie 
Gonzalez [chairman of the Subcommittee] Presiding.
    Present: Representatives Gonzalez, Lipinski, Altmire, 
Westmoreland and Chabot.

             OPENING STATEMENT OF CHAIRMAN GONZALEZ

    Chairman Gonzalez. I call this hearing to order.
    I would preface my opening statement by thanking certain 
individuals that have been instrumental in our ability to 
actually look into this particular subject matter, which I 
think looms large for every businessman and woman in the United 
States, big or small.
    First, of course, to our Chairwoman, Nydia Velazquez, who 
has allowed the committee and every member, majority and 
minority party members, to not only express an interest in what 
we believe are timely issues but to allow us to address them in 
a hearing setting, which means everything that is being said 
gets recorded. And this basically will allow us a resource, 
which we can then move on to the issues that confront Congress 
and what we are going to do regarding, again, certain 
challenges that are being faced in today's modern business 
world.
    Secondly, committee staff, can't say enough about them. The 
amount of work that they put in, in just the preparation of the 
memorandum, just quality work. Again, this is information that 
we make reference to with our clients when individuals ask us 
to describe the issue in general terms. It is because the hard 
work of the members of the committee staff that we are able to 
put something together.
    My own staff, special thanks because I cause them so many 
headaches on this particular subject.
    And this is only the first step, and I am hoping that we 
will develop something more comprehensive and that we take the 
ideas and the recommendations of those in the real world before 
we fashion any kind of regulatory relief.
    Dawn Rivers Baker, who actually has an online publication, 
"MicroEnterprise Journal," I want to thank Dawn for alerting me 
to what really is perplexing to many businesses that are 
definitely not big, may not even be small but truly are micro 
businesses. And they even have different challenges from what 
we refer to as small businesses.
    And last but not least, to the author of the book "The 
Search," John Battelle, for his ideas in the conversation we 
had the other day, but more for the fine work--the book is over 
2 years old, but I still recommend it. I think it is kind of 
basic text if you want to try to understand where all this is 
going as far as the Internet.
    This morning the subcommittee will examine the increasing 
value of online marketing to the small business community. The 
speed and interactivity of the Internet have helped millions of 
entrepreneurs identify and attract new customers. But, 
unfortunately, not all small firms have been able to capitalize 
on its power. Even today, many small businesses face 
significant roadblocks to optimizing their online presence.
    In today's hearing, the subcommittee will hear from 
entrepreneurs who have launched successful Web marketing 
campaigns as well as from content providers who support display 
ads and use the pay-per-click platform. We will also listen to 
testimony from small business owners who have both benefited 
from and have been challenged by search engine technology. 
These witnesses will testify not only to the advantages of 
online advertising but also to its limitations and its demands.
    More and more consumers are using the Internet to shop and 
research products prior to purchase. In fact, the National 
Retail Federation reports that over 92 percent of adults 
conduct Web inquiries before buying products in stores. And 
studies show that these shoppers are doing more than just their 
homework. They are buying. In 2007, online retail sales grew 16 
percent to reach $116 billion. Forecasts by JupiterResearch 
show this trend to be on the rise with online sales expected to 
reach $171 million by 2011.
    In keeping with Internet sales, the online advertising 
industry is rapidly growing as well. Indeed, Web ad revenues 
totaled $21 billion last year. The entire industry expanded by 
45 percent annually between 2003 and 2006, and is expected to 
exceed $50 billion in 2011. By 2007, profits from online 
advertising had already eclipsed those for radio advertising.
    Needless to say, Web ads present significant revenue 
opportunities that small businesses cannot afford to ignore. 
What distinguishes online marketing from more traditional means 
is its abilities to micro target potential customers based on 
browsing histories. According to WebVisible-Nielsen, an 
estimated 74 percent of consumers use services like Yahoo! or 
Google when shopping online. For small businesses hoping to 
identify and appeal to new clients, these systems offer a 
refined approach to tailoring ads and generating revenue. As 
people increasingly look to search engines as a jumping-off 
point for commerce, small firms must learn to embrace and 
effectively utilize this particular method of advertising.
    But even with this potential, many entrepreneurs are unable 
to fully take advantage of these tools. In order for them to 
reap the rewards of search engine marketing, small businesses 
must first and foremost design their home pages with Web 
browsers and search engines in mind. While many entrepreneurs 
are already doing so, millions more don't have the resources to 
build such search-engine-friendly Web sites.
    In examining the state of online advertising, it is 
important that we keep an eye towards the industry's future. 
This way, we can assure that small businesses have the kind of 
diversification that will allow them to get the most out of 
their often limited budgets. We must keep in mind that unlike 
their corporate counterparts, small businesses don't always 
have the funds to pay for ad spots on prime time television. 
Rather, they need to be more strategic in their approach and 
seek out ways to make their dollars stretch further. Online 
marketing is a great way for them to do this. And it is crucial 
that the industry remain a viable, accessible, and affordable 
option.
    For small businesses, technology has been a remarkable 
field leveler. It has allowed many firms to compete on equal 
level basis with companies 10 times their size, but as with any 
technology, entrepreneurs must learn to evolve alongside the 
Web and industry, because in a world that increasingly revolves 
around e-commerce, small businesses that cannot compete on the 
Internet, will not compete anywhere. And this is a disadvantage 
our entrepreneurs cannot afford.
    I look forward to today's testimony, and I thank all the 
witnesses for participating here today.
    I now recognize Ranking Member Westmoreland for his opening 
statement.

             OPENING STATEMENT OF MR. WESTMORELAND

    Mr. Westmoreland. Thank you, Mr. Chairman.
    And thank you for holding the hearing today.
    And I would also like to thank all the witnesses for coming 
and participating.
    Mr. Chairman, I think it is safe to say that the Internet 
has changed the way we all live our lives.
    Everything from how we eat to how we dress to how we 
receive our medical care has evolved since the arrival of the 
Internet age.
    Of particular significance is how the nature of business 
has been forever changed by this technology. The speed at which 
we gather large amounts of information has made us more 
informed customers, but even more importantly, it has changed 
the relationship between retailers and consumers.
    This change in the commercial landscape is providing a more 
advantageous environment for small businesses to advertise 
their services to potential customers. The basic techniques of 
Internet advertising mirror those of the more conventional 
advertising. However, conventional advertising, such as 
listings in the Yellow Pages, is not cost-effective due to the 
low response rate that those ads generate. On the opposite end 
of the spectrum are radio, television and cable ads, which are 
very effective. But as all of us know that have run a campaign, 
they are also very expensive.
    Internet advertising provides benefits to small businesses 
by helping them to effectively target customers on a more cost-
effective basis than conventional means. This means that a 
small business that was once limited by geography is now able 
to advertise their products to a customer thousands of miles 
away for the same cost as advertising their products to his 
next door neighbor. Through the use of media forms of Internet 
advertising like rich media, lead generation and keyword 
searches, small businesses are in a position to compete 
globally.
    As a former small business owner, I understand the many 
barriers that prohibit businesses from entering the 
marketplace. While I am looking forward to hearing about how 
the utilization of these tools have helped small businesses 
succeed, I am also interested to hear what we in Congress 
should be or should not be doing to help more small firms 
achieve success.
    Again, I welcome the distinguished witnesses, and I thank 
you again, Mr. Chairman, for having the hearing.
    And I especially look forward to hearing from the builder 
over here because I spent all my adult life in the building 
business.
    But thank you again.

    Chairman Gonzalez. Thank you, Mr. Westmoreland. Thank you 
for your participation and a special thanks to your staff for 
working so well with the majority staff.
    I am going to instruct the witnesses of how we operate. You 
have 5 minutes basically for your testimony. Now I realize you 
have submitted written statements. Those are made part of the 
record. I know 5 minutes goes by really quickly, but please 
understand that you probably will be able to expand on your 
remarks when we go into the question and answer. Depending on 
how many members filter out today, I may be very fortunate and 
Mr. Westmoreland may be very fortunate that we will have you to 
ourselves because we have plenty of things to ask you about.
    I first would ask you to please observe the timer. In 
essence, you have 5 minutes. When yellow comes on, you have 1 
minute; and of course red, time is up. And then I will remind 
you, I think Mr. Chabot was going to be introducing the first 
witness, but he is not present.
    Okay. They tell me that he is on his way so we are going to 
go ahead and kind of reverse the order and pull that on you 
real quick so that Mr. Chabot will have the privilege of 
introducing what I believe is maybe a constituent.
    I know you are from the Cincinnati area, so I am just 
assuming that you are one of Steve's constituents.
    So I am going to start at the other end with Mr. Richard 
Lent. And Mr. Richard Lent is founder and CEO of AgencyNet in 
New York. AgencyNet is a full service award-winning interactive 
shop that specializes on all aspects of digital marketing. The 
creative shop has 47 employees and an annual revenue of $6 
million. Mr. Lent is chairman of the board of the Society of 
Digital Agencies.
    Mr. Lent, if I change one more thing on you in the space of 
30 seconds--that is the way we operate. But Mr. Chabot is here. 
And I know that Mr. Chabot is the ranking member of the entire 
committee, but he has taken the time to be here to introduce 
the first witness. So I am going to go ahead and defer to Mr. 
Chabot because I believe that he probably--not the fact that he 
is just the ranking member of the entire committee but, again, 
just because I know that he has other scheduling conflicts.
    And at this time, the Chair will recognize Mr. Chabot for 
the purpose of introducing Mr. Carter.
    Mr. Chabot. I thank the gentleman from Texas for his kind 
remarks.
    And he is a great American, by the way. I really like Mr. 
Gonzalez.
    But in any event, I do appreciate the opportunity to 
introduce--Mr. Westmoreland is a great American as well.
    Mr. Westmoreland. I was wondering.
    Mr. Chabot. But I wanted to introduce another great 
American, and this gentleman happens to be from my district, 
from Cincinnati. And I am very, very pleased to be able to 
welcome him here. And his name is Mr. Tim Carter.
    And when Tim left the University of Cincinnati with his 
geology degree in hand, he declined a scholarship to graduate 
school, and choosing instead to indulge his entrepreneurial 
spirit and go into the home remodeling business. An eventual 
master carpenter and plumber and roof cutter, his array of 
knowledge taught him that there were more cost-efficient ways 
to handle jobs.
    At the urging of his wife, Tim began writing a syndicated 
newspaper column called "Ask the Builder" that found a home 
online all the way back in 1995. AsktheBuilder.com, just as it 
sounds, that is the way it is spelled, and that is what it is, 
AsktheBuilder.com, was early into the online advertising fray, 
and it is an excellent example of how an entrepreneur with a 
good idea can utilize the Internet and be successful and 
prosper and help people all over the country in a particular 
area that they have substantial knowledge in.
    I am sure Tim will be able to provide the subcommittee with 
an interesting perspective on the evolution and direction of 
Internet advertising. It has been very successful for him and 
those who have utilized his services, and I think will be very 
revealing to many of us this morning.
    I want to thank the chairman and the ranking member, and I 
continue to think they are both great Americans.
    Chairman Gonzalez. Thank you very much, Mr. Chabot.
    We are going to then resume in the order in which the 
witnesses are set up. So we will start with Mr. Carter.

   STATEMENT OF MR. TIM CARTER, FOUNDER, ASKTHEBUILDER.COM, 
                        CINCINNATI, OHIO

    Mr. Carter. Chairman Gonzalez, Ranking Member Westmoreland 
and Ranking Member Chabot and other members of the committee, I 
sincerely thank you for granting me this opportunity to address 
you and, perhaps more importantly, answer any and all questions 
you might have concerning the impact of online advertising on 
small businesses and here in America.
    I have been a small business person my entire life. Within 
months of graduating from college in 1974, I was operating my 
one-person remodeling and building company. When I started, I 
had so little capital, I had to borrow some of my dad's tools 
and make others out of scrap lumber. But diligence, 
determination, and discipline have allowed me, with the help of 
my wife, Kathy, to build that small business into a sizable 
Internet publishing company that has discovered quite by 
accident what appears to be the true sweet spot of online 
advertising.
    In the 13 years I have been operating AsktheBuilder.com, I 
have accumulated strong evidence to prove that online 
advertising, when presented in the correct format and in the 
right context, is a powerful tool that solves the millions of 
problems consumers have each day. Tens of thousands of the 
small businesses like AsktheBuilder.com are making a positive 
impact economically from the ability to reach customers with 
online ads. Their combined success helps contribute to our 
gross national product. Small businesses that have an online 
presence are an important and growing part of our economy.
    The transition from a hands-on remodeler to Internet 
publisher has been fascinating. When I was still working in the 
field as a builder, I was solving problems for my customers. 
They had leaking roofs, peeling paint, sticking doors and 
countless other issues that needed attention. Because I was 
just a one-person company, it was only possible for me to 
complete perhaps 20 or 30 jobs a year.
    But the Internet has changed all of this. Now I can share 
my nearly 35 years of accumulated home improvement knowledge 
via my articles and videos with millions of consumers at one 
time. Each day, 40,000 people on average come to 
AsktheBuilder.com for this help, and they get it for free.
    I am able to provide this service because of the revenue I 
receive each day from online ads. Not only do the visitors to 
my Web site get my advice, but through the ads that are 
displayed within my content, my visitors connect with companies 
that provide them with the exact materials and services to 
repair, remodel, and build their homes. Not only do I sell my 
own ads, but I also serve ads that are delivered to my visitors 
by Google, Kontera, Taboola, and Amazon.com. It is fast and 
easy to create the small amounts of code to insert on my Web 
site so these ads appear. Any small business publisher can do 
what I have done. And hundreds of thousands of them are 
displaying these ads, even now as I address you.
    I am fortunate to be a charter member of a group of small 
business Internet entrepreneurs. Many in this group are 
thriving businesses that in one way or another directly benefit 
from online advertising. Ravenwood Marketing, based in Boulder, 
Colorado, is one. This small business specializes in 
performance-based search engine marketing and was ranked the 
number one fastest-growing Denver-area private company by the 
Denver Business Journal in 2006. Ravenwood is a three-person 
small business that purchases online ads in search engines and 
gets paid when it delivers high-quality leads and actual sales 
to other small and large businesses.
    The dynamic growth of this small business would not have 
been possible were it not for online ads. Prior to the 
Internet, it took days, weeks, or months to reach the same 
audience that can now be reached in seconds with a click of a 
button. This blazing productivity is indeed an advertising 
paradigm shift of epic proportions.
    When I announced to my AsktheBuilder.com newsletter 
subscribers that I would be testifying today, I heard from many 
who were small business owners. Ms. Rachael Kahne is a 
community development coordinator in Nashville, Tennessee. Her 
pithy comment did a great job of summarizing the power of 
online advertising. Rachael said, "I can certainly attest to 
the fact that online marketing is basically the only way to go. 
I work for a small business whose bread and butter comes from 
online advertising. There is simply no other better more viral 
way to get in touch with a targeted audience. Online marketing 
allows a business to track and target what is working and what 
isn't. It is certainly one of the most cost-effective solutions 
out there today."
    In closing, I think it is important to realize that I am 
not unique. If we surf the Internet right now, I could readily 
show you thousands of small businesses that are satisfying 
their visitors with great content that solves problems. 
Allowing this open sharing of information should be a high 
priority. This allows someone like me to better educate people 
who make informed buying decisions. When they do this, the end 
result is higher productivity and more commerce. These are just 
two of the things that have helped make America a great Nation 
to live, work, and raise a family.
    Thank you for allowing me to share my success story. It 
would be my pleasure to answer any questions you may have.
    [The prepared statement of Mr. Carter may be found in the 
Appendix on page 43.]

    Chairman Gonzalez. Thank you very much, Mr. Carter.
    Our next witness is Paul Sanar. Mr. Sanar is founder and 
CEO of SkyFacet.com, headquartered in New York. Mr. Sanar 
started his online company when he was only 20 years old. 
SkyFacet.com was founded in 2004 which means he is still very 
young and he is currently expecting sales of $55 million in 
2008. The firm distinguishes itself by donating 5 percent of 
the company's revenue to charity.
    Mr. Sanar.

STATEMENT OF MR. PAUL SANAR, FOUNDER AND CEO, SKYFACET.COM, NEW 
                         YORK, NEW YORK

    Mr. Sanar. Chairman Gonzalez, everybody else on the 
committee, thank you for having me here today.
    Chairman Gonzalez. You may have to get closer to it.
    Mr. Sanar. My name is Paul Sanar. I started SkyFacet.com 
when I was 18 years of age in 2004. I am currently 23 years 
old. We have been featured in numerous wedding magazines, 
bridal shows, and we do a lot of Internet advertising. I 
started SkyFacet at 18 when I had a factory--I had a family 
factory that was about to be bankrupt because of overseas 
pressures of--I am sorry. I am a little bit nervous.
    Okay. I first started advertising on Google in 2004, and I 
have learned the importance of profitable advertising using 
Google's AdWord system. What I admire most about Google and of 
Internet advertising is that it really gives all companies a 
level playing field. When I first started SkyFacet.com.com, I 
had $5 in my pocket, and today we are a $55 million company.
    By now, most businesses have heard of Google and Internet 
advertising but most small firms don't understand the 
difference between profitable advertising and nonprofitable 
advertising. If this concept is understood by the advertiser 
upon creation of their advertising program, I think they are 
going to be a very successful company. But most small companies 
don't understand that. Most of them will try to make a 
marketing plan based solely on Google, which can end up costing 
a company a lot of money if Google does not seem to work out 
for it. I myself had an experience with Google when I had hired 
somebody to do national listings on Google, which is free 
advertisement, not paying for a click. And I had paid $35,000 
for that fee, for that advertising for 1 year. And it got my 
site banned by Google national listings. Forbes did an article 
on us. And I helped--it really helped us when people found out 
that we got pretty much banned by Google. And I turned the 
$35,000 loss into a $500,000 profit by letting people know that 
we were out there and that we were actually a Forbes major 
company or featured in Forbes, should I say.
    In conclusion, I would like to thank everybody for their 
time and the opportunity to be here. Just remember SkyFacet.com 
for all your jewelry needs.
    [The prepared statement of Mr. Sanar may be found in the 
Appendix on page 49.]

    Chairman Gonzalez. Thank you, Mr. Sanar.
    I don't think there is a father here that doesn't wish 
their son had the success at such an early age as you have 
had--if you are still co-signing the notes, the student loans-- 
for a lot of reasons.
    Anyway, our next witness is Rob Snell.
    Mr. Snell is co-owner of GunDogSupply.com, a company based 
in Starkville, Mississippi. In addition, Mr. Snell is managing 
partner of Snell Brothers, a consultancy that helps small 
businesses succeed online and is the author of the book, 
"Starting a Yahoo! Business For Dummies." As a consultant, Mr. 
Snell has designed, developed, and marketed hundreds of Yahoo! 
stores that have generated millions of dollars in online sales.
    Mr. Snell.

    STATEMENT OF MR. ROB SNELL, CO-OWNER, GUNDOGSUPPLY.COM, 
                    STARKVILLE, MISSISSIPPI

    Mr. Snell. Chairman Gonzalez, Ranking Member Westmoreland, 
members of the subcommittee, good morning. Thank you for asking 
me to appear on this panel.
    My name is Rob Snell. I am from Starkville, Mississippi, 
and I am here to today to talk about how search engine 
marketing has transformed my family's business, my clients' 
businesses, and to show how other small businesses can take 
advantage of this effective and affordable way to drive 
visitors to their Web sites. These days I wear quite a few 
hats. I am co-owner of Gun Dog Supply, our family retail 
business that sells supplies for hunting dogs. I am also the 
managing partner of Snell Brothers, and we help some of the 
45,000 Yahoo! stores with their online marketing.
    And like you said, a couple of years ago, I wrote my 
dummies book on Yahoo! Store, "Starting a Yahoo! Business for 
Dummies," based upon experiences we have had in the past 10 or 
11 years selling online. I have included information from a few 
of the marketing chapters at the end of my written testimony 
for your review. Today I am going to share some real numbers 
with you so you can see the impact of search marketing on a 
real small business in dollars and cents.
    Every year our Yahoo! stores get millions of visitors from 
the search engines. Most of that traffic is free. A lot of the 
traffic is from paid search ads. Tens of thousands of those 
visitors convert into paying customers. This year we will sell 
over $10 million worth of product through several different 
Yahoo! stores. The Internet levels the playing field for small 
business folks like us.
    As a consultant and a speaker, my job is to teach the 
little guys how to compete with the big guys. We use the 
Internet to leverage the strengths of the small business 
retailers. We have unparalleled product knowledge, enthusiasm 
for what we sell and what we do and we give outstanding 
customer service and support. Bigger retailers cannot compete 
when we go head to head, product to product. They sell too many 
things.
    A little background on the company. My parents, Warner and 
Anne Snell, started Gun Dog Supply back in 1972 on their 
kitchen table in Jackson, Mississippi. They ran tiny display 
ads in hunting dog magazines and went full time in the business 
in the late 1970s. Slowly the business changed to a retail 
store with less emphasis on mail-order sales, but business was 
good.
    In 1996, we had a problem: PetSmart opened across the 
street; 50 percent of our competitors went out of business 
overnight, and our sales dropped, too. We dusted off our 
mailing list and put together a new catalog. Unfortunately, we 
lost money every time we sent a catalog in the mail.
    In 1997, I built a 5-page Web site. I wrote a killer Yahoo! 
directory listing, and we started getting tons of visitors. We 
had to figure out how to sell online and fast. Fortunately, we 
found an online store builder which is now Yahoo! Store.
    For my family, selling on the Internet has literally 
changed our world. We went from a retail company doing $400,000 
a year and struggling to make payroll to becoming a 
multimillion dollar retailer in a few short years. How did we 
do that? Ninety-five percent of our marketing is online 
advertising, and 95 percent of that is search marketing.
    Search marketing is the one-two punch of getting free 
traffic and then buying paid ads. To get more free traffic, you 
write good content and perform search engine optimization or 
SCO on your Web site to rank better and get more clicks. For 
even more traffic, you can buy paid search ads to ensure you 
control your advertising message.
    The secret to our initial success with the search engines 
back in 1997 was using all the content from our print catalog 
in our online catalog. Those 50 pages of text covering hundreds 
of products would help us sell everything from dog training 
collars to retriever training dummies. Originally, half of our 
traffic came from banners, and the other half was free traffic 
from search engines.
    But I like search traffic better. With search engine 
visitors, I can tell where the traffic came from and what 
keywords folks are searching for, especially the buyers. This 
information was gold. For example, someone would buy a leather 
dog collar, and the source of that order would show the sale 
coming on a search on Yahoo! for leather dog collars. Another 
order would come in with a search for retriever training 
videos, and they would buy some training dummies or a video on 
training retrievers. I caught on pretty quick that converting 
keywords were important. People buy the things they search for.
    So I started to obsess over our keywords to improve our 
free search engine rankings. For example, say I wanted to rank 
better in the free search results for orange dog collars. 
First, I would choose a page on my store that is about orange 
dog collars. Then I would put the words "orange dog collars" in 
the title of the page and in the text on the page. Finally, I 
link to that page from other pages with the words "orange dog 
collars" in the linked text.
    If research is good, paid search is even better. With an 
online store, a small retailer can instantly have access to 
millions of potential customers with as little as $5 deposited 
in a Google AdWords account. Retailers can run national ad 
campaigns targeted only to folks searching for what they sell. 
Imagine doing that with TV spots. With paid search, you can buy 
ads but only for keywords relevant to your product mix. And 
retailers with physical stores can target their ads to only run 
in specific geographic markets that they serve.
    Search marketing is extremely efficient because you are 
only marketing to those interested in your products. In my 
experience, no other marketing method can touch search engine 
marketing for targeting the right prospects in the right places 
at the right time, which is when folks are ready to buy.
    Thank you for the opportunity to appear before this 
committee. I look forward to answering any questions you may 
have.
    [The prepared statement of Mr. Snell may be found in the 
Appendix on page 50.]

    Chairman Gonzalez. Thank you very much, Mr. Snell.
    Our next witness is Randall Rothenberg. Mr. Rothenberg is 
president and CEO of Interactive Advertising Bureau in New 
York. Prior to leading the IAB, Mr. Rothenberg worked as 
director for intellectual capital for Booz Allen Hamilton. The 
Interactive Advertising Bureau is the trade association for 
interactive marketing in the United States.
    Mr. Rothenberg.

    STATEMENT OF MR. RANDALL ROTHENBERG, PRESIDENT AND CEO, 
       INTERACTIVE ADVERTISING BUREAU, NEW YORK, NEW YORK

    Mr. Rothenberg. Thank you, Chairman Gonzalez.
    Thank you, Ranking Member Westmoreland.
    And thank you to the members of the subcommittee for 
inviting me to testify on the impact of online advertising on 
small firms. I am very honored to be here. I am the president 
and chief executive officer of the Interactive Advertising 
Bureau, the trade association for ad-supported interactive 
media in the U.S. We have 350 members, companies that account 
for 86 percent of the interactive advertising sold in the U.S. 
Our members include the great names of the online and offline 
media world, Google, Yahoo!, AOL, MSN, New York Times, CBS, and 
Walt Disney among them. But 61 percent of our members are small 
businesses earning between nothing and $8 million a year in 
advertising revenue.
    Last year, together, all these businesses sold $21 billion 
in interactive ads. To put that in perspective, as the chairman 
said, that means that interactive as an advertising medium 
rivals not only radio but outdoor and magazines. Evidence 
suggests that much of this advertising comes from small 
businesses.
    Interactive advertising provides consumers with significant 
benefits in the form of cost-free access to content and 
services.
    Among the things interactive advertising underwrites are 
quality online content, news, business, entertainment, the maps 
that help you get from place to place, education and 
information-gathering tools, competitive pricing and product 
comparison tools, online safety tools, such as anti-spam and 
anti-virus protection, social networking and professional 
networking environments and, very obviously, communications and 
other online services, including, for example, e-mail, chat, 
telephone services, resume services, job banks, enhanced 
classified services, video, photo storage, and sharing.
    And then there is just pure communication through blogs. 
The Pew Center estimated that, in July 2006, some 12 million 
American adults, 8 percent of our population, were writing 
blogs. Some untold thousands of these are supported by 
advertising. The consumer benefits have also created benefits 
for business, with a disproportionately positive impact on 
small business. Thousands of businesses of all size have 
achieved more efficient marketing of goods and services through 
targeted online advertising.
    According to Pew, 32 million American adults have used 
online classified ads for selling or buying. Online advertising 
has created regional markets out of local markets, and national 
markets out of regional markets. Items once sold in local 
garage sales and pawn shops are now available nationally and 
internationally via advertised interactive auctions, in which 
some 40 million Americans participate annually. eBay says more 
than 768,000 small businesses across the U.S. use its online 
marketplace as their primary or secondary marketing channel. 
More than 1.3 million people supplement their income by selling 
materials on eBay.Many of the small sites exist in large part 
because of online advertising networks consisting of hundreds, 
thousands, even tens of thousands of independently owned sites. 
These networks are the Internet version of the broadcast radio 
and television networks with which we grew up. They deliver 
content and ads across a network of affiliates. No one knows 
how many small publishers are supported by these networks. But 
let me give you a sample. The 24/7 Real Media network sells and 
places ads for 1,000 Web sites. The Blue Lithium network 
reaches 119 million unique U.S. users, also through 1,000 
publisher sites. The AdBright, auction-based ad marketplace 
represents 19,000 Web publishers.
    How diverse are they? We don't have a census. I would love 
to do one. But let me give you a sample that came in when I 
asked my staff for some of their favorites:
    Baristanet.com is a community site started by three local 
women from the area of Northern New Jersey where I grew up. Its 
advertisers include a local hospital, Montclaire Family 
Dentistry and Dial Pest Control of Roseland.
    Then there is womenslacrosse.com. It is the central meeting 
place for women who participate in the oldest American sport. 
It is a family business run by Cathy Samaras of Annapolis, 
Maryland. Its advertisers include the Kaplan test preparation 
company and the Bowie Baysox Class AA Minor League baseball 
team.
    And then there is Africansisters.com, formed in 1999 in 
Garland, Texas, by a group of black women to help women like 
themselves increase employment and build revenue. Its 
advertisers include the iGourmet.com Tea-of-the-Month Club, 
Crockpot cookery and Kmart.
    In summary, I want to thank you again for considering the 
IAB's views on these issues. The success of the Internet has 
helped fuel this country's economy. It is important to ensure 
that this medium can continue to grow and thrive. No segment of 
our economy will reap greater benefits from a robust Internet 
advertising industry than small businesses. The Internet in no 
small part is the primary engine driving small business growth 
in the United States. And a lot of that has to do with the 
ability to advertise. Thank you very much.
    [The prepared statement of Mr. Rothenberg may be found in 
the Appendix on page 58.]

    Chairman Gonzalez. Thank you, Mr. Rothenberg.
    And I have already introduced Mr. Lent. I want to remind 
individuals, though, he is chairman of the board of the Society 
of Digital Agencies, which says a lot just in the very title of 
the society.
    Mr. Lent, your testimony.

STATEMENT OF MR. RICHARD LENT, FOUNDER AND CEO, AGENCYNET, NEW 
                         YORK, NEW YORK

    Mr. Lent. I like getting introduced twice. That was nice.
    Chairman Gonzalez, Ranking Member Westmoreland and members 
of the subcommittee, thank you for inviting me to testify on 
the impact of online advertising on small firms.
    As Chairman Gonzalez stated, I am the founder and chief 
executive officer of AgencyNet. I have 14 years of experience 
producing strategic digital campaigns, content and marketing 
initiatives for startup companies, small businesses, medium-
sized businesses, and some of the world's most recognized 
companies. As the CEO of AgencyNet, I charter over all 
strategic vision and growth plans, run high-level client and 
partner relationships and oversee our A person executive team.
    I started AgencyNet in 1994 as a single-person company 
managing a team of global freelancers and have since shepherded 
its evolution to the 50-person agency it is today with offices 
in New York City and Florida. As such, I have unique insight 
into the marketplace and its effects on businesses of all sizes 
in America. I have witnessed and withstood the dot-com bubble 
at the turn of the millennium as well as thousands upon 
thousands of technical innovations that have driven and changed 
the way consumers and brands interact and commerce is 
exchanged.
    I have attached a copy of my full biography for additional 
information on my background and career if you find it 
interesting.
    I would like to take this opportunity to articulate to the 
subcommittee my personal opinion on some issues relating to 
potential government regulations within the digital ecosystem. 
Being from the agency side, I have a little bit broader 
perspective, and I can speak on a number of different issues. I 
tried to look at four in particular that I think need to be 
discussed.
    First is search engine dominance. I assume with Yahoo!, 
Microsoft, Google, and their discussions ongoing, the 
subcommittee has a particular interest in this topic. It is my 
opinion that Google has achieved a dominant position in the 
search marketplace by creating a culture of innovation and 
maintaining core market intelligence. Their search engine, 
coupled with their simplistic and consumer-focused user 
experience is superior to anything else in the marketplace. 
Their arsenal of Web-based tools are far reaching, well beyond 
just search, and they are all of a high quality and 
consistently improving. And oftentimes, they are free to 
consumers and small businesses alike. They have consistently 
hired some of the most intellectual and forward-thinking 
engineers and technologists in our industry and that collective 
intellect has empowered them to their market-leading position. 
Their technology empowers companies of all sizes, especially 
small firms, to engage, operate, and prosper in this new 
marketplace.
    While their potential allegiance with Yahoo! will certainly 
advance Google's dominance within the search arena, it does not 
ensure that they will utilize that advantage to control pricing 
structures or to gain an unfair market advantage. Until 
something is proven to the contrary, I would personally deem 
any government obstruction as premature. With today's economic 
state, America needs innovative and astute corporations to 
support a dynamic and fast-changing global economy. And to 
date, Google has proven to me that it will not rest on its 
laurels.
    It is important to note that neither I nor my company have 
a prior working relationship with Google. My testimony is from 
my personal perspective and as a user of their products and 
knowledge of their reputation within the industry.
    The second topic that I feel is important to discuss is 
privacy and how it relates to interactive advertising. The 
digital medium, while limitless in terms of interactivity, 
entertainment and educational value, also presents inherent 
privacy concerns that can be directly attributed to what makes 
an extraordinary communication medium in the first place, two-
way data flow.
    I believe the government should continue to do its part to 
protect the privacy of the American consumer, as it always has. 
Clearly there is a fine line between involved and overinvolved. 
I will attempt to draw the line where it negatively affects the 
consumer. Direct mail presents similar data concerns, and 
obviously credit card companies are privy to a plethora of 
personal information on consumers. Internet data protection 
should be no different:
    Consumers need to be able to opt out of their personal 
information being stored.
    Minors need to be protected and should not be marketed to.
    Annoyances like spam, phishing scams and proactive display 
of objectionable material should be controlled and regulated.
    Data should have a shelf life and should not be sold or 
shared without a user's consent.
    That said, though, thanks to this great conduit of 
information, advertisers have valuable data at their disposal 
that, if used correctly, would surely lead to a more positive, 
relevant and engaging two-way communication and a better 
consumer experience. Passive mediums like traditional 
television, radio, and print do not offer that same level of 
sophistication. And as a byproduct, brands have little tangible 
evidence of their campaign's true performance directly 
attributable to their advertising.
    The digital medium and its inherent trackability provides 
the insight that they need to shift their budgets to 
destinations where the audience actually cares about what they 
have to say. This understanding of the return on investment is 
especially relevant to small firms whose limited budgets do not 
allow for the cushion of fiscal mistakes.
    Intelligent brands will use this data to serve advertising 
that is potentially germane to a consumer. Advertising by its 
very nature has historically been intrusive. Digital allows for 
relevancy in advertising and marketing that has traditionally 
been interruptive, irrelevant and emotionally underwhelming, 
and that market shift should not be stifled.
    Again I would like to thank the members of the subcommittee 
for this opportunity to share my thoughts on the digital 
ecosystem and the necessity for regulation. I have also touched 
on Net neutrality and portability of content in my written 
testimony. And if I can be of further assistance, please feel 
free to contact me at any time. I look forward to answering any 
additional questions you may have.
    [The prepared statement of Ms. Moore may be found in the 
Appendix on page 66.]

    Chairman Gonzalez. Thank you, Mr. Lent and thank you to all 
the witnesses.
    I am going to start off with the questioning.
    And please understand that this particular committee, we 
share some jurisdiction, obviously, with the other committees, 
but our prime focus is going to be small businesses.
    Small businesses can accomplish many things. I indicated 
earlier, I have to be reminded that there are micro businesses 
out there which are obviously even smaller than small but 
nevertheless probably constitute the majority of businessmen 
and women out there in the business world. So we can always 
think in terms of small businesses in whatever context that we 
may be discussing. It will be very interesting.
    The other thing I want to preface some of my questions with 
is that I think, whether you are a Republican or a Democrat, 
truly I think that we need to be governed by basically what 
governs the actions of physicians, and that is: First do no 
harm. And I think you probably would agree with that. In the 
regulatory scheme, what do we do? Should we do anything? Do we 
allow market forces to play out? And I am a strong believer in 
that. And I think my Republican colleagues would join me in 
that particular sentiment up until the point where we do feel 
there is a disadvantage and either the consumer or a business 
person is no longer on a level playing field or treated fairly. 
And that is part of the technology out there in business 
relationships and such.
    But my first question to Mr. Carter, there is an article 
today, Mr. Carter, that appeared in The Washington Post, and it 
was very, very interesting, about an individual, I think in New 
York, in his basement, and he would not give his full name, but 
allows you basically to download an application that blocks 
advertisements. I don't know if you have had a chance to read 
the article. And I will quote from it a little later.
    But first things first, if you go to your site, obviously, 
you have a small business that utilizes the Internet. You have 
a column. You give advice. People come to you and so on. And 
that is supported through advertising dollars. So you really 
have an online business.
    But also the other aspect of it would be small businesses 
that would like to appear on your Web site for all the obvious 
reasons. The credibility of your column, obviously, spills over 
to those that advertise on your Web site and such.
    Two things, how do you promote your Web site? How do you 
promote your online business? And secondly, how do small 
business advertisers fare at your site? How do they get on? Do 
you have any control over who ends up appearing on your Web 
site? And what is that business relationship with individuals 
that may advertise on your site?
    Mr. Carter. Great questions, Chairman. I.
    Promote AsktheBuilder.com primarily just through writing 
abundant content as frequently as I can. And because of the 
years of doing that, and because the content is higher quality, 
I also--I tend to rank very high on the search engines, you 
know, both Google, Yahoo! and even MSN. And I do about an hour 
a day of research on how I think that someone gets on page 1. 
And so that is--so I think that that is the way that I do it 
because I have decided it is a key part of my business. So I 
have taught myself my own--what many people call search engine 
optimization.
    I do very little advertising of my own about 
AsktheBuilder.com. The newspapers that do run my syndicated 
column at the bottom of my column do publish my URL, but I 
consider that incestuous advertising because the subscribers to 
any given newspaper, once they see that URL, they know it. So I 
don't have a growing base from that.
    With respect to small businesses that advertise on 
AsktheBuilder, you might be surprised to discover that most of 
the advertising that I sell myself is actually small 
businesses. I have found that when I approach these small 
businesses, I get a more rapid response, a more favorable 
response and a quicker decision. And more importantly, they 
understand the benefits.
    As far as me controlling if they want to be on Ask the 
Builder, they have complete control of that. It is their buying 
decision. It is very easy to do. And my rate card is actually 
published for the entire world to see. If you and I were to go 
online right now, you could see right at the top there is a 
little advertise button, click it, and you see what it costs to 
get there. And it is very affordable, and it is highly 
effective. I have click-through rates on some of my advertising 
that I sell myself that are as high as 35 percent. That means 
that 35 percent of the people who actually see the ad, they 
actually click it because they know that that ad or that ad is 
communicating to them. I can solve your problem. I can clean 
your deck. I have got the right sealer, whatever the product 
might be. So it is highly effective. And because of those high 
clicker rates, as you can imagine, the companies that are 
buying it are very happy.
    Chairman Gonzalez. Thank you very much.
    Mr. Sanar, let me ask a question that is--you have 
indicated that--we were talking about organic search and such. 
And Mr. Carter being out there for such a long period of time 
that maybe certain keywords, he has identified, he has 
mentioned. So he may have an advantage maybe a startup business 
would not. And I look to you as a very young person out there. 
And you said something about, not to confine all of your effort 
on search engine or the relationship with Google. Did I hear 
you right? In other words, if you are a small business person, 
there is more than just basically a search engine organic type 
search-based promotion of your business. Is that right?
    Mr. Sanar. Yeah. That is correct. I mean, it is not just 
small business. I guess all businesses should diversify their 
marketing plan. But especially with small businesses that are 
going to get impacted a lot more than a big business would. 
Like if his Web site went down on Google, like mine did, where 
I lost about $400,000, $500,000 with the national listings, I 
don't know what he would do, what would other--where would the 
people find them if they weren't just number one on Google for 
free?
    Chairman Gonzalez. Now when you say your site went down, my 
understanding of course is the way a search engine--and I will 
use Google as an example--is that they don't want their system 
manipulated. In other words, legitimate inquiries, legitimate 
clicks and not some that may be created, and they are not a 
real inquiry, they are not--there is not a consumer out there 
hitting on that. So I think that is legitimate for any search 
engine, Google or anyone else, to make sure because part of how 
they place someone or rank somebody is based on the number of 
clicks. And so the legitimacy of those clicks is really the 
basic DNA of what we have as far as credibility. When you say 
your Web site was shut down, what do you mean by that?
    Mr. Sanar. Well, we were actually--we went down on our 
national listings. We went from like number one for diamond 
engagement, say, and then we went to 100 because of a third 
party that I had hired that said he was--he was getting more 
number one positions on Google for different keywords.
    Chairman Gonzalez. So, I mean, the lesson to the small 
business person is you know that you want prominence, you want 
your name out there, but there is a legitimate way of doing it 
and an illegitimate way of doing it. There are so many lessons 
out there, and I will refer to it now.
    In our memorandum, on page 7, that was prepared by my 
staff, they point out something--I believe it is on page 7. Let 
me make sure. And some of the things that we are going over 
here, and that was in essence that 60 percent of the 
respondents in a survey found that they don't have the 
resources or expertise to grow their companies through an 
Internet presence. So what we are talking about here, to many 
small businesses, is really a very daunting task. And you know 
there are minefields out there, and one of them of course is 
who you establish a third party relationship to promote your 
Internet presence, which I think I had Mr. Snell, Mr. 
Rothenberg and Mr. Lent, they probably have opinions on how to 
make sure that you have a legitimate relationship with a 
legitimate party.
    Mr. Snell, your story is very interesting. I understand 
that people bid on words. You buy words. And there was an 
article in the Post a couple of weeks ago. And they were 
talking, I think the University of Phoenix, it is kind of an 
interesting story of how they are involved. But they were 
talking to someone from GM. And I think the quote was, we buy 
millions of words, millions. How does a small business person 
compete in that particular role, number one? The other thing, 
too, if you are pretty well established, people seem to really 
like you. And it is gun dog. And I am wondering, Gun Dog 
Supply--
    Mr. Snell. Correct.
    Chairman Gonzalez. Could I buy Gonzo's Gun Dog Supply? 
Could I play off of your name? Is there somehow that I can 
actually buy--I don't know if you have a copyrighted name, what 
protections do you have?
    Mr. Snell. We have trademark protections. You can infringe 
on my trademark and find out what happens.
    Chairman Gonzalez. I wish Steve Chabot was here because 
then I would say, you have good lawyers. Steve and I disagree 
on the role of the legal profession in society.
    But regardless, so you had trademark protections and such. 
So let's say trade--and I am trying to make sure that I get 
your site down, Gun Dog Supply and such. You are pretty well 
protected. What about people that are just buying millions of 
words, thousands of words, how does that work?
    Mr. Snell. Compare GM to GunDogSupply.com okay in terms of 
revenues, in terms of employees, in terms of the different 
number of skews that we have, the different number of products 
that we have. I mean, we have 1,200 products, and you know, our 
average sale is going to be, you know, between $100 and $200, 
where GM--how many different kinds of things are they into? So 
a huge conglomerate like a GM would have millions of keywords 
like they have millions of customers and thousands of 
employees. But with a small business--usually small businesses 
that are successful on the Internet are so much focused and so 
you have a much smaller group of keywords. You know, in our 
business, like I said, we have 1,200 products, but I have got 
14,000 unique converting keywords that I have been tracking the 
past 4 years. Some people collect stamps. Some people collect 
comic books. I collect keywords. That has the difference 
between us making it and not making it.
    You raised the point earlier, what would a new business do? 
I have 4 years worth of information in my index tools, which is 
my statistics or analytical package. It tells me what keywords 
folks searched on, on what engine, and when they came to my 
site, and what, if anything, did they buy, so it tells me the 
value of each individual keyword.
    With paid search, I am only buying about 10,000 of those 
words to send traffic to my site. But if I look in deep, deep, 
deep into my stats, I have got over 200,000 unique keywords 
that send traffic to my Web site. So, basically, what I am 
saying with keywords, you want to have a very small subset of 
keywords that are driving most of your business, and you kind 
of keep those as your best keywords.
    You raised a point earlier about somebody who is new, who 
is getting into the business. They don't know what keywords are 
going to convert for them. It is really easy. There are all 
these free keyword tools on the Internet. The search engines 
actually provide research tools so you can put in if you are 
selling, you know, pet doors, you can go put in "pet doors" on 
Google or Yahoo! search marketing, and it will give you 
suggestions on some phrases like "cheap pet doors" or 
"automatic pet doors." And these tools are available to 
anybody. And there are also paid keyword tools like, 
WordTracker and Keyword Discovery. If you look online, you can 
do a search for keyword tools, all these sites will come up. So 
it is pretty easy to get a list of the keywords that you want 
to learn about.
    Chairman Gonzalez. Thank you.
    I will reserve the other questions, Mr. Rothenberg and Mr. 
Lent, since I have exceeded my time.
    There are very few of us. I will give the others a chance, 
and then I will come back.
    Mr. Lent, remember exactly how you want to comment on 
keywords because I--
    Mr. Lent. I have a question for you. A definition question, 
that you prefaced the conversation on saying we were focused on 
small business. I was wondering if you could define that for 
us.
    Chairman Gonzalez. We are talking about 50 employees or 
less and such. But the truth is, it is one of those things 
depending, the setting determines what is small business is. 
You know, what are your revenues per year? How many employees 
and such? But I really do think this committee--I mean, I know 
how we view small businesses. But as I said it earlier, I was 
reminded that the micro businesses out there and the Internet 
opportunities that should be there, because I think the 
Internet is probably something that is as accessible and 
affordable if we keep it in a way that they can still use it.
    I mean, and I am going to get into particular questions 
about Amazon, eBay, search engine dominance and such and the 
more global stuff in a minute. But at this time, I would like 
to recognize the ranking member, Mr. Westmoreland, and thank 
him for his patience.
    Mr. Westmoreland. Thank you, Mr. Chairman.
    First of all, I want to congratulate all you guys for that 
entrepreneurial spirit. It is what makes this country great, 
and the fact that the Internet is so new--I forgot how long it 
has been since Al Gore discovered it. But it is amazing how 
creative people have become to be able to make money on it.
    Mr. Lent and Mr. Snell, I want you to pay close attention 
to this because you wrote the book about dummies. And this is 
all new to me, for my generation really, that aren't really 
that computer literate in how to do these things. But Mr. Lent, 
you are an agency, an advertising agency. Is that correct?
    Mr. Lent. That is correct.
    Mr. Westmoreland. So would any of these small business 
owners contact you about how to go about this advertising or 
what would make Gun Dog Supply sell better or--and then, would 
you go purchase these keywords for them? I mean, what kind of 
package does your agency offer?
    Mr. Lent. It is a wide net right now. There are so many 
options in terms of marketing online that searches is a very 
effective methodology but coupled with--and I think Mr. Sanar 
said it best, you really have to have a diverse media plan. You 
have to look at all the different opportunities, whether it is 
display advertising that we referenced or keyword search, a 
combination of all of those things.
    I really liked what Mr. Carter said about developing new 
content on a regular basis to drive traffic. So as an agency, 
first and foremost, we will sit down and we will talk to our 
potential clients or existing clients about what their 
objectives are, and then we will put together a strategic plan 
to accomplish those objectives, and all of these different 
touch points more than likely would be a part of that overall 
media mix.
    Mr. Westmoreland. Okay. Let me ask, Mr. Carter mentioned 
that he sells some of his own advertising, I guess.
    Mr. Carter. Yes.
    Mr. Westmoreland. How does that correlate to you? The small 
business guy comes in, talks to you, you set him up, he starts 
catching on to this, and then starts selling his own 
advertising. How does that work?
    Mr. Lent. There are a number of what is referred to as 
advertising networks that essentially represent destinations, 
destination Web sites. And they will own that advertising and 
sell it for them on their behalf as if they were a broker 
selling that traffic. I don't know if Mr. Carter is using a 
third-party advertising serving network or doing it direct. But 
usually, you will get a much larger audience if you bring on an 
agency that does that as their sole focus.
    That said, there is obviously a very loyal fan base to 
AsktheBuilder.com, and certainly I am sure that there are 
unsolicited requests for sponsorship and advertising that Mr. 
Carter receives. And based on those requests, he can strike up 
individual deals with the individual advertisers.
    Mr. Westmoreland. Okay.
    Now, Mr. Carter, how do you get paid?
    Mr. Carter. That is a great question, Congressman 
Westmoreland.
    It is really--what I am going to tell you, you might not 
even believe. It is so simple that I actually can't believe it 
happens. I am serious about this. When I started 
AsktheBuilder.com back in 1995, it was actually a huge Web site 
at the time. I had already at that point in time written 100 
columns, and I had 100 other supplemental columns that went 
with the other 100. So I had 200 pages on my Web site, which 
was enormous at the time. And I started selling my own ads 
right away.
    But the magic happened--and why we are here today gathered 
in this room--in 2003, when the people at Google--and I think 
they were the first. I am not positive on this. But one of the 
founders I believe Sergey Brin, he saw how successful their ads 
were on their own Web site. And he thought, he thought, "you 
know what"--I think this is how it happened. I don't know for a 
fact. "Why don't we take these same ads and put them out on 
hundreds of thousands of other Web sites, and if that Web site 
delivers us a customer or a click, we will share some of the 
advertising revenue with them." Because if you go to Google.com 
right now or Yahoo! or MSN and you are seeing that on their Web 
page and you click it, Google or those Web sites, they get all 
the money because they are doing everything.
    But those ads that are on my Web site, if someone clicks 
one of those ads, I get paid money that day by Google. 
Actually, I get the money at the end of the month. It is wired 
into my business checking account. But that is the transaction. 
In other words, it is really no different--I am also a real 
estate broker on hire. Basically, I am just brokering the 
transaction. I am getting paid a brokerage fee.
    Mr. Westmoreland. I understand that from Google.
    But when you said you sell your own ads--
    Mr. Carter. Yes. Oh, how I get paid that way?
    Mr. Westmoreland. Yeah.
    Mr. Carter. Oh sure. It is really kind of cool. I get the 
money up front. I make the people pay up front for the entire 
term of the advertising run. I do not do--I do not have any 
sophisticated tracking--well, I have tracking software that 
allows that customer to know how many times their ad is 
displayed and clicked. But I can't do the sophisticated work 
like Google and Yahoo! does where--I have this live auction 
happening. They just pay me the money up front. And I have been 
doing it since 1995. And in fact, I actually got--my first 
customer was Pella Windows and they actually paid me money up 
front before the Web site was launched; they wanted the 
advertising spot.
    Mr. Lent. Congressman Westmoreland, just to add on, I just 
want to make a distinction between two different types of 
display advertising in Google's model and Yahoo!'s model, as 
well.
    You pay per click, so when a consumer actually clicks on an 
ad or a search listing, you pay for that click. In the case 
where you are selling sponsorship on your site, sometimes it is 
a CPM methodology, a cost-per-thousand methodology. But as Mr. 
Carter just explained, there is a fixed fee for a duration. And 
what that ad shows up for is a period of time. So for the month 
of July, when we visit AsktheBuilder.com, you will see the ad 
for those windows. Whereas, in Google's case, you don't pay 
unless they click. I just want to make that distinction.
    Mr. Westmoreland. Mr. Snell, just one quick question for 
you now. You said you have got all these collections of 
keywords and different things. Do you market those for other 
people? And I mean, could you actually--
    Mr. Snell. Yes.
    Mr. Westmoreland. That information would be useful to other 
people.
    Mr. Snell. You mean my keywords?
    Mr. Westmoreland. Yes.
    Mr. Snell. No, I am closing my notebook. I would not share 
that information with--because keywords, I have a friend of 
mine who competes with me at another space. He sells the exact 
same thing we do on one of our sites. It is baseball bats. And 
the keywords that convert for him and the keywords that convert 
for us are actually pretty different even though we sell 
similar products. Because one of the retailers is more of a 
like new product and certain brands and another is more of like 
a closeouts or a discounts. And so based on the tone of your 
site, different sites selling the exact same things are going 
to have like a slightly different keyword universe. Does that 
make sense?
    Mr. Westmoreland. Yeah.
    Mr. Snell. I had a comment on the pay-per-click side. On 
the agencies, like most of the folks who come to us cannot 
afford to hire an ad agency to do, you know, a lot of fancy 
stuff and hopefully after we get through with them, they grow 
to the size that they can. But there are a lot of smaller 
consultants that do pay-per-click advertising, paid search 
advertising, and there are like three or four different models. 
One is the, you know, you pay for an audit. They kind of look 
at your account, and they help suggest keywords, that kind of 
thing. It is more like an advertising agency where they charge 
you--or you spent $10,000 on your pay-per-click, this campaign, 
this month, they would charge you like 15 percent of your spam 
like your traditional advertising agency model. A lot of folks 
have an hourly model; you know, 75 bucks an hour to do whatever 
you want. I recommend that most small retailers--and I don't 
know what the definition of a micro retailer would be. But most 
folks that I run across, they start off doing maybe $100,000 a 
year, and we try to get them into the million dollar club as 
fast as we can because at that point, they can hire consultants 
to come out and do stuff. Small business folks can actually get 
in there. These tools are really easy to use.
    I mean, I bought--just as an example, I bought an ad last 
night in about 5 minutes that is now running on Google, right 
now, just to use as an example. If anybody wants to play along 
at home, if you search on Google on your BlackBerry right now 
for "orange dog collars," I will be in the number one spot--I 
hope--unless one of my competitors decided, you know, I am 
going to outbid him. I ratcheted my bid up to $2. If everybody 
in America were to go to Google and search online and click on 
that, what will happen is, I set a budget of $100. So if 
everybody clicks on it, after I get, you know, like 50 clicks, 
my ad is going to shut off. There are these advertising things 
in pay-per-click marketing to protect me and my account.
    Mr. Westmoreland. So you bid $2 a click.
    Mr. Snell. As a maximum. And then you think about search 
engine, paid search engine advertising is, it is an auction-
based system. They charge me as little as they possibly can.
    Mr. Westmoreland. Thank you.
    Mr. Rothenberg. Thank you, Congressman.
    Just to put a headline over what they have all been saying 
is that there now exists in the United States an ecosystem of 
small businesses, of micro businesses that simply did not exist 
10 years ago. And to simply shape this for you, any individual 
can go online with the tools built into his or her laptop 
computer and create a Web site. That same individual, again for 
free, or for $10 a month or a small hosting fee, could go 
online and get a set of free services from numerous companies, 
some you have never heard of, that will support advertising on 
the site. Other companies will act as rep firms, the same way 
they acted for rep firms for radio stations or television 
stations, and place ads on the site. There are thousands and 
thousands of interactive advertising agencies, some of them are 
just individuals, some of them are small shops, that will help 
you optimize the site.
    And so what we have is a situation where you have people 
starting blogs in their dens, listing recipes, who are using 
free tools to start those blogs, using free tools to take ads. 
They are getting ads from national marketers on there from the 
Procter & Gambles, Unilevers and Perdue chickens. And they are 
making an income out of their hobbies. That grows, and then 
they can afford to hire independent consultants. That is the 
ecosystem. We simply don't know how many, but there are 
hundreds of thousands to millions of them out there based on 
the statistics that we look at from various sources.
    Chairman Gonzalez. Thank you very much, Mr. Westmoreland.
    And if you still want to stick around, we are going to have 
another round.
    First of all, I want to give Mr. Snell some good news. As 
of 2 minutes ago, you are number one in "orange dog collar." My 
staff just e-mailed me that, using our government BlackBerry.
    I now would like to recognize Mr. Altmire at this time for 
any questions he may have.
    Mr. Altmire. Thank you, Mr. Chairman.
    I would like to thank the panel. Many of us have had the 
opportunity to talk with the folks at Google and to hear about 
what they do and to hear the real-world examples here in front 
of us of how you utilize that technology really helps put that 
in perspective for me. And I want to thank you.
    And I have a question about that in particular, that if 
Google holds such a dominance in the market in the search 
engine capacity, and obviously it is such an important 
component of your business, do you have a fear of the dominance 
of Google moving forward with regard to search engines?
    Mr. Carter. Who are you asking that to?
    Mr. Altmire. Let's start with Mr. Snell.
    Mr. Snell. Google has done such a good job, it is kind of 
like with Elvis when he got into the record business. He did 
such a good job of making records that everybody wanted to buy 
his records. And Elvis said, "hey, I think I am going to get 
into movies." Oh, no, Elvis is getting into movies. He is 
taking over. I think Google--I mean, they are like light years 
ahead of everybody else. The thing that--I sleep well at night 
knowing that there are so many people watching Google right 
now, I could not imagine the scrutiny that they are under from 
you guys, from their advertisers, you know, from their 
customers, you know, who run their ads on their Web sites. I 
mean, I don't really have a problem. I would like to see less 
consolidation in the industry from a--more search partners. But 
at the same time, it is like Google could be evil. You want to 
talk about, you know, maximizing their revenue; they could 
immediately double their revenues. Do you know any other 
multibillion dollar company that could press a button and go 
completely to a pay-per-click model, totally eliminate the 
organic, and just like have a killer quarter and go out of 
business the next quarter because everybody would go out of 
business and go someplace else. But it is in their business not 
to be evil.
    Mr. Lent. Not to mention, that is not their only business 
line. They are into a number of different digital tools that 
are oftentimes free to use for small businesses and for 
consumers alike, and they have really created their company on 
a model of innovation. And innovation is what we need in this 
country right now.
    Mr. Altmire. Mr. Carter.
    Mr. Carter. That is a great question. Probably of anyone 
here on the panel that would have a fear or should have that 
fear would be me because the other members on the panel here 
are actually buying their traffic. And my traffic, every bit of 
it is for free. I have no fear whatsoever. And I would say, I 
had fear 5 years ago or maybe a little bit longer because I 
didn't totally understand the system. But as maybe you were not 
here when I said it before, I spent about an hour each day 
doing my own internal research on how the search engines, not 
just Google, just search engines, work. And what I have 
discovered--and I really do hope many small businesses are 
listening to this right now because I would be more than happy 
to help them. It is not as hard as you might think. What my 
research has shown me is that if you want to rank really well 
in the search engines, you just have to do a good job on your 
Web site. Think about this for a minute. Here is how simple it 
really probably is: If you were Google right now or Yahoo! and 
on your front page, when someone types in "orange dog collars" 
in the case of, you know, Mr. Smell, those top results, if they 
aren't really good Web pages about orange dog collars, if you 
do that three or four or five times, you go, you know what, 
this search engine is not very good. I am not using it anymore. 
So I think what the search engines have done is they have 
developed sophisticated algorithms. They actually are able to 
recognize those Web sites that are working hard, that are doing 
it the right way, that are not selfish, that are actually 
thinking of the common good, and they reward those Web sites 
with a higher presence. I think another thing that can happen 
is that the Web--I know this from my own log files, that I know 
how much time someone spends on a page before they go to 
another page. And if all of a sudden the search engines see 
that a particular Web site that people go to this page, that 
they are engaged, like, wow, this is a good video or this is 
good content or whatever, their search engines go wow, that 
person, whoever they are, they must really like that. That must 
be a good thing. I think that is how simple it is. So there 
should be no fear. The only fear that I think any small 
business should have out there should be, am I working hard 
enough to produce really good content that engages the people 
that need the help, whose problems have to be solved.
    Mr. Lent. There is also consumer benefit to it in that the 
advertising is relevant, the advertising is relevant to their 
interests. We live in a world where advertising historically 
has been interruptive. It has been a billboard on the street or 
an interruptive ad; while you are watching a television 
program, you see a 30 second interruptive ad. It very well 
could be something you are interested in or it could have 
absolutely no interest to you at all. The technology allows for 
relevancy. And that is a new dynamic that has been introduced 
to the new digital ecosystem, and that is valuable to the 
consumer.
    Mr. Snell. Could I add something really quick?
    Mr. Altmire. Sure.
    Mr. Snell. I don't want to put all my eggs in one basket. 
And we are starting to talk about Google. Let's just talk about 
search engines. I don't want to be dependent on search engines 
in general. Let's just say you guys decided that people are 
spending too long much of their free time and too much time at 
work on the Internet, so we are going to cut search engines 
off, and we will take a search engine vacation for a week. 
Okay? I don't want to go out of business. And so we have 
basically come up with several different ways to make sure that 
we are not only getting traffic from paid search and free 
search on Google and Yahoo! and MSN. I recommend to my clients 
and other retailers and the small guys, the micro guys, you 
build a customer list, you have an e-mail marketing campaign 
where you communicate both information and product specials to 
your existing customers both through snail mail and through e-
mail. You can also sponsor Web sites. Like I have a site called 
BobtheJanitor.com that sells janitorial supplies.
    We need to hook up. Unbeknownst to me, I am probably 
running ads on his site if they are contextual because like, 
how to unclog a toilet, I probably have janitorial supply ads 
running on that site.
    Mr. Carter. Let me interrupt.
    Congressman, one thing that is really interesting there, is 
that the small--let me tell you how sophisticated that 
advertising really is. Small businesses can go out right now--I 
know they can do it at least through Google, maybe Yahoo! and 
some other ones. They can actually target specific sites, 
meaning I have in my account at Google, where I am displaying 
my ads, I am actually telling companies in the world: Here is 
the type of ad you will get. Here is where it will be. This is 
the positioning of the ad, and these are the type of people 
that are coming. I mean, that is unparalleled communication 
back downstream to the advertisers, so that Mr. Snell would 
know exactly where his ad is going to appear, and he can buy a 
specific spot on my Web site. That is powerful.
    Mr. Snell. And I can also buy a direct ad, right?
    Mr. Carter. Yes.
    Mr. Snell. Again, we are going to talk after this thing.
    As far as tools to build Web sites, I think there is a 
misconception. I mean, I remember one of our manufacturers, we 
went out to meet them in Arizona, and they were bragging about 
how great their Web site was, and they spent $250,000 
developing their Web site. I said, dude, I would have done that 
with a couple thousand bucks over the weekend. Why reinvent the 
wheel? Why design an internal combustion engine from the ground 
up when you can go across the street to the Ford dealer, and 
buy a product that works for you? I mean Yahoo! Store, the 
platform we use, is great, but it is not the only one. It is 
$50 a month. If you want to open up your dog supply store, we 
can talk maybe after this thing. But for $50 a month, you can 
have an e-commerce shopping cart that works. It is not 
$250,000. We are talking about free tools WordPress is free. 
Hosting is $10. The 60 percent of small business owners in this 
country who say it is too hard to get on the Internet, we can't 
compete; that is a cop-out.
    Mr. Rothenberg. Also, Congressman, there are many, many 
forms of interactive advertising. And they can all be done at 
the same time on the same site. There is contextual 
advertising, as folks are suggesting. Contextual advertising is 
running an ad in a context that is relevant to it, a Gun Dog 
Supply ad on a site for hunters. There is behavioral 
advertising. That is advertising that is relevant to your 
interests as a user. But it may not be on a relevant site. So 
let's say you have done some research searching for Florida 
vacation spots. You have done that, and you went to Florida 
online magazines. Then you go on to someplace else, looking for 
recipes, you might get a resort ad there. That is behavioral 
because you have exhibited the behavior. Then there are 
different formats. Search is only, according to IAB statistics, 
search is only about 40 percent of the whole. The other 60 
percent is display. It is video. It is rich media.
    And that is another part of the cost equation here. If you 
were a small business owner and you wanted to do national video 
advertising, 15 years ago, it was prohibitively expensive. You 
couldn't do it. You as a small business owner, as the owner of 
Gun Dog Supply, no way you could do national television 
advertising. Today you can do national video advertising 
online. It is cheap to do. You can buy a camera. You can 
produce it yourself with the free tools, and you can use the 
representation and distribution mechanisms to buy the ads and 
run them nationally. So it is important to point out the wealth 
of opportunity for small businesses now, to employ all the 
great tools that in the past were only available to large 
national or global marketers.
    Mr. Altmire. Great.
    Thank you, Mr. Chairman.
    Chairman Gonzalez. Thank you, Mr. Altmire.
    There are some observations that I am going to follow up 
with some questions. We really do appreciate the 
entrepreneurial spirit that you represent here, the enthusiasm 
and such.
    And yet there has to be some sort of regulatory scheme, as 
we said, to keep that playing field level and such. Maybe we 
don't have to do anything. But I think we have to watch it 
carefully. I mean, you have heard the argument about Net 
neutrality and maybe those particular principles and the spirit 
of Net neutrality may be spilling over to other aspects of the 
Internet, which I think is a legitimate concern. If you want it 
apply it to one of the aspects of the Internet, maybe it is a 
good idea in the other. And I am talking about search engines 
and the potential for things that could happen.
    I understand where we are today. The question is, where 
would we be tomorrow? There is a basic principle here in 
Washington that we adhere to, and that is that competition is a 
good thing. And I know, at the present time, you know, we do 
have some--the contemplated arrangement between Yahoo! and 
Google and the concerns that certain Members of Congress have 
expressed, some of which I share, maybe not to the degree of 
others. But I think it does need to be explored. We have heard 
this argument before, that if someone is doing such a great job 
and they predominate the market, why not just allow them to 
continue? And maybe even reach certain contractual 
relationships that perpetuate that particular dominance. We had 
this issue with Microsoft not long ago. I still remember a 
legal argument being advanced that, yes, monopolies are bad, 
but technology is so different today. It is not the same, you 
know, it is not your father's Oldsmobile. That is true. It is 
not even around anymore.
    However, the principles remain. And there is no such thing 
as, I believe, temporary monopolies. We have had people in this 
particular field in the past advance arguments that we are the 
leaders; technology changes so quickly that you are going to 
have temporary monopolies. I don't think temporary or permanent 
monopolies serve the American public or the business world very 
well.
    There is a contemplated agreement between Yahoo! and 
Google. And in a minute, I want to get into what is organic 
search and then what are we talking about as far as the ads 
themselves. Can a business subsist, exist through just organic 
searches? Or are they going to eventually have to take out some 
sort of ads? And how is that controlled? And who dominates in 
that particular arena? And regarding that particular--not 
merger because this is not a complete merger; it is still 
shared services and, such and the potential there of what it 
might represent because I am trying to remember exactly if most 
searches--67, 68 percent are Google searches. I forget where 
Yahoo! may be, another 12 to 16 percent, whatever it is.
    When you put it all together, you are probably at 78 
percent or more of all searches will be either Google or a 
Yahoo! search. But Rob Pegoraro, in his column, fast forward 
May 8, in The Washington Post, "Google Still Unchallenged." And 
someone has always said it before, and they said it a lot 
better, so I am just going to quote it: "It is not that Google 
is some tyrannical monopolist that must be brought to justice. 
This company has come to dominate the markets for Web search, 
advertising and many other services fairly by providing quality 
products at a fair price which, for most Web users, is free. It 
has moved when others have stood still: Imagine, for instance, 
how limited Web mail and online mapping would be if Google 
hadn't reinvented each category earlier this decade. But that 
doesn't mean that I want it to run away with the rest of the 
market. It is fundamentally unhealthy for any one company, even 
one that claims to have "don't be evil" stamped on its 
corporate DNA, to amount to the crossroads of the Internet."
    And I am going to ask, Mr. Rothenberg and Mr. Lent, for 
your own opinions. I know, Mr. Lent, you have kind of had 
already had an opinion of, "let's see where it all goes."
    Should Congress be concerned about the market share that 
will be represented as Yahoo! and Google obviously reach this 
agreement? Or if Microsoft is successful in acquiring Yahoo!?
    Mr. Rothenberg.
    Mr. Rothenberg. Mr. Chairman, all these companies are 
members of my association.
    Chairman Gonzalez. Well, in that case, I should move on to 
Mr. Lent.
    Mr. Rothenberg. As you might imagine, I love all our 
members equally, big and small.
    I do think that there are legitimate subjects for Congress 
and regulators to look at, and competition is one of them.
    The only point that I would like to make is that the 
competitiveness of this industry, the dynamism of this industry 
is unquestioned and unquestionable. We need to make sure that 
anything we do promotes robust development of more content, 
more sites, more places that advertising can run. Thus far, 
from everything that we have seen, certainly our own membership 
statistics, certainly in the growth of interactive advertising, 
and certainly in the evidence on this panel, we have a system 
that ain't broke at all. So I would be very careful of kind of 
going across that bridge - from research, inspection, and 
exploration into regulation - without very, very careful 
scrutiny. The success of the people on this panel is based 
almost entirely on what we call the long tail of the Internet, 
the ability of these tens of thousands, hundreds of thousands 
of small sites to develop to sell advertising, to take 
advertising, either to sell it directly or to take it through 
online networks. And that is where I think this committee ought 
to spend as much time as possible assuring that that dynamism 
continue.
    Chairman Gonzalez. Mr. Lent.
    Mr. Lent. Chairman Gonzalez, you asked a very pointed 
question. Should the committee be concerned? I think the direct 
answer to that question is, yes, of course. With any growth 
that is that substantial and then any dominance that is that 
substantial, of course there should be concerns.
    The line for me though draws between concern and action. 
And I believe that there should be a high level of scrutiny on 
any industry, especially one that is as important as this one 
for the future of this country, but this level of dominance 
should be scrutinized.
    But I have not seen anything in my 14 years and in the 8 
years that I have closely been associated with following the 
marketplace, especially search and display, that would lead me 
to believe that Google is doing anything to take advantage of 
their market position.
    So I do believe that it should be closely watched, but I 
don't think that--I think any action would be premature at this 
point. And that said, somebody will build a better mouse trap. 
It always happens. This is an innovation-led business. And 
someone, some small business will come out of nowhere with some 
great insight, some great intellect, and put together a better 
mouse trap. And that will happen. It is inevitable. It 
continues to happen. Whether Google will buy them or not is 
still up for grabs. But that will happen. And you know, very 
likely that level of dominance with this fast-paced industry 
will not exist at the level it is right now forever.
    Chairman Gonzalez. Okay.
    Mr. Carter.
    Mr. Carter. Yes, Chairman. I have some insight on this. The 
analogy between Google, Yahoo! and Microsoft, I don't think it 
is too valid. And the reason why is, I distinctly remember the 
days when I first started using personal computers back in the 
mid 1980s, and what happened is that Microsoft, I believe, got 
their dominance because of deals they made with the makers of 
the personal computers. So when I got my personal computer, I 
didn't have much choice. It had that on there already. The 
difference though between Google and Yahoo! and the other 
search engines right now, are your constituents, Congressman 
Westmoreland's constituents, everybody out there in America, 
they are voting themselves by their own action each day as to 
what works and what doesn't and what is good for them. And that 
is my own experience. And not only that, there are still people 
out there who use many of the different search engines. I have 
one of my own column editors in Victorville, California, who 
still uses Dogpile. I mean, many people in this room might not 
even know what Dogpile is. It is a search engine that still 
works. She loves it. There are people who still use AltaVista. 
There are other search engines out there. People are voting; 
consumers in America are voting each day. And they are--just 
like you want to get reelected, they are electing each day 
right now that Google, for the time being, is the winner. And I 
think you should let the people out there do it. And the best 
part is that it is free, meaning no one is compelled and no one 
is forced to use Google each day. So I think the consumers are 
talking to you and speaking to you right now through those 
statistics that, just like Mr. Rothenberg said, the system is 
not broken right now. It is going along just fine.
    Mr. Lent. Also I think it is important to add that never 
has there been a time when consumers have had a more active 
role in defining the marketplace. This is a world right now 
where social media rules communication and conversation. 
Consumers have a voice. Blogs are replacing mainstream media, 
as you all know, on a regular basis and consumers have the 
ability to choose.
    And, as Mr. Carter said, they have chosen.
    Chairman Gonzalez. And I am going to yield to my colleague 
Mr. Westmoreland.
    But I am going to come back because I want to take up this 
concept of something being free because nothing is free. And I 
want to go ahead and explore that because I want to explore 
tracking, identifying the consumer, the consumer DNA. I think 
your bureau was quoted in today's article regarding an 
application that basically blocks all advertising, the 
consequences to all businesses big and small.
    Mr. Westmoreland.
    Mr. Westmoreland. Thank you, Mr. Chairman.
    And I think you can tell by our panel of witnesses that 
this would be hard to regulate. But let me say this, that you 
know this hearing, it has been good for me because I have seen 
what an unregulated industry can do, and the fact that the 
enormous growth that, because government has not put its little 
tentacles in there, has grown at an enormously fast rate and 
has been beneficial to many, many, many small businesses.
    And according to what Mr. Lent said, and I had written down 
the same thing, there is going to be another Google to come 
along. If we go into the market right now and start regulating, 
what we may ensure is that Google remains the largest search 
engine out there because we will, Mr. Chairman, I think what we 
will do is keep other people from getting in it. And when so 
you start regulating the ones that are at the top of the class 
right now will automatically remain top of the class. And so I 
think we are really--with all due respect to my friend, I think 
we are an answer looking for a problem. And right now, I just 
haven't seen it.
    And I am sure if anybody knows, Mr. Rothenberg does because 
of the difference of his membership and of his organization. 
But I see--I see some happy campers out there that have gone 
into business, learn more and more about their business. And 
because it is an unregulated thing, they are able to do 
creative things to expand their business and use their own 
ingenuity to make things better, not just for them but for our 
whole economy and all of us as a whole. So I think it would be 
beneficial for us right now to leave the industry as it is and 
hope that they just continue to make more and more and more 
money so that they can pay more and more and more taxes. And 
give us the ability to do what we do best, and that is expand 
government. So, again, I thank you, and I really don't have any 
questions, just those comments.
    And thank you for the time.
    Mr. Snell. Can I make comment?
    Chairman Gonzalez. Mr. Snell.
    Mr. Snell. My understanding of the Yahoo!-Google deal and 
all this is above my pay grade. I don't understand this 
acquisition and stuff. But it is kind of like it is an 
inventory situation, if I understand things correctly. When I 
do a search on Yahoo!, Yahoo! is going to check their own 
search marketing engine, Panama, to see if their ads and 
display those ads, but Yahoo! will also be able to choose to 
display Google's inventory as well.
    I have a good analogy, for me anyway: It is like if I went 
to Target and I needed a t-shirt, it is like I am going to need 
a double extra large tall, okay. And if Target doesn't have my 
size, I sure hope that Wal-Mart or Rhe Gap or somebody else is 
going to be right there in the store. It would be so awesome to 
say, here you go, here is your t-shirt. And I think that is 
what the situation is. It is not a merger. It is like they are 
not taking over their search engine. I think it is just a 
partnership on the advertising. But like I said, it is above my 
pay grade. So I may not understand that correctly.
    The main reason that I am interested in it is that with 
some of my retailers, with paid search, there is not enough 
inventory for me to buy. I have keywords, and there are only 
3,000 clicks a month on this keyword, one specific keyword, I 
am not going to say what it is. I want 10,000 clicks, you know, 
and so I am on Yahoo!, I am on MSN. But sometimes really 
specific on the long tail, like "orange dog collars" is a good 
example of a pretty specific keyword. It is not that 
competitive. Anybody in this room could rank for it if they 
created a little bit of content. But what happens is when you 
go to Yahoo! and do a search, sometimes the ads just doesn't 
show up. So I see this being a good thing from an inventory 
perspective. Because how many $5 bills would you buy for $3? 
All of them. And there is a limited number that I can buy for 
my retailers when I am sending them traffic. And that is what 
the Yahoo!-Google deal is to me.
    The other thing I want to say about it is it is a lot 
easier to do to switch to a different Web site than it is to 
change to a different operating system. I think that is what 
Tim was saying. I switched from a PC to a MacIntosh. And it is 
tough. Man, I switched from Google to whoever the best search 
engine is, and talking about new innovators in the space--
search, okay, Google has search locked up. They are great. But 
they have been doing search for, what, 10 years now. If you 
look in the social space, I mean, Google had orkut. Yahoo! had 
Yahoo! Groups and 360. These startups came up. MySpace was the 
hot thing. Now Facebook is the hot thing. I mean, video, Google 
had Google video. They had to buy You Tube because You Tube 
came out of nowhere; 18 or 24 months ago they didn't exist. 
Google had to buy You Tube because they did such a better job 
at video than Google did. These big companies are going to have 
to innovate or acquire. So I am not worried about--Google is 
going to be--there is going to be a paradigm shift coming that 
none of us see coming. Maybe somebody watching this has an idea 
of what is going on, but it is going to totally change the 
game. And it scares the hell out of me because I have to stay 
on top of this stuff all the time.
    Chairman Gonzalez. To a certain degree, I am going to agree 
with you.
    However, the fact that is more technology based and such I 
don't think really escapes the whole industry or denies the 
industry the scrutiny that we would give regardless of the 
enterprise. And I have been trying to make that point since the 
Microsoft lawsuit years ago. I think those principles have 
served us well. And I know that where we are today, there isn't 
a problem. The issue is, you may reach a point where there is a 
problem, but you just don't have the competition or the players 
to do anything about remedying the problem, meaning 
competition.
    I am not for regulation at this point. I think we do have 
to view each and every one of these, if you want to call it a 
merger or a partnership or whatever, and the impact on, again, 
on the consumer, on competition and whether you have you know 
antitrust and monopoly concerns and such. By the same token, I 
mean, we have certain individuals that would like to apply a 
different standard maybe to another aspect of the Internet. And 
I have been saying all along, we don't need a regulatory scheme 
in law legislatively enacted. If you don't have a problem, 
let's say now with the five principles of Net neutrality. And I 
am saying, don't legislate. And I say the same thing here when 
it comes, whether it is search engine, advertising, unless you 
have a real serious problem that is identifiable and that we 
want to correct.
    There is one thing we wanted to point out, you know, Mr. 
Carter was saying about everything being free, and it just 
can't be free because I mean you have to support your business 
enterprise. Advertising dollars represent that stream of 
revenue that allow the consumers to have all of these "free" 
services. Now the consumers I don't believe understand that. 
And we are going to start running into issues of privacy and 
such. But we will leave privacy aside right now.
    And we will talking about the article that appeared in 
today's Washington Post in which the bureau here is quoted. And 
that was where we have an individual in New York, I believe, in 
his basement. He wouldn't give his name or--
    Mr. Rothenberg. Ray.
    Chairman Gonzalez. Ray "the blocker" or whoever it is, who 
has devised basically an application that would block all 
advertising. And I was speaking with staff earlier in Energy 
and Commerce. I am on the Subcommittee on Telecommunications. 
And we had the wonderful inventor, and I am just such a great 
fan of this individual, of TiVo. And so, of course, we had 
individuals saying, yeah, but you are driving advertising 
dollars away because you can basically fast forward them away. 
So then we had actors come and say, look, now you are getting 
advertisers into our art form. You know, they are placing Coca-
Cola cans in different scenes and everything else. And then 
this particular actor--I want to share this with you. I wish I 
had taped it, it was so wonderful. He says, "can you imagine 
Humphrey Bogart and Lauren Bacall at that last scene, when the 
airplane is revving up its engines, and he is saying--you know, 
"you are getting on this United flight at a reduced rate today. 
I hope you have a return, though. I know you are staying at 
Casablanca Inn. I will miss you very much. Let's have one more 
Royal Scotch," whatever it is. So he made his point.
    But the whole thing is, I think we have to recognize that 
advertising revenue is the way that businesses are able to 
provide many, many services. What I am wondering, though, is 
this thing about--this notion of being free. If I subscribe to 
a service that is offered by somebody, generally there are 
conditions which I and millions of other Americans don't read. 
We just say okay. Most of those conditions allow them to track 
me.
    And I am going to ask Mr. Rothenberg, and anyone else, but 
Mr. Rothenberg and Mr. Lent from the industry may understand 
the importance of--what is this they are tracking me? And what 
exactly are they tracking that translates to a better way of 
advertising, which then means micro targeting, which then means 
it is maybe something available to my small business guys?
    Mr. Rothenberg. Chairman, let me address the broader 
principle first because you have mentioned it a couple of 
times. We believe--everybody on this panel believes, the IAB 
and all our members believe absolutely- in the principle of 
consumer control. The reason this medium, interactive digital 
media, has grown so dramatically in traffic, in user audience 
and the like is because you can choose what you want, when you 
want it, how to get it, what you don't want. You can screen it 
out. So we believe in consumer control. Consumer control 
improves advertising.
    If the advertising is no good and people choose to skip 
it--and this is the TiVo principle--then the pressure is on for 
the agencies and for the marketers to make better advertising 
so that people will want to watch it. So we believe in that.
    There are forms of control mechanisms that can be 
illegitimately done and that can certainly be illegitimately 
marketed. Ray, in the story today, for example, is quoted as 
saying that advertising is the same as spyware and malware. 
Well, it is not. Spyware and malware are criminal things that 
get put on computers illegitimately. Advertising is something 
that, as you noted, pays for a wealth of free services.
    When the Rays of the world do things that illegitimately 
and illegally interfere with the ability of advertisers to 
deliver advertisements, the law should be able to go after 
them.
    However, when consumers are offered legitimate tools, as 
they are on every single major Web browser, to screen, then I 
think it is incumbent on us as an industry to do two things: 
One is, create better ads that people will want to watch, that 
people will want to absorb; and the second is to do a lot 
better job about educating the public about the trade-offs. 
These ads are what pay for the hundreds of millions of free e-
mail accounts, that pay for all the free videos that are 
online, that pay for all the financial tools that allow you to 
analyze your investments. That is what we need to do a better 
job of communicating.
    I think the good news in today's Washington Post story was 
that very few people, very, very few, are blocking ads. There 
does seem to be an intuitive understanding on the part of most 
Americans that there is a good trade-off here. And it is a good 
trade-off, not an unhappy trade-off. They are recognizing that 
these tools and services make the advertising more relevant to 
them. And the relevant advertising is as good as the content in 
informing them about how to live better lives. So I think we 
are in a good position. But we do need to recognize the 
importance of education and that, when people are illegally 
blocking advertising, we need to be able to go after them.
    Chairman Gonzalez. Mr. Lent.
    Mr. Lent. It is a new model. We are dealing with an entire 
new landscape right now. Consumers ingest media differently 
today than they did 5 years ago than they did 10 years ago. We 
need to recognize that. The anecdote that you brought forward 
on Humphrey Bogart and Casablanca, it is funny, and you know, I 
think--again, anecdotally, it makes some sense. The reality of 
it is, it would never--the consumers would never stand for it. 
They wouldn't ingest that media. In today's world, that analogy 
does not hold true. If Paramount Pictures created that movie 
today and they said, you are about to board your United flight 
on the way to Casablanca Hotel, consumers see right through 
that right now. There is too much content available at their 
fingertips within two clicks. They are not going to stand for 
that kind of blatant integrated advertising. We have to step up 
our game dramatically as an agency to build relevancy for our 
brands. For our clients who come to us and want to communicate, 
have a two-way dialogue with their consumers, we consistently 
talking about avoiding the old trap of interruptive 
advertising. And the whole relevancy of this data, the data, 
the transformation of the model allows for data to give 
insights to the consumer.
    And as Mr. Rothenberg has said, as Mr. Rothenberg said, 
there is content. There is advertising, and sometimes it is 
hard to tell which is which. And if the advertising is as 
strong and as valuable to the consumer than the content itself, 
that it is in fact advertising. And I can give you a very 
direct analogy to a project we created for one of our clients 
for Bacardi. They don't sell rum online. Obviously, they can't 
sell rum online. But they wanted to reach their consumers in a 
unique way. We know what their consumers do; they drink rum at 
night clubs. And at night clubs, music is the hero. So we 
created the most robust online music mixer and hired 
professional DJs from all over the world to create content that 
consumers then go online and create their own songs, download 
them to their iPods, vote on them, send them to their friends. 
That is relevancy in a branded communication. There is not an 
ad on the site. It doesn't talk about the product. It doesn't 
talk about any of that. All it does is add value to the 
consumer that leaves behind a positive reflection on the brand. 
That is the new model of advertising, and the relevancy of 
understanding what consumers' interests are is a natural foray. 
This data propagates more relevancy in a conduit, in a 
communication conduit.
    Chairman Gonzalez. And I am not saying that collecting this 
information is not valuable in the terms that you just 
described.
    The question then is about full disclosure, the consumer 
knowing the information that they are being tracked, and it is 
very interesting to the degree that they are, because I am not 
even aware--and I need to correct myself, and I apologize, but 
most of the people in this room are so young, they have never 
even seen Casablanca. Ingrid Bergman in that scene and not 
Lauren Bacall. That was another leading lady, another movie.
    I will yield back to Mr. Westmoreland here. Where we 
started was really the concern of the small businesses because, 
I mean, we started talking this way. And I am wondering, okay, 
where do we plug in the small businesses? So last week or a 
couple weeks ago, I brought staff in. I said, you know, let's 
Google and let's Yahoo! books and San Antonio, Texas. I want to 
see if my little bookstore is still surviving out there. I 
don't visit it often enough. But I try to place my orders there 
and such. And I am just wondering if y'all could kind of guide 
me through what is our--I was able to find. This is the Google 
search, and obviously, it is "books San Antonio, Texas." And 
then what I ended up with--there are 10 pages of listings. I 
didn't go past page 1. And then you can also give me your 
opinion how many people go past page 1. And what I wanted to 
compare was what I would--what I see organically and what 
appears. So I am just assuming, I don't--it says local business 
results for books near San Antonio. And then they list A 
through J and even have a map. All right. And then off to the 
right, they have sponsored links, books at Amazon.com and then 
Barnes & Noble, obviously the big guys and such. Then it starts 
with some listings, books in San Antonio, Texas, in the Yellow 
Pages and such. What is paid for and what is not paid for on 
this page?
    Mr. Lent. You are looking at three different pieces of 
content there on that page.
    Chairman Gonzalez. You can see this? You are young. All 
right.
    Mr. Lent. We talked about the fact that Google doesn't just 
search. There are a lot of different components in their 
digital arsenal, one of which is their mapping technology. And 
that is what you are seeing at the top left corner of the page. 
That is a Google map. And those results are essentially the 
modern day Yellow Page results set for a particular area. In 
this case, you put in San Antonio, Texas, but you could just as 
easily put in your zip code. And you see the results of local 
businesses that fit that criteria. That is a standardized 
Yellow Page model.
    Chairman Gonzalez. No one pays extra for this? It just pops 
up?
    Mr. Lent. That is right. I think there is the ability for 
them to monetize that channel, and you can buy sponsorship 
within the Google maps platform. I can't see from here whether 
any of those particular ads--or whether those listings are ads 
or not. Underneath, you are looking at organic. That is 
organic. Those are free. That is how Mr. Carter has built his 
business, as he said. And that right side, the right column, 
those are monetized links, those are sponsored links. That is 
where your Google AdWords will come into play.
    Chairman Gonzalez. Okay. Then Yahoo! has a variation of it 
again. A small map. They only have three listings for books 
near San Antonio. And then, of course, over here, sponsored 
results rather than links. And Amazon and then San Antonio 
books. And Amazon.com again is listed. And again, that would 
basically be the same format.
    Mr. Lent. Yeah. Same format.
    Chairman Gonzalez. And if you are a small business--and 
this is to Mr. Carter and Mr. Sanar and Mr. Snell, you guys 
know that I am probably not going to go past page 1, right? 
There are 11 pages on Yahoo! or 10 with Google and such. But 
your experience would be, on the organics, you want to be 
somewhere in this first page.
    Mr. Snell. You want to be number one; 90 percent of the 
folks that are clicking on organic click on the first page, and 
about half the clicks are on the first or second position, and 
it drops off precipitously after that. You are talking about a 
local search there with a local by including a zip code.
    Chairman Gonzalez. San Antonio.
    Mr. Snell. Right. If you were just looking for dog training 
books or something that would be more specific and there 
probably wouldn't be a store for it, it wouldn't have the local 
component. And one thing to add about the local side of things, 
that is like a subset of search. It is Yellow Pages-like in 
that it is a listing of businesses, but you have to pay to 
have--you have to have a commercial phone number. One of the 
problems that I have got with my Yahoo! Store owners is there 
are a lot times they are not buying Yellow Pages ads. They are 
not in that database. So these national retailers, I don't even 
know if Gun Dog Supply is for local search. And the results 
from local search are not ordered by--like in the Yellow Pages, 
if you pay more, you get a bigger ad, and you pay for position 
in the physical Yellow Pages. In local search, I think that is 
done algorithmically based upon like the proximity of that zip 
code and based upon the keywords occurring in the name of the 
business and even keywords on the Web site.
    With search engine optimizations, you need to be on the 
front page. And I was talking about keywords earlier. I have 
got 200,000 keywords. I have got 14,000 keywords that actually, 
when folks search for them, they end up buying something more 
than not. A lot of people get obsessed for ranking number one 
for only one or two keywords. You were talking about long tail 
earlier. That is basically really obscure specific searches 
that result in having--there are not that many people who have 
a Web site that have orange dog collars on it. So that would be 
an example of like--of a term that we can rank really well for, 
and I am not competing with hundreds of millions of other Web 
sites.
    Chairman Gonzalez. Mr. Westmoreland, do you have any 
questions?
    Let me ask you one last thing because I am always wondering 
exactly.
    If it is the free application I am getting, if it is my 
Gmail account, if it is anything that is basically offered for 
free but I am agreeing that they can track my Internet 
activity, whatever that means, what are they exactly tracking? 
Are they tracking when I go to the Internet and my searches? 
Are they tracking something else?
    Mr. Rothenberg. They are not tracking you. I think the word 
"tracking" or the phrase "behavioral targeting" sends the wrong 
signals. It indicates that they know you, Mr. Gonzalez, where 
you live, who you are. People do have that information. Credit 
card companies have that information.
    Chairman Gonzalez. Sure.
    Mr. Rothenberg. Your utilities have that information. So 
that information has been used in direct marketing for decades 
and decades and decades. That is not the information that is 
tracked in interactive. What happens is anonymous 
nonidentifying markers are placed that indicate what your 
interests are, in ways that allow relevant advertising to be 
mechanically, automatically delivered against your interests. 
You know, you showed the search page. I am in the market for a 
car right now. So I went online out in the east end of Long 
Island where our house is, and I plugged in "Ford hybrids." And 
I noticed that in the paid search side of it, in addition to 
having some national ad, you know, Ford had a paid ad in there, 
there were a number of local dealers. The local dealers were 
there because, in my computer, based on my ISP, there is an 
identification of the geographical area I am in. So I have 
actually been able to identify dealers and go to their sites 
based on relevant advertising, in this case geographically 
relevant, that has been placed.
    I think that the terminology has done us ill. You know, 
tracking and targeting give the sense of a deer in the gun 
sights. And that is not what is being used here. What is being 
used are anonymous technological markers that indicate 
relevance to you based on your activities.
    Another thing that is very important to note is that much 
of this tracking activity is essential to the operations, not 
just of the interactive media but of all media. For example, I 
note some of the proposals that have been floating around to 
regulate some of this activity would regulate tracking of user 
activities. Well, tracking of user activity is the main way 
that Web sites use to set advertising prices. It is the only 
way they have to measure their audiences to know how many 
people are coming in. That is done through those markers, 
through those cookies. Another thing that is essential to the 
management of interactive media is the ability to count the 
advertising impressions. I mean, did you actually see the ad 
that I sent to you?
    Did you see it? Well, the only way to count those 
deliveries is through the same tracking mechanisms. So it is 
very important to understand that so-called tracking is what we 
use for assessing audience size, to set prices, what we use to 
assess the accurate delivery of ads to know how to charge our 
customers and also to be able to deliver things that are 
completely, as much as possible, relevant to your interests.
    Chairman Gonzalez. It would seem to me, the more 
information that we have and the particular taste and behavior 
of a consumer, the greater chances it would be that a small 
business might be able to provide that particular service or 
product with more specificity just because we have this 
consumer DNA that we built up. But you said that they don't 
really know that it is Charlie Gonzalez. But the truth is--I 
will just call it a user ID number. They have got to know who I 
am. So I am all these little component parts. Every search that 
I have ever--they have got to be compiling this profile on me. 
And so they can trace it back to a particular user. I mean, it 
wouldn't make any sense otherwise. So they do know who I am. I 
mean, it is not a quantum leap here to figure that, based on 
all the activities of all these free services, because I have 
got a lot of people tracking and--I know people don't like the 
word--following my activities. They are compiling this profile. 
And so when people say, no, this is anonymous cyberspace, 
right, I think people still have that concern, Mr. Rothenberg, 
that they do know who you are. And they are looking into all of 
your activities. And I am saying that a consumer can agree to 
that. And we will be looking at that and exploring it. If you 
looked at the story this morning, I think Mr. Markey had his 
own comments on it. I think we need to carefully explore it 
because of the potential consequences, unintended or otherwise.
    Mr. Rothenberg. But let's be careful to separate out what 
is possible, because everything that you are identifying is 
certainly possible, to what actually goes on as a matter of 
consistent practice. As a matter of consistent practice, the 
only way someone is going to know who you, Mr. Gonzalez, are, 
is if you subscribe to something, if you give your name and 
your address. But that is different from you just going around 
surfing on sites, looking at San Antonio bookstores and 
vacation spots, restaurants, books to buy. They know a lot 
about some of your preferences. And based on that, advertising 
will be able to be delivered. But that is a mechanized process 
that doesn't get at your name or your address or your Social 
Security number unless somebody actively tries to put one and 
one together to make three.
    Chairman Gonzalez. And we have different components of the 
Internet that track. I mean, ISP, search engines, applicators, 
all of them. I mean, everyone that is out there tracks pretty 
much. I mean, that is the way their business model is 
formulated. And I know we have been here a long time.
    I know, Mr. Carter, I think you have a comment.
    Mr. Carter. I think I can summarize and speak to some of 
your points, Chairman Gonzalez.
    I maintain that there are only two reasons why people get 
on the Internet. If you boil down to the lowest common 
denominator, you come up with two of them. One is pleasure; the 
other one is pain or problems. In that context that you are 
talking about with respect to tracking, tagging, following, 
whatever, think in your own personal life, and everybody 
actually in this room, if you can go back in time just 10 years 
ago, I would venture to say that your life was less 
complicated. You spent more time doing certain things. And what 
has happened is that we have got this compression of 
information that is ever-increasing. So your life is busier. 
Everyone's life is busier. And what happens is, you want and 
need solutions to problems faster because that is--your life is 
increasing, just everything is getting faster. So, I maintain, 
and I see it on Ask the Builder, that that tracking or that 
setting of cookies actually is a beneficial thing. Because it 
allows the--whether it is Yahoo! or Google, whomever, even my 
own ads that I throw up to throw a solution at you for the 
problem you are on the Internet today, whether it is you are 
buying an airline ticket, whether your roof is leaking, whether 
you may have just found out that you have been diagnosed with 
cancer. You need help, and you need it now. So that type of 
technology is actually beneficial.
    So I ask you, as a legislature, and you, Congressman 
Westmoreland, and other members of the committee, that if you 
decide to go down that pathway, go down it very slowly because 
there has been good and bad with everything I think that we 
have had here in America. But at this current time, just think 
about this one last thing: Who would have ever imagined that a 
guy like me that used to eat lunch on drywall buckets--
seriously, I used to sit on a drywall bucket and eat lunch--can 
compete equally with The Chicago Tribune, The Washington Post, 
The New York Times? I am a syndicated columnist. But I have an 
equal profile on the Internet, maybe in certain respects higher 
than some of those publications that have been around for 
years, that have millions of dollars of infrastructure. So if 
you start to tweak this too much or too rapidly or too fast, 
you could actually make everything go backwards. And that would 
be a very bad thing for consumers. And I beg you, before you do 
that, to really get in touch with your constituents and ask 
them personally, have some type of town meetings.
    I am an elected official myself actually. I mean, I know 
how that works. And get in touch with them. Find out how they 
really use the Internet and how it has impacted their life. 
Because those people that are buying those things, they are 
what have made everybody on this panel successful. So please 
talk to them as well.
    Chairman Gonzalez. I would just like to add one thing.
    I, first of all, agree wholeheartedly with everything you 
said. There is one thing that hasn't been brought up. Consumers 
do have the right to opt out. They can shut of the cookies on 
their machine. Now, granted you may just read a legal document 
and just say "I agree" without going through the process. But 
that is a decision you made. If you have a concern that your 
private data is out there and that is something that you want 
to curtail, you have the ability to do that. You may have to do 
a little research. You may have to find out what the process is 
for you to opt out, you may have to do a quick Google search 
and find out how to shut off your cookies, but that is within 
your power. You are capable of doing that. And based on that 
fact alone, the value supersedes the damage for me.
    Mr. Rothenberg. Actually, also just to reinforce, there is 
a fair amount of research already out there that says, even 
with the paltry amount of consumer education, that something on 
the order of 40 percent of consumers clear out their cookie 
caches each week. So already people know how to control their 
privacy or their identity online. So I think that education is 
a far better path to follow, certainly at this point, than 
regulation.
    But, generally speaking, in fact specifically speaking, I 
think the education that this committee is bringing to this 
process and also to the benefits that interactive media and 
advertising bring to small businesses, that is really the 
education that needs to be out there. So we are very pleased 
that you held this hearing. 
    Mr. Snell. Can I add one thing?
    Chairman Gonzalez. Sure, Mr. Snell.
    Mr. Snell. You guys asked us, what do we want Congress to 
do, and what do we want Congress not to do? And one thing that 
we haven't talked about, you talked about 60 percent of the 
folks, you know, small business folks surveyed said it is hard 
to get on the Internet. I think you guys can help with, like 
the SBA having an e-commerce czar or somebody who knocks on the 
door, you know, metaphorically, and says, hey, it is real easy 
to get on the Internet. Talk to any of these guys on the panel 
or just surf around on the Internet. But most of the small 
businesses that are in your districts are probably not folks 
who could open up a Yahoo! Store. I would imagine that they are 
not like catalog retailers. And this is where a different kind 
of search marketing would apply. In the example that you gave 
on the bookstore, if I had a small bookstore, you know, in San 
Antonio--and forget the San Antonio part of your query, let's 
just say you searched in--you were at home in San Antonio and 
you searched for books. Amazon will probably come up first.
    But if you were a small business, you could buy a targeted 
ad that would only run in San Antonio. So we talk about how 
search can get some of us national reach, but it can also get 
local businesses generic reach on these really broad keywords 
that there is no way a San Antonio bookstore could ever rank on 
the first page of Google for books. And we have done it with 
our copy shop. I have got one copy shop in Starkville, 
Mississippi. I will never rank for color copies on Google, but 
I can buy color copies for 10 cents a click and be on the first 
page of Google in Starkville, Mississippi. And I think you guys 
need to push that.
    Chairman Gonzalez. I want to thank all of you.
    I know Mr. Westmoreland joins me in just thanking you for 
the time, the effort and the expense of coming and enlightening 
us.
    Let me end, of course, with the last--beginning and the end 
of any hearing that we have here. Our concern is small 
business, micro businesses in America. We have some 
representatives of those businesses here. And we commend and 
applaud you. And I think it is a question of education. 
Legislate only when totally necessary. I am not sure that is 
where we are. I know that on Net neutrality, there may be some 
legislation out there. But we surely don't have legislation 
elsewhere that is impacting common practices out there that 
seem to be working as long as we don't have any abuses and such 
at the present time.
    Small businesses have to be part of what is going on out 
there, and the concern being is, as long as we still have some 
sort of a model that allows their entrance into this market and 
taking advantage of what is there, that is what is important.
    I think, Mr. Snell, your suggestion is well taken on, what 
is the Small Business Administration doing and way beyond that, 
what can this committee do to enhance and assist small 
businesses? As far as technology moving on, it can be used for 
a good purpose, and we can have good people. It is in their 
hands.
    But it reminds me of when I was in college, and I took a 
course. It was science for majors. The only thing I remember is 
that it started off--I can't remember if it is a Buddhist 
saying or not and that is, just like technology, science, that 
the keys that unlock the gates to paradise also unlock the 
gates to hell. And that is what technology and science is all 
about. In the proper hands, it can be a really good thing. If 
you do have misuse and you have certain concentrations of 
power, bad things can happen.
    And I think we have to be ever watchful. But in the 
meantime, you know, we have you out there. And I take it that 
you will always have the concerns of small businesses at heart, 
you know in your own business ventures or personally what you 
are doing in your hometowns.
    And I want to thank everyone.
    And if I forget this, I will get in trouble. I ask 
unanimous consent that members will have 5 days to submit a 
statement and supporting materials for the record.
    And without objection, so ordered.
    And this hearing is now adjourned.
    [Whereupon, at 12:10 p.m., the subcommittee was adjourned.]

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