New York State Mulls Million-Dollar Question

New York State Mulls Million-Dollar Question

Janet Caldow

By Steve LeSueur



The state of New York is seriously considering allowing its agencies to display advertising on their Web sites, a move that could break open the Internet's potential for enhancing statewide coffers with revenue.

A task force within the state's Office for Technology is studying the issue in preparation for a January report to James Natoli, director of state operations and chairman of the technology office, with recommendations on how to proceed with the effort, said Thomas Duffy, deputy director of the office.

If Natoli decides to move forward, New York would be the first state to approve advertising on government Web sites, Duffy said.

"Ad-supported Web sites for public services, whether sponsored directly by the government or offered by industry, is the real gold mine," said Thomas Davies, senior vice president for Internet services at Federal Sources Inc. of McLean, Va. "It is coming and in a big way."

While it is too soon to say precisely how much revenue would be generated, each state probably could attract millions of advertising dollars with busy Web sites that serve targeted audiences.

For example, insurance companies and other businesses that sell products and services to car owners would pay top dollar to advertise on a government Web site where people renew driver's licenses or vehicle registrations.

"There are very few companies today who can guarantee that 10 million eyeballs are going to be on a site at some point or another. That's a very powerful thing," said Janet Caldow, director of the Institute for Electronic Government at IBM Corp., Armonk, N.Y.

Allowing businesses to advertise on government property is anything but new. Governments routinely authorize advertising on buses and subway trains, and government highway signs that alert travelers to nearby gas stations and restaurants also are considered a form of advertising. Many state and local governments also allow advertising in their tourist brochures and information packets.

Consequently, as state and local governments develop sophisticated Web sites that provide information and services, advertising becomes the obvious next step, government and industry officials said.

The issue has been informally discussed among state technology leaders, but it is fraught with political land mines that have made the leaders reluctant to move too quickly or get too far ahead of elected officials and their constituents, Davies said.

The New York State Web Site Steering Committee, which consists of representatives from about six agencies and is headed by Natoli, is looking very closely at the legal and constitutional questions connected with advertising on government Web sites, Duffy said.

Government officials must balance First Amendment concerns about freedom of speech against practical concerns over how to regulate advertising on government-sponsored sites.

One chief concern is that public sites do not become an open forum for pornography or for highly politicized and controversial content.

The steering committee is reviewing statutes, policies and guidelines that govern advertising on subways and other public property to help draft recommendations for advertising on the government Web sites.

"It's an old business problem but a new opportunity," said Duffy. "The issues are the same."

Efforts to restrict and regulate advertising on state Web sites could trigger opposition from watchdog organizations that champion freedom of speech.

To help avoid challenges, state policies should not treat the Internet differently than other media, said Gregg Leslie, acting executive director of the Reporters Committee for Freedom of the Press, an Arlington, Va.-based group that follows First Amendment issues.

"This has come up before at places like bus stops," he said. Governments, for example, have been able to regulate advertising at such places by adopting neutral policies that prohibit speech intended to advocate a particular cause rather than sell a product.

Gregg said he would have concerns if the regulations and laws governing advertising on state Web sites were different from those that applied to bus stops and other public places.

"Current standards still apply and work," he said.

Many technology officials in government and industry would like to see the states use advertising revenue to help pay for new online services and applications. But the revenue also might flow into general government coffers or perhaps be used for other programs.

In New York, for example, the law requires that revenue generated by the Division of Lottery go to education, said Rob Hayes, a division spokesman. He said the division, which gets about 1 million "hits" or visitors each month on its Web site, has considered online advertising, but the decision to proceed must come from the state's technology office.

Utah Chief Information Officer David Moon said online advertising could be appropriate for planned services such as an e-business portal that would help companies find partners and conduct business online.

"I'm not sure if citizens would accept the notion of the state's general homepage having advertising, but the e-business portal would be perfect for that kind of [advertising] model," he said.

Utah has no official policy on online advertising and is still studying the issue, he said.

But Don Heiman, chief information technology officer for Kansas, is more skeptical about whether government agencies should open up their Web sites to advertising.

The government has a stewardship responsibility and must ensure that all individuals or groups have equal access and participation at its Web sites, Heiman added.

Many analysts, however, contend that state governments should use their Web sites for more than just providing information and services. IBM's Caldow, for example, said the Internet could provide governments with a potent tool for economic development, promoting local businesses and generating revenue.

State agencies could use a combination of methods to generate revenue, such as charging transaction fees for online services as well as through advertising.

"Governments don't realize how much power they have when they move to a portal approach," she said, adding that the Internet offers "a whole new market and financial footprint."

Each state agency likely would adopt a different approach to how it exploits the Internet, she said, depending on such variables as the agency's functions and the number of visitors to its Web site.

Advertising on government Web sites is really a business and political decision, not a technological decision, said Davies, who thinks the potential payoff will be too lucrative to ignore.

"Look for some interesting partnerships among governments, education and industry next year," he said.

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