Pudding Media Raises $8 Million To Serve Ads Against Phone Conversations

pudding-media-logo.pngPlacing ads based on what people say in phone conversations is going to be controversial, but Pudding Media just raised $8 million in an A round led by Opus Capital and BRM Capital to prove the concept. Pudding Media already operates The Pudding, a Website we covered in September. As we reported back then:

ThePudding provides free, PC-based phone calls to anywhere in the US or Canada. The big catch: computers in Fremont, CA will eavesdrop on and analyze every word of your conversation so they can serve up advertisements tailored to the topic at hand.

These ads are like the ads in Gmail, except that the Pudding’s computers do a speech-to-text translation of what you are saying and serve up contextual ads accordingly. The company says it does not store any of the conversations. The company plans on using its new capital to expand its reach to “cover all forms of voice services – mobile carriers, VoIP operators and Web voice applications.”

Privacy hawks could have a field day with this one. Many people, if they stop to think about it, will find this idea chilling, even if it is just a computer that is doing the surveillance. Others will be willing to give up anything for a free call, and that is Pudding Media’s target. Consumers who object to the surveillance aspect of the service don’t need to use it, right? But what about the people on the other end of the line? It doesn’t seem like they ever consent to their phone conversations being monitored (or monetized).

In some states it is illegal to record telephone conversations without telling both parties that the conversation is being recorded. Those laws may or may not apply here, since these phone calls are not recorded, but rather monitored on the fly. A counterargument would be that the content of the calls are stored (i.e. recorded) for some period of time in order to be converted to text, analyzed,and matched to ads—even if it is just a few seconds before being discarded. This could become a legal can of worms.

Even bigger than the legal risks will be just gaining basic consumer acceptance for such services. These are big hurdles. But if Pudding Media can get past those, there are a lot of phone conversations and emerging voice apps out there creating more potential advertising inventory than any single startup can handle. Is Pudding Media pushing its luck, or will it find a big payday where others fear to tread?