NEW YORK - A startup has come up with a new way to make money from phone calls connected via the Internet: having software listen to the calls, then displaying ads on the callers' computer screens based on what's being talked about.

For instance, a caller talking about going for dinner might see ads to local restaurants and restaurant review sites, while someone pondering whether to buy a new computer might see ads for computer stores. Relevant unsponsored links also appear.

That is, if the system works. It's notoriously difficult for computers to recognize speech. A test of Puddingmedia's beta software was a mixed success: Relevant ads appeared when this reporter talked about restaurants and computers, but the software was oddly insistent that he should seek a career as a social worker, showing multiple ads and links pointing to that field.

"Sometimes crazy things pop up. It actually enriches the conversation, which is very cool," said Ariel Maislos, chief executive of Puddingmedia.

On Monday, the Silicon Valley-based company is launching a public trial of the software on its Web site, http://www.ThePudding.com. Visitors will be able to place free calls to U.S. and Canadian phone numbers from their computers using headsets or microphones. The phone numbers are entered via a Web browser, which is also where the ads and links show up.

The company's aim is not to be an independent provider of ad-financed Internet phone calls, but to license its speech-recognition service to other companies that use Voice over Internet Protocol, or VoIP. Puddingmedia said it was talking to several possible partners but can't name any yet.

Outfits like eBay Inc.'s Skype unit would be possible partners. Skype provides free calls between computers but charges for calls to phone numbers so it can recoup connection fees charged by phone companies. Those costs could possibly be offset with an advertising model like Puddingmedia's.

The actual speech recognition is performed at Puddingmedia's servers in Fremont, Calif., not on the user's computer. In the test, the quality of the call did not seem to be affected by the extra step.

Maislos stressed that the calls are not stored in any way, nor does Puddingmedia keep a record of which keywords were picked up from a particular call.

"Have you talked about mountain biking? We wouldn't know," Maislos said.

The advertising model is similar to that of Google Inc.'s Gmail, which shows ads based on scans of the user's e-mail correspondence. That idea initially raised privacy concerns, but those have abated as users have become comfortable with the system.

Eventually, Maislos hopes to be able to expand the service to cell phones. In that case, ads would pop up on the caller's screen after the call.

http://news.yahoo.com/s/ap/20070924/ap_on_fe_st/ads_that_listen