New Services May Peddle Privacy on Virtual Market
SAN FRANCISCO — Amid a flurry of attacks on personal privacy on the Internet, new services called “infomediaries” may soon help consumers gain a degree of control over the circulation of their personal data in cyberspace, and even pay them cash dividends in the process.
Infomediaries would collect personal information voluntarily supplied by millions of consumers, protect that information with stringent privacy guards, then sell access to groups of those consumers to direct e-mail marketers and Web merchants based on users’ interests.
Such businesses offer a new model for solving the privacy dilemma, a third way between potentially chilling government regulation and the ineffectual self-policing that has promoted today’s Wild West Web mentality.
Infomediaries say merchants would fulfill a marketer’s dream: gaining intelligence on, and access to, potential buyers certified as interested in their wares.
And consumers would benefit in several ways. They would be compensated, either in cash or special offers, for use of their personal information. And by aggregating demographic data and product preferences of millions of Internet users, infomediaries will try to create powerful blocs of buyers who can demand better prices and more personalized, less indiscriminate marketing pitches. For example, users interested in sports-utility vehicles would be sent e-mail ads and Web reports on SUVs but not information on luxury sedans, let alone Viagra.
If the model works, unwanted marketing methods would persist but the volume would gradually decrease.
“We’re trying to establish a culture that says, ‘I understand the value of my individual data and will share data only with those who respect that,’ ” said Larry Lozon, chief executive of PrivaSeek, the Louisville, Colo.-based creator of PersonaXpress, a nascent information middleman.
Such companies say that concerns about personal data security stem largely from a fundamental imbalance in today’s digital marketplace.
The deluge of junk e-mail, or “spam” in cyberspeak, surreptitious tracking of people’s Web surfing in order to push personalized Web ads, and unique, hidden I.D. numbers hard-wired into PC microprocessors and Windows 98, demonstrate that technologies for online commerce are weighted toward the sellers.
Seeking Ways to Woo Online Consumers
Today, only a fraction of Web users shop online. Among those who don’t, most cite security and privacy concerns, according to the San Diego-based market researcher InfoBeads.
John Hagel III, co-author of “Net Worth,” a book on the infomediary business, argues that people would happily share personal information for a fair return: to be a player rather than a pawn in the information marketplace. But as individuals, they lack leverage.
While they cannot guarantee absolute privacy, infomediaries intend to correct that imbalance.
The new services, in the form of software programs and other methods, also would by no means eliminate spam--it’s too easy and inexpensive for Internet marketers to ply their wares. But if the concept catches on, the river of spam might slow to a relative trickle as merchants reap rewards of more effective targeting.
The resulting virtual buying clubs could shift power from vendors to consumers and rein in excesses that have made America Online’s friendly “You’ve got mail” greeting sound to some like a messenger from marketing hell.
As a bonus, consumers could earn product discounts or even cash for agreeing to view ads. Industry experts predict payments from 5 cents to $1 per e-mail, in part based on existing “attention marketing” plans, such as one created by Cybergold Inc. of Berkeley, Calif.
According to “Net Worth,” the average infomediary client could earn $260 per year by merely looking at marketing messages and save more than $1,000 with product discounts. That could be enough to turn anti-spam crusaders into spam lovers.
“The unifying key to the new companies that are emerging is that you have to be on the side of the user,” said Michael Sheridan, vice president for strategic businesses at Novell Inc., the large Salt Lake City-based computer networking company. Novell’s forthcoming “digitalme” product stores personal data, passwords and credit card numbers in a kind of identity vault that users can customize and selectively unlock for merchants, Web sites or other individuals.
“You have to give them the tools to control their personal data,” Sheridan said.
Infomediaries say that they will do just that, enhancing privacy with customized filters to reduce the flow of spam, services to cut back on junk postal mail and telemarketing calls, countermeasures against technologies that track your surfing habits, and ultimately, payment plans in which a consumer can retain anonymity even when using a credit card.
Emergence of ‘Infomediaries’
Hagel expects successful infomediaries to emerge from partnerships of Internet technologists and corporations that already enjoy a large customer base.
Along these lines, Novell has licensed digitalme to Citigroup Inc. and First USA, leading credit card companies.
“We think customers want an existing trusted brand,” said Novell’s Sheridan. “Look at what people trust to FedEx: the most important documents and, literally, diamond rings.” Novell is trying to promote FedEx-like relationships in cyberspace, he said.
The prospect of greater individual control over personal data seems to offer an enticing alternative to the sledgehammer of regulation and the feather duster of self-policing.
The Internet industry’s voluntary controls feature seals of approval, such as those provided by the nonprofit group Truste and a recently announced alternative from the Better Business Bureau. They certify Web merchants who agree to disclose what personal data they gather and how they protect it, and to provide special safeguards for children.
But only a tiny fraction of the Web’s millions of sites participate. And such systems are far from foolproof. For example, last year the popular Web-community site GeoCities, a Truste member, reached an out-of-court settlement with the Federal Trade Commission following accusations that it lied to its users about how personal data was collected and distributed.
A government regulatory alternative, such as the strict data-transfer rules recently adopted by the European Union, could stem abuses. But the Clinton administration and most industry executives say regulation would stifle electronic commerce and innovation.
Infomediaries could theoretically give consumers, rather than government agencies or merchants, the largest share of control.
“The Net can become a unionizer, to get a consumer-profiling union together and use some technological methods to let our information go on strike,” said Fred Davis, chief executive of the El Cerrito, Calif., infomediary start-up Lumeria Inc. “If you want it to go back to work, you need to pay us better.”
But just as labor unions can’t guarantee protection against a vindictive employer, infomediaries can’t promise absolute security. For example, none of the ideas would subvert I.D. number generators within the Intel Pentium III processor and Microsoft Windows 98, which have the potential of making all electronic communication traceable to the computers where it originated. (The companies have created free software programs that solve the problems, however.)
In the long run, the success or failure of infomediaries comes down to trust. And many Web users and privacy advocates feel queasy about trusting, say, Citibank to be the ultimate guardian of their personal data.
Ensuring Privacy Is Ultimate Goal
Jason Catlett, president of Junkbusters Corp., a Green Brook, N.J., privacy watchdog company, doesn’t oppose the infomediary approach but warns that it should not be confused with genuine user control.
For that you’d need something like a product called “Freedom,” due for release this spring from Zero-Knowledge Systems, a small, Montreal-based company. If Freedom works as advertised, it will ensure complete online privacy--including e-mail, e-commerce, Web surfing, chat rooms and instant messaging-encrypting personal data so that not even Zero-Knowledge itself can unscramble it.
“I can also live in a barred home and not be affected by crime,” said Sheridan. “There’s a certain lunatic fringe aspect here . . . a certain paranoid quality to some of these schemes.”
But Catlett counters: “What you want from a public policy point of view is a baseline for privacy that everybody gets. It’s a little like water quality. Information is so widely processed in our society, unless you have a legal right to control the information about you, no amount of technology is really going to protect you.”
