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     Leslie Walker
      Leslie was online with guest John Hagel III to discuss the intense competition for consumer-preference data. Read the transcript.

    A New Market for Middlemen

    By Leslie Walker
    Washington Post Staff Writer
    Thursday, February 11, 1999; Page E1

    The first war on the Internet is for our attention. We still hear the echoes as mega-sites such as Yahoo and Lycos battle to amass the largest audiences.

    The next war will be more personal, and more profound. It will be for our data souls -- those ever-expanding electronic dossiers about our likes and dislikes, assembled automatically by software that can track our movements online.

    John Hagel III believes this will be the defining battle of the Information Age. And the McKinsey & Co. executive says we, the consumers, will win -- but we can't do it alone.

    In his new book, "Net Worth," Hagel says the chaos on the Internet is a breeding ground for "infomediaries," automated consumer advocates that with our permission will take control of our personal World Wide Web profiles and bargain on our behalf with online merchants.

    Instead of surrendering our personal information every time we register at a Web site or make an online purchase, we would rely on these agents to negotiate some benefit for us in return for that information -- a price discount, free service or perhaps even cash. Eventually the agents might stage Net auctions whenever we made a major purchase, soliciting bids from competing merchants.

    Hagel predicts that these online brokers will become wildly profitable business franchises, to the tune of some $20 billion in shareholder value for each infomediary company that survives a decade. But they can only succeed, he says, if they gain consumers' trust and protect privacy. They will do this by developing sophisticated software that allows each person to choose how much will be revealed to merchants on a deal-by-deal basis.

    As far-fetched as his idea may seem, I hope Hagel is right. Because if he is, the Internet could turn marketing on its head, giving consumers more control over the seemingly random 1 million advertising messages they are exposed to annually.

    It could save the enormous time and energy that serious Web users are already expending as they explore the vast number of commercial offers on the global computer network.

    So who would these infomediaries be -- new firms or more established players?

    Hagel sees many would-be contenders on the Web today, but no apparent leaders. Services like Yahoo and America Online, which offer an array of content and track how visitors use it, are certainly trying to connect with customers.

    But because they collect data only on how people use their own services, he believes they would be vulnerable to infomediaries that assemble data about people's dealings with many different Web sites.

    The broader the data, the better the agents' negotiating position.

    Fast-growing niche Web sites like Intuit's Quicken.com and AutobyTel.com, which collect information and services from a variety of retailers and present them to consumers to choose from, are strong contenders.

    "These sites have an opportunity to build trust with customers in a way most product vendors would have difficulty establishing," Hagel said in an interview.

    "Because with product vendors, there would always be concern about whether they are tilting their advice to favor their products."

    He's skeptical that infomediaries will rise from the ranks of the companies now offering online loyalty programs -- such as FreeRide Media Inc., which rewards people for surfing at participating Web sites with points redeemable for music CDs, movie tickets and a vast assortment of products. He sees them representing advertisers first.

    But Steve Markowitz, the chief executive of Intellipost Corp., the Web's largest online loyalty program, said the firm's mission is to get the best deal for its 1.9 million registered users, even though it is paid for by companies wanting to reach them.

    Online data "mining" technology remains in its infancy, with less power than one might think to cross-reference personal profiles and people's surfing behavior across various Web sites. But a chat with one of the Web's leading data miners, Engage Technologies Inc. of Andover, Mass., convinced me the infant is growing up fast.

    So far, Engage has amassed deep profiles on 30 million Web surfers that include information about them in up to 800 different demographic and interest categories. Unlike traditional credit card and mail-order databases, these profiles record such factors as how often and how long people look at individual Web pages.

    All the profiles are anonymous -- Web users are identified only by a unique number that Engage assigns to protect their privacy.

    Web sites pay Engage to help them deliver ads that match people's interests when they visit the site -- without the site ever knowing that these individuals are in the database.

    The powerful technology is now harnessed for Web merchants, which scares consumers. But Hagel's vision gives me hope that I might one day share in the data nirvana that direct marketers are finding.

    I confess, though, that I've never been swayed much by discounts or bonus points. Relevance and meaning are what I crave. I'd gladly tell my boring buying secrets to Hagel's little software agents if they could focus the ads I get, save me time shopping and negotiate my travel plans.

    While they're at it, Hagel, can they clean my house?

    © Copyright 1999 The Washington Post Company

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