E-Commerce Newsletter A-Clue.Com, Volume 4 Number 35
A-Clue.Com
by Dana Blankenhorn
Volume IV, No. XXXV
For the Week of August 28, 2000

This Week's Clue: Winning the Privacy War

This Week's Clue: Winning the Privacy War

SSP (Shameless Self Promotion)

The Real Incubators

Whose Tax Cuts Are Best For the Rich?

Why I-Mode Works Best

Clued-in, Clueless

No subject in Internet commerce causes the confusion, consternation, and comment of privacy. 

Users worry about what will become of the data sites get (with or without permission) but do little about it. Site managers complain that direct mailers get more data, and use it more thoroughly, than they do, and wonder why they're singled out. 

Is the fear rational? It's true that few people know just how much data outfits like Acxiom hold on their behavior, or know how widely it's traded. But there are supposed to be controls on that trade, established over 30 years ago under the Fair Credit Reporting Act

There's also an implied transaction going on with all our data exchanges. NetPerceptions  executive vice president Steve Larsen explained it to me. 

"For every piece of information I give up there has to be an equal benefit coming to me. That's the basic premise. We'll give lots of personal data to the doctor, information we'd kill an accountant if he asked for it, but we know you have to be honest to the doctor if he'll help you. By being that open, we get better medical care. It's the same with your accountant - you give him data about your finances you'd never give the doctor. You get value for that. The key on all these issues is if the consumer does not feel they're getting a good deal by giving this information, if they're not getting benefits, there's going to be an imbalance and a backlash."

But it's not mainly big business we fear, but the government. This fear actually makes problems of identity theft worse because the industry's key index term - Social Security Numbers - are easy for crooks to get and don't really prove identity. All attempts to create a "national identity card" so far have failed because we're afraid of what the government will do with them. Even though a chip-based card with biometric backup would make identity theft nearly impossible, voters won't accept it because (they fear) it would make their actions and attitudes traceable by the government, specifically by law enforcement.

So the issues of privacy against business and privacy against government are closely linked. The fear of the latter makes us susceptible to the former. The protections we've built for our identities are a house of cards - get my "social," my driver's license number (through the social) and my mother's maiden name (easily obtained once you have the first two) and you can become me. How common does this have to become before people demand the protection of a secure identity card? It has to become much more common because we're more afraid of the solution than we are of the problem. 

Even if the protection may prove useless, voters are increasingly demanding controls on the trade in personal data. The stiffest protections are those of the European Union - there shall be no trading of data without notice. These controls are not as bad for business as business makes them out to be. Any Internet information business that stands ready (and able) to meet these rules has an enormous strategic advantage as the political pressure builds. Such a business can become a gatekeeper for weaker businesses looking for a way to park their own data banks, and a buffer for the industry against the worst the government can do. 

This is a huge business opportunity because, while there are established data banks for credit data and static preference data, there are as yet no regulation ready data banks for dynamic preference data. When I decided I was in the market for a refrigerator recently and began hopping around sites like those of Amana and Sears, there was no one jumping on that information and offering me a deal say, on a GE or Kenmore. (I actually had to walk into a store to buy the thing.) 

We buy for two reasons. We need it, or we decide we want it. Present databases can guess at our needs - we get samples of diapers when we leave the hospital with our new baby and a flood of mail afterward. The struggle of etailing is to link to our wants, to respond with offers as our desire for something moves to the front of our mind. That requires databases, but those databases are (or will be) subject to regulation. Make such a database regulation-ready and you'll win. 



SSP (Shameless Self-Promotion)

I'm still making myself available for consulting to a limited number of clients, with an eye toward assuring their long-term success. If you're interested give me a shout at 404-373-7634.

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I write daily for ClickZ, and weekly at Andover.News. I write monthly for  NetMarketing, Boardwatch, and  Intellectual Capital. I've been in Advertising Age and the Chicago Tribune . Once every other month I'm in CLEC Magazine. Twice each month I'm at OneChannel.Net  and I've recently joined the staff at ISPWorld. You can always buy my book . Subscription instructions are at the bottom of each issue.

Remember that it's journalism that keeps the Clues coming...


Takes on the News

The Real Incubators

I have followed the idea of "business incubators" since the early 1980s, when Georgia Tech began developing its Advanced Technology Development Center. The original ATDC consisted of some rooms in a former high school. Wiring hung from the ceiling and the air conditioning didn't work. The ATDC eventually got a neat new building, but I never thought that added much to the mix. The value always lay in the attention of the local VC community and the talent of researchers who were otherwise ignorant of the market.

In the last year dozens of private incubators have been created, most built on the model of Bill Gross' Idealab. Money, space, a rigorous "angel-like" vetting process, some wisdom sitting over your shoulder, and access to more talent and money than any one start-up would ever need is supposed to equal big success.

Most of these incubators will fail, however, because even an entrepreneurial incubator needs an entrepreneur. More to the point, they need an entrepreneur of a particular stripe, a teacher who prefers the background to the foreground. The mix of entrepreneur and teacher is a rare one - Sky Dayton was wise to back out and return to the fray.

The best incubators, however, are successful entrepreneurial companies. Outfits like Intel and Microsoft are like the Atlanta Braves - always bringing up prospects to replenish the bench, and with plenty more to trade for veteran help. Others, such as Ascend , explode like supernovas upon a merger.

Not all the big companies are good incubators - most aren't. Not all outfits that become good incubators are great investments - look at Xerox. But behind every great tech center are one, or more, true incubators - great training grounds for entrepreneurs.

Whose Tax Cuts Are Best For the Rich?

The debate over tax cuts has me stumped. Bush wants to give them to those who earned them - the well to do. Gore wants to give them to the poor and middle class. My question is -- what would be better for rich people?

Do the math and it doesn't figure the way voters are figuring it. Drop another $100 billion onto bloated capital markets each year and you have a lot of money competing with itself. You have the potential for new stock bubbles, lower interest rates (lower returns on capital) and the great likelihood much of that money will leak into other countries where returns are better and competition for opportunities are fewer.

Put the money into demand, on the other hand, and you create jobs, investment returns, and new capital that mostly goes to the wealthy. Target that demand on people-intensive industries - like health care and education - and you're also building tomorrow's innovations. You're also making sure the money stays at home, at least for a time.

Were this a capital-poor society like Russia or India, China or South Africa I'd say the Bush way worked for everyone - capital builds jobs. But when you're capital-rich new money grows best on the demand side.

Do the math yourself and prove me wrong.

Why I-Mode Works Best

How was it that WAP  got wiped-out so quickly by a Japanese product, NTT DoCoMo's I-Mode? I-Mode has 5 million users, mainly in Japan, while reviews of WAP are just horrid.

The keys to I-Mode's success are control and instant commerce. NTT's control of the technology vets vendors - there's reliability about the business and simplicity in the way it's implemented. By making its phone an instant credit card, NTT also makes its M-commerce (m is for mobile) solution instantly useful. The open WAP standard, meanwhile, is no more reliable than the Web itself, and since the network hasn't built-in a payment mechanism, buying with it is cumbersome. (Japan's mobile youth population - more free-spending than their parents - also helps.)

Sprint, Verizon, AT&T and the other mobile networks goofed big-time by failing to put commerce capability directly into their phones. Americans aren't Japanese - we're more suspicious of a network controlled by a single vendor. But it's now clear that a real assurance that the merchant's legit and you can buy at the press of a button is vital for this type of business to grow. An alliance among major carriers is the obvious solution.

Clued-in, Clueless

Clued-in is Charles Cooper of ZDNet , for understanding the true implications of the Pew privacy study and explaining it in plain English. Scott McNealy's "You have zero privacy anyway, get over it" is the "let them eat cake" of our time.

Clueless is Chinese President Jiang Zemin , who admitted last week the Internet will transform China, but refuses to acknowledge that his government still stands in the way of that change. The keys to Internet success remain liberty, capitalism and a trusted rule of law -- Communism can't deliver them.


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