by Dana Blankenhorn
Volume V, No. IV
For the Week of January 28, 2001

This Week's Clue: The Real Privacy Issue

This Week's Clue: The Real Privacy Issue

SSP (Shameless Self Promotion)

The Powell FCC

Death to the "Incubators"

Sucker Fish and other Parasites

Clued-in, Clueless

In our hearts we know Scott McNealey was right. We don't have any privacy and we should get over it. 

But we can't get over it. We feel like Democrats do over the last election. We'll never get over it. And we shouldn't get over it. We should have a right to be left alone, we should "own" the personal data we generate, and we should get mad as hell about efforts by others to profit on that data without our approval or participation. 

Still, privacy is like the weather. Everyone complains about it but no one does anything about it. We do this because we feel powerless before it, as before a thunderstorm. 

So we fill out registration forms, and give out phone numbers at check out stands. (Maybe we give out false phone numbers, when we can.) But we also support strong legislation to protect our rights to our own data (if half-heartedly) and oppose (strongly) anything like a "National ID" that might let folks tie that data securely to us. (The fact it might also be required for honest elections doesn't trouble us.) 

The real question is how can marketers take advantage of this attitude? How can they use our personal data while still being seen as the "good guys"?

Fred Davis is a great guy, but his Lumeria scheme won't work. We don't think of our personal data as an integrated whole, or consider our identity a good in the marketplace. Instead we slice off pieces of ourselves - our phone number, our address, a transaction record - when we feel we're getting value in exchange. Identity is not a roll -- it's a loaf of bread. 

Most of us allow sites like Amazon to track us because we see the site giving us better recommendations in exchange. The idea that this data might be sold to others troubles us, but not enough to keep most of us offline. But we use so many different stores that most of the "personalized" those most merchants get from us is worthless. 

I buy most of my clothes from the "Mens Wearhouse" because the prices are good and I get in-and-out fast. They put me in their "frequent shoppers club" and, after about a year sent me gift certificates worth $100. I got two free shirts and a tie, but I'm not going to be spending more there because they gave me the merchandise. CRM (Customer Relationship Management) technology told them to give me the certificate, but they wasted their money.

For a merchant a discount is only worthwhile at what football coaches call "the point of attack," when a consumer wants to buy and only has to decide where to buy it. Offer a discount before that and it won't be used. Offer a discount after that and it will be wasted.

Consumers feel the same way. We want the best price when we go to market, not before and not after. When sites demand data of casual users we click away. When CRM systems tell checkout clerks to demand our phone number we bristle, and they get no benefit from it because we've already bought but now we're angry. 

The key is for an intermediary to wait until I raise my hand to buy, then give me the merchants' best deal and let me make my own decision. For this to work the intermediary must first earn my trust, and preferably provide some up-front benefit. By loading the database through trust and benefits, and waiting until the "point of attack" to provide discounts, an intermediary can provide the most value from data on both sides of the transaction. 

Many, many people have tried to become this intermediary, long before the Web was spun. No one has yet cracked the code and gotten the "critical mass" of both consumer data and merchant offers to create a self-sustaining franchise. But someone will, I think, and soon. The opportunity is too great, and the costs are declining too fast, for it to be otherwise. 

The first intermediary to gain a critical mass of data will be the biggest winner in the personalization game. 

SSP (Shameless Self-Promotion)

Add Personalization.Com to the list of markets now served by A-Clue.Com . No money, but lots of prestige y'know?

We're going to Hawaii! I've committed to speaking at the E-Commerce 2001 Conference and Exposition  on the Big Island of Hawaii, March 8-10. There's still time for you to register via e-mail to this big event . I hope to see you there.

You can join the A-Clue.Com discussion by joining I-Strategy , the shared e-mail digest that replaced our discussion board late last year. I-Strategy covers your future and that of the Internet. It will be lively, take just a few minutes to go through, and provide a host of voices other than my own. Please subscribe to it .

I'm still 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. Also, please pass this along to friends and urge them to join our list. You can send me e-mail any time.

My Clues come from daily writing for ClickZ. I write monthly for Crain's B2B, and Boardwatch. I write weekly for WorkZ and Internet Content . My monthly column has launched in Publish Magazine . I have written for Advertising Age and others as well. Yes, I'm very busy, but you can still buy my book. (Yes, I am working on a new one.)

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

Shameless Promotion

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Takes on the News

The Powell FCC

Most press coverage of the Bush transition concerns his abortion about-face, his appointment of John Ashcroft at the Justice Department or Gale Norton, the fox now in charge of the EPA henhouse.

What little attention has been given to Michael Powell's appointment as FCC chairman has been warm , even glowing . Powell, after all, is the son of war hero (also Secretary of State) Colin Powell and is considered a "rising star" among Republicans.

He's also the most radically conservative chairman the FCC has ever had, the product of a group called the "Progress & Freedom Foundation", whose directors are mainly people who served under Ronald Reagan and concluded Reagan's problem was he was too liberal. It's the PFF's directors who are in charge of telecommunications policy, they say, not Powell .

The PFF's agenda is radical and (what's worse) it may work in the short run. They've advocated breaking up Microsoft , while opposed any preconditions on the AOL-Time Warner merger .

Powell's basic view makes sense. The 1996 Telecommunications Act wasn't a deregulation, but a re-regulation. (This is the view John McCain eventually held - he voted against final passage of the bill.) Consumer protection was used merely as an excuse for more regulation, and the bill's assumptions are "analog," not digital. Powell wants to let companies do what they want, and "warn them" when they might break the law.

This sounds like carte blanche for the big to eat the small, but it's not. Phone and cable companies remain tied to 30-year depreciation schedules. New entrants like CLECs and ISPs can create wireless alternatives that follow Moore's Law. Powell's view may be ideological (which I distrust) but he comes to the right conclusion. It's time to let the small eat the weak.

Death to the "Incubators"

A technology incubator can be a wonderful thing. It can give ideas time, space, and money to prove themselves. It can bring together technical, business, and marketing expertise that brings in jobs. But is it a business model? No, it is not.

The purpose of an incubator should always be to get out of the way. If it makes an investment in a company an incubator should be looking to cash out quickly, so that money can be put into more start-ups. When an incubator overstays its welcome it becomes a mutual fund and (worse) a mutual fund masquerading as an operating company.

Such were the stories of CMGI , Internet Capital Group and idealab . During the boom times these guys were so successful that every new Internet billionaire wanted to be them - at least half-a-dozen who were lucky to cash out in 1999 said they would plow their money into becoming the "next" CMGI.

Remember the lesson. An incubator is a venture fund, whose benefits are public and not private. A holding company must make sure all its holdings make money or it's worthless.

Sucker Fish and other Parasites

Parasites have a bad reputation but they're a natural part of the food chain. Without the parasites in your digestive track you wouldn't be alive. Sucker fish clean the river ecosystem and provide food for both larger fish and human beings. Just because they're not high on the food chain doesn't mean they're not vital. (Think of them as life's administrative assistants.)

Take to Auction is an Internet example of the "sucker fish." It lives off eBay (along with Yahoo and other auctioneers), claiming expertise, delivering "content" in the form of products, and driving users to the auction services as "members." Like the sucker fish in American rivers, Take to Auction is also endangered - my point is this should worry sites like eBay that depend on a continuing flow of new users for their business model.

Big businesses, like sharks or vultures, also have their place in the business ecosystem. They see opportunity in cleaning up messes left by others. Petsmart is a good example of this. They took out Pets.Com, watched rival Petopia (backed by store chain Petco) lay off 60% of its staff, and took out public holders in its dot-com for $30 million. Now it's playing Regis for Webvan and offering what it calls a lifeline . In order to survive money losing dot-coms, like Webvan and Amazon, will need the help of parasites, and the only question is whether there are enough of them.

Clued-in, Clueless

Clued-in was ESPN , which secured the Kathicam.com  address before making it the focus of an ad campaign for ESPN.Com. (They could have done more with the Web site, but you can't have everything.)

Clueless are Yahoo and Pepsi-Cola for the "Your Vote Counts" online promotion. No one wants to be reminded of elections right now, and the target market (under 25s) is less likely than any other demographic to be watching the Super Bowl that's the target of the enterprise. (They're also less likely to vote than the rest of us.)

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