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Lumeria Introduces I-Commerce
In a recent no-action letter, the Securities & Exchange Commission (SEC) opined that a company was selling stock if the company received personal information (i.e. a name and address) as compensation for the stock. The SEC's recognition that personal data has value has long been recognized by list brokers who have amalgamated colossal databases of personal information in order to drive the $175 billion direct marketing industry.
Technology is revolutionizing this industry because it has drastically reduced the cost of acquiring and managing information and created a new medium, the Internet, in which producers and consumers can interact. This has created the possibility of new business models to personalize e-commerce services and offer one-to-one direct marketing. However, while the hard costs for acquiring data have been reduced, the social costs have increased. Most of the currently proposed personal data management solutions ignore these costs and have inflamed the debate on personal privacy.
Lumeria's SuperProfile system, which minimizes these social costs by offering a complete privacy solution, creates a revolutionary model that shifts power from companies to the individual. In addition, the SuperProfile system uses personal data as a new form of currency to enable the Identity Commerce marketplace (I-Commerce). I-Commerce is the next step in a number of technologies that have evolved to utilize personal data. Lumeria's solution, however, is likely to receive accolades from privacy advocates and trust from individuals. Lumeria will also kindle the development of I-Commerce in which an individual's identity has a value and can be traded and exchanged for money, discounts, and additional services.
Cookies Technology
On the Internet, the most common profiling mechanism is the "cookie." A cookie is a data file stored on the individual's computer by a specific Web site. Cookies technology allows a Web site to track transactional information, user preferences, and user activity. Because only the Web site that initially stored the original data can access that data, the individual cannot share any cookie information between different Web sites.
However, it is unlikely that an individual would be interested in sharing this data. Although the data is stored on the individual's computer, the information is stored in a cryptic form such as "cfae017a36014030" which only a computer database can understand. Moreover, most users do not even know what the cookies technology is or how it is used. These users have unwittingly accepted the default option on their browser to accept all cookies requests. Even the minority who has selected the option of verifying cookie requests will generally have difficulty determining what information is being requested. Unfortunately, disabling cookies is an undesirable solution since it results in the loss of the benefits of personalized e-commerce services.
Open Profiling Standard (OPS)
The Open Profiling Standard (OPS) was proposed by Microsoft, Netscape and Firefly. OPS was created in order to provide Internet site developers with a uniform architecture for leveraging profile information to offer individuals customized content while protecting their privacy. OPS was simply a profile or form of an individual's personal data such as name, address, phone number and credit card data. It was initially designed to focus on the secure storage, transport, and control of user data.
However, there were several problems with OPS. First, OPS was still depended upon the support of each Web site in order to be effective (e.g. each site had to be redesigned). In addition, OPS did not create privacy protection beyond the privacy policy of a Web site. Moreover, although OPS was designed to be an open standard, Microsoft's purchase of Firefly discouraged other companies from supporting the standard. Finally, the value proposition to consumers was simply to save time from retyping data. OPS did not attempt to allow individuals to own or profit from their profile.
Platform for Privacy Preferences Project (P3P)
The World Wide Web Consortium (W3C)'s Platform for Privacy Preferences Project (P3P) is an attempt to provide a rich language for the exchange of information between both the user and Web site. In contrast to the one way nature of OPS (from user to Web site), P3P allows the individual to ascertain a Web sites privacy policy before providing her profile data to the site. P3P applications should allow users to be informed about Web site practices, delegate decisions to their computer agent (Web browser, plug-in, or infomediary agent) when they wish, and tailor relationships with specific sites. Lumeria has announced its support for the P3P protocol.
The Infomediary Revolution
The information intermediary, or infomediary, business model is described by John Hagel and Marc Singer in their book, Net Worth. Published in 1999 by the Harvard Business Press, Net Worth describes this new type of business as an intermediary between consumers and vendors in order to help consumers maximize the value of their personal information. Infomediaries will then act as brokers and agents to represent consumers in commercial transactions and marketing. Although the infomediary model has received consierable attention recently, Lumeria's approach to infomediation has its roots in the broadcatch concepts first developed by Lumeria's VP of Technology, Fen Labalme. Mr. Labalme conceived of broadcatch in 1979 while at MIT in the department now known as The Media Lab.
Traditionally, producers have had greater resources and access to information. This data has been used to refine inventory techniques, maintenance scheduling, and other activities to provide better services to the customer. However, this knowledge has also been used to identify the customer's value drivers. For example, multi-level pricing structures (e.g. peak and non-peak pricing) are a way of extracting greater profit from customers who place a higher value on a given product or service.
Grocery stores and airlines have created membership programs to procure explicit consumer purchasing behavior, which can then be used to pinpoint consumer value and thereby price flexibility. If a consumer demonstrates a strong loyalty to a given brand or a need for specific travel destinations, then prices on those products and services can be raised. Essentially, if a consumer is willing to pay a higher price for a product, then there is a surplus value that the producer has "left on the table." Ideally, a company would like to charge each individual the highest price she is willing to pay in order to extract the entire surplus value from the marketplace.
Whereas technology has traditionally assisted companies in acquiring additional data, the Internet is now flipping this paradigm upside down. Data acquisition techniques, specifically information about competing products, are becoming commonly available to consumers, too. Moreover, producers are finding themselves at an information-disadvantage: companies cannot refuse to share information about their products lest they lose a sale (e.g. a strong supply of product information). Consumers, on the other hand, do not have an intrinsic desire to share their purchasing data with anyone (e.g. a weak supply of purchasing data). Consequently, given a set demand level, fundamental economics (and experience) dictates that product information will have a minimal value, while consumer data will have a high value.
The infomediary exploits this growing advantage by aggregating consumer data. Although an individual's data, by itself, has nominal value, the combined value of a group of consumers has considerable value to the merchant. The infomediary, representing the individual, enables the extraction of value from the company to the individual. Flipping the picture upside down, the company is willing to pay a higher price for this unique data and has surplus value that the individual can recapture.
The Identity Commerce Marketplace
Simply representing the individual is an evolutionary approach to the Internet economy. Lumeria, on the other hand, intends to take a revolutionary approach. In addition to helping consumers attain compensation for their personal data, Lumeria is developing the SuperProfile system, which will give individuals the ability to:
- opt out of traditional direct marketing programs;
- mask their identities so they can shop online and browse the Web anonymously;
- block cookies requests so that Web sites cannot acquire data outside of the individual's control;
- track their own surfing to build a robust, private profile with user-centric cookie aggregators (as opposed to web site controlled cookies);
- consolidate their various passwords into one password controlled location;
- filter email to delete spam mail;
- pay for e-commerce transactions with electronic wallets that conceal their identity but provide authentication for merchants;
- create a new marketplace for negotiating the use and fees that individuals charge others for the use of their personal data.
The last item, creating the Identity Commerce marketplace (I-Commerce), is the revolutionary step in the SuperProfile system. Fundamentally, the SuperProfile system transfers ownership of personal data back to the individual. Utilizing tools in the SuperProfile system, the individual can then monitor and control the exchange of this data to other parties for personalized services, discounts, or monetary compensation. In other words, the individual participates in I-Commerce, or the new personal data economy.
In addition to merchants, I-Commerce will include marketers and advertisers by allowing them to "buy time" from individuals. For example, an individual could indicate her interest in purchasing a certain product, such as a new car. Furthermore, she could designate certain data about herself that could assist car marketers in tailoring their sales pitch, or advertisement, to the needs of this individual. The marketer assembles a commercial and an offer, such as rebate or discount, for the individual. Essentially, the marketer pays the individual for her personal data and her willingness to view the commercial.
This is merely one possibility in which a marketer participates in I-Commerce. Another alternative, based on future technologies, is for an individual to download a TV program over the Internet. In exchange for the program, the individual would provide certain data to the content provider or distributor who would use this data to add targeted commercials to the TV program. Under this scenario, numerous people might watch an identical episode of Seinfeld, but each person would see different commercials tailored to their own interests.
The possibilities of I-Commerce are unlimited because I-Commerce is not a closed system with a defined set of rules. Rather, I-Commerce is a set of tools that provides a foundation for a revolutionary economy. Lumeria anticipates that individuals, companies, marketers, and new technology will continue to evolve I-Commerce with new ideas, new concepts, and new products and services to the benefit of all participants. However, I-Commerce will only flourish with the complete privacy solution provided by the SuperProfile system in which an individual has control of their personal data.
