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Industry Standard

The information exchange economy

April 30, 1999
Web posted at: 3:05 p.m. EDT (1905 GMT)

by Debra Aho Williamson

Do you willingly give out personal information on the Web in exchange for services?

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(IDG) -- "On the Internet, nobody knows you're a dog." So goes a classic New Yorker cartoon.

But those days will soon be over. It won't be long before Internet sites know not only that you're a dog, but that you like Purina Dog Chow and Milk-Bone biscuits, had fleas last summer (which were treated with pills, not sprays) and oh, by the way, are overdue for a trip to the vet.

A series of initiatives, built on the basic tenets of direct and database marketing, are converging to transform the browse-and-surf Internet into a giant information exchange, one that features a tug-of-war between consumers and Web sites for everything from e-mail addresses to shoe sizes. The sophisticated one-to-one marketing that the Net always promised is finally set to become a reality for better or worse.

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A lot of marketing techniques of the recent past will soon seem quaint. Remember targeting Internet advertising based on keywords like "travel" or "Rolling Stones"? Or on regions of the country? Outdated, outmoded. How about counting anonymous impressions or visitors? History. Or tracking the number of times a link got clicked, but not knowing who clicked it or why? Forget it.

For Internet companies armed with sophisticated database-mining technology, targeting won't just mean delivering a message to a single person. It will mean delivering the message and tracking the response both the immediate response and the chain of future responses.

At the same time, Web sites will entice consumers to provide more personal data than ever before. Personal information will become the new currency that opens doors to an ever-broadening array of Internet content and services. The more data consumers provide about themselves, the more access they will get.

The Web of the future will be all about "coach, business and first class," says Rich LeFurgy, chairman of the Internet Advertising Bureau and a consultant to venture-capital firm Walden International Investment Group.

Signs of the information-exchange economy are proliferating:

  • In a promotion with RealNetworks in March, the Gap let consumers see its latest TV commercials on the Web before they aired on TV but only if consumers gave the retailer their e-mail addresses.
  • Digital Impact, an e-mail-marketing company, uses database technology to deliver targeted e-mail messages for more than 30 clients, including Virtual Vineyards, and eToys. The company can track how each recipient responds or whether the message was ever even opened. People who sign up but then never open their mail get dumped off the list.
  • In January, SportsLine USA launched SportsLine Rewards, a frequent-visitor program that gives people points for visiting the site. The points are redeemable for sports merchandise or private online chats with sports stars, for example. The more you visit, the better the rewards, and the more SportsLine knows about your surfing habits.
  • Free PC will give away 10,000 computers to consumers who provide extensive demographic data and endure constant ad messages on their screens.
  • Microsoft even as its hand got slapped for a bit of code that gave each Windows user a unique ID is reportedly developing ID technology to personalize a consumer's shopping experience on the MSN portal.
  • Intel and Excite last month said they would partner for their own personalized shopping tool.

These moves go well beyond personalized Web pages such as My Yahoo, which may be fun to set up but ultimately offer little consumer appeal beyond convenience. Not only do these initiatives put extraordinary value on consumer data, but they also tell the consumer, "If you give something to us, we'll give back to you."

Seth Godin, VP of direct marketing at Yahoo, calls it permission marketing. "Consumers who visit a Web site are sometimes asked to give their phone number," he says. "But what's in it for the consumer?"

"Without a specific reason for the consumer to behave, without a reward or benefit, the overwhelmed consumer will refuse," Godin writes in Permission Marketing, his new book.

In this new information-exchange economy, Expedia Travel, Microsoft's online travel agency, could convince many more people to make reservations online by offering a reward for completing the transaction.

The Wall Street Journal could offer a special online subscription price to people willing to receive targeted messages from Journal advertisers.

Yahoo and Excite, said to be considering their own frequent-visitor reward programs, could create basic, gold and platinum tiers and cordon off some content for their best customers.

None of this is unusual in the offline world, where product sampling, frequent-flyer programs and gold credit cards all depend on consumer data, and customers are categorized according to their purchasing habits, their income and other variables.

But segregating online consumers will be a profound shift that obliterates whatever was left of the egalitarian Internet.

Privacy watchers are already concerned about the growing sophistication of data-mining tools. But if consumers accept an offer for free content in exchange for personal information, sites can argue that there's no privacy infringement at all.

"If you're on an e-mail list and you receive 10 messages a day about golf, you're really into golf," said Ariel Poler, CEO of Topica, which aggregates e-mail lists. "This person is not telling me he's into golf so I can make money off of him. He's telling me so he can get more information about golf."

But do consumers know that when they get an e-mail marketing newsletter from Virtual Vineyards, the online wine retailer can track whether they clicked on a link in the newsletter, such as red, white, cheap or expensive wine, and whether they bought something from the site that day or the following week?

If consumers get something in return for providing personal information, and if sites are vigilant in explaining how that information as well as information gathered without the consumer's direct knowledge will be used, then both sides will win.

Companies will be able to fulfill the Internet's promise of delivering the right message to the right consumer at the right time, and consumers will enjoy a richer Internet experience.

After all, if everyone knows you're a dog, they also know you'll behave only when you want to.

Debra Aho Williamson, former executive editor of The Standard, is a Seattle-based writer covering Internet business issues. Reach her at

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How ad agencies see the Web
(PC World Online)
When a vendor sends you unwanted e-mail
(InfoWorld Electric)
How much should you pay for a free PC?
(The Industry Standard)
U.S. online ad market to hit $2.6B this year, study says
Interactive advertising continues to promise big returns
(The Industry Standard)

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RealNetworks, Inc.
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The Gap Online
My Yahoo
Digital Impact

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