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.
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
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
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 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
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
- 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
- consolidate their various passwords into one password controlled
- 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.