Personalization technology is supposed to be a
win-win situation. Companies who use it can gain valuable information about their products and their customer base. And, in exchange for sharing their personal information, consumers can save time, effort and energy and receive only relevant information about goods or
services. Everyone is happy.
At least, that's the theory.
But privacy advocates are predicting a dire future where everyone's move is tracked and corporate Big Brothers trade highly personal information like kids swap Pokemon cards. A slew of recent horror stories about the misuse and re-marketing of personal information is making Web-site visitors leery of any type of data-collection technology. And e-commerce companies are beginning to wonder whether the benefits of personalization can be balanced against the chance that they will fall afoul of some new law or anger their customers.
A report released by Forrester Research (www.forrester.com) last June reflects those concerns, predicting that privacy vs. personalization will reach the "crisis point" by 2004. The uproar will be sparked by businesses that, under continuing relentless competitive pressure, feel they have to increase the power and the scope of their information handling abilities continually, according to Forrester analyst Jay stanley.
stanley believes we'll then see a "steady stream of privacy mini-scandals" which will include an outcry over companies who, having realized that the data collected about customers is almost as valuable as their more tangible assets, increasingly trade in information.
He predicts that by 2005, the U.S. Congress will be forced to pass legislation that will require genuine opt-in for the sharing of personal information with third parties, including any business partners and affiliates.
Personalization itself is nothing new. It all began with portal sites like Excite and Yahoo offering customized sites, "My Excite" and "My Yahoo," respectively, which company spokespeople say have increased customer retention rates. Pioneer e-commerce sites soon followed, with businesses like Amazon.com using information about customer's buying habits to tailor the shopping experience to each visitor.
But Bonnie Lowell, CEO of YOUpowered (www.youpowered.com) and chair of the Privacy Committee of the Personalization Consortium, says that it's clear that Web-site visitors are growing increasingly concerned about the quantity of personal information that is collected under the guise of offering them a personalized experience.
Other experts differ. In a study conducted by research firm Privacy and American Business (www.pandab.org), 68 percent of the Internet users
surveyed said that they would happily provide personal information in order to receive tailored banner ads. And 53 percent of those surveyed said they would not mind if the combination of personal information, Web-site visit data and online and offline purchase information were used to personalize banner ads to them, if they were given the option to choose these services.
It's important to note, though, that this survey was underwritten by
a grant from privacy-problem-plagued Internet advertising firm DoubleClick and was conducted by randomly interviewing 471 adults who identified themselves as Internet users.
Andrew Shen, a policy analyst at the Electronic Privacy Information Clearinghouse, says the results of this study seem dubious to him. "Were these people really saying they wanted this information to be gathered and collated, or that they wanted a choice? Depending on how you word your survey questions, you can get exactly the answers you're looking for."
No matter how you feel about the results of the P&AB study, virtually all of the most recent surveys do agree on one thing: The majority of consumers like personalization if it provides a custom online shopping experience.
But some consumers feel that personalization technology isn't working at all, since it's often based solely on past-purchase data. Complaints abound from people who have been permanently assigned to a particular purchasing purgatory after a one-time buy.
"A couple of years ago I bought six children's books in a single order on Amazon.com. It was a present for a boyfriend's niece. The boyfriend is long gone, and I have no kids in my life, but Amazon keeps insisting that I want and need more children's books. And this after I've placed numerous orders that don't include any books with bunnies, trucks or bears as the main subjects," said Vincent DelAmico, a Manhattan-based Web-site designer.
DelAmico knows the limitations of Web technology. But he still insists that what he wants are personalization tools that could make recommendations based on what he's searching for at that moment.
One-to-one Time Only?
Marc Johnson, an analyst with Jupiter Communications, says that many e-commerce sites are still far from implementing real-time personalization. "It's an expensive proposition, and true one-to-one marketing is often much more hype than reality," he says.
So is anyone gaining real results or profits from personalization? Honest e-commerce analysts say it's hard to tell.
"The most popular and most successful sites- -Yahoo, Amazon, CitySearch-TicketMaster Online, Travelocity, SonyOnline- -all offer personalization features," says Barry Robertson, a professor of economics at Rutgers University.
"But is that why they are heavily trafficked? Or is it that they have information that people want, like Yahoo and Travelocity, or a wide range of products, like Amazon? Perhaps it is that they make it easier to do tasks that are annoying in the real world- -like Ticketmaster does? Plus all these Web sites are also well known for offering excellent customer service- -people feel safe buying from them. Personalization is just a small piece of a very large and complex process."
Robertson said there are no "neutral" statistics available as to whether personalization techniques have been profitable for companies that are using them. "There are plenty of studies by firms who also happen to offer e-commerce tools or services, but we can dismiss them. Until an unaffiliated economist looks at this field, I'm afraid we'll have to draw our own conclusions."
But he notes that "one has to assume that if the successful sites are using these tools, and continue to develop and refine them, there must be real value in personalization- -both as a people-pleasing tool to increase a site's ‘stickiness' and also as a source of solid data."
still, Robertson cautions companies against reading too much into the information they gather online.
"Those customer complaints about Web sites insisting that 66-year-old Mary Jones wants to buy more Back street Boys CDs or size 6 jeans simply because her grandchild used her computer to buy things online while she was visiting last summer are a red flag. You must carefully consider the source and limitations of your data and your technology before you make business decisions based upon it."