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Fred Davis is a little worried about his competition. "I am afraid they are going to drive a rental truck full of fertilizer up to this shopping mall," he says.
He's not bluffing, either. In temporary digs in a dead mall in El Cerrito, California, Davis has cottoned onto a business model that could threaten what he estimates is a US$74 billion industry. It's an entirely new approach to privacy, online shopping, and advertising.
Davis is CEO of Lumeria, a new kind of company known as an infomediary. Like the handful of other infomediaries launching in the next few weeks, Lumeria aims to give consumers total control over their personal information -- their spending habits, ZIP code, gender, and more.
His timing may be bang on.
The US Federal Trade Commission is increasingly anxious about protecting the privacy of consumers who browse and shop online. And the European Union is tightening controls over what personal data may leave the Continent, a worry for multinationals.
Into this Zeitgeist, Davis is about to hand millions of consumers a "superWallet" and a "superProfile," with a "superPassword" to lock it all up. Such tools will let Jane Doe control and update her information, including which marketers get to what parts of it, how much those firms are allowed to see, or if they can see it at all.
"As someone who loves the Internet, it is dismaying to see the Net becoming the worst of all places for unwholesome invasions of peoples' privacy and massive societal identity theft," Davis says.
He refers to the backstage industry that builds and trades consumer profiles behind closed doors at Internet firms MatchLogic, DoubleClick, and Engage, and at direct-mail database giants like Experian.
"The owners of information should participate in the process when that information is sold," Davis says. "There is a lot of information [out there] about what I buy. It is my information, and yet there are these other companies like Metromail selling this information, and they are not cutting me in."
Davis wants to cut the consumer in and take a cut for himself, in the form of a small license fee paid by Web companies to access what should prove to be especially "clean" -- that is, accurate -- data.
Consumers will control their information through an encrypted Web form that only they will have access to. They will be lured to keep it fresh with frequent-flier miles, discounts, or other offers.
Davis also plans to pique consumer interest by beefing up new profiles with the contents of existing databases -- such as those owned by Metromail -- that are not ordinarily accessible to them. He'll then challenge consumers to correct them.
He isn't the only one to develop such a plan, made possible by the favorable political climate in Washington and Europe.
"A lot of people would view this [concept] as a plus because it is an 'opt in,'" said David Medine, an assistant director with the FTC. "It benefits consumers and marketers, who get a bunch of people who really do want to hear their pitch."
Then there's that book. Venture-capital circles have been buzzing about the release last month of John Hagel and Mark Singer's Net Worth: Shaping Markets When Customers Make the Rules.
It was Hagel who coined the term infomediary -- a contraction of information intermediary -- in a 1996 Harvard Business Review article called "The Coming Battle for Customer Information." Net Worth is a blueprint for the intermediary business model, and apparently it is selling well.
"I should put a new option on Junkbusters' voicemail," says its president Jason Catlett, who advises companies on the privacy aspects of new products and technologies. "To leave a message, press 2. To pitch a business plan for an infomediary startup, press 3...."
Besides Lumeria, at least four start-up companies are poised to launch into the space, including PrivaSeek, InterOmni, @YourCommand, and PrivacyBank.
While Lumeria, in development for a year and a half, is still a month away from launch, PrivaSeek will roll out its version, Persona XPress, on Tuesday. Earlier this month, PrivaSeek received $14 million in venture-capital financing.
"When a consumer comes and fills out what we will call our 'persona,' you can fill out a quick one or get into tremendous amount of detail," says Steven Lucas, PrivaSeek's chief technical officer and a former executive at MatchLogic. "You can fill out information on likes and dislikes, you can get down and say, 'I only want my age to be used for certain organizations.'"
As with Lumeria, organizations would enter into licensing agreements with PrivaSeek that give them access to consumer profiles for targeted advertising.
"The online [company] spends too much time surfing users as opposed to letting users surf the Web," said Lucas. "We have to get away from that. We are never going to see the Web develop without that level of confidence and trust."
Trust is the magic currency that will sink or sail an intermediary.
Lucas hopes to earn it through a TrustE-style "seal of approval" program. Davis will give away privacy-enhancing software, such as no-brainer freeware encryption software.
Davis is also building an elaborate infrastructure to help consumers build online reputations for buying and selling. The project would resemble eBay's feedback rating system.
Catlett points out one potential snag: Where would consumers turn when faced with multiple infomediaries?
"It is not a question of trusting us more than anyone else," Lucas says. "We feel we provide the best overall combination of an easy-to-use product with the right technology and the right business model."
The same principle -- consumer control over personal data -- is the model for a pending open standard called the Platform for Privacy Preferences, or P3P. Both Lucas and Davis are involved, at least tangentially, in the standard's development at the World Wide Web Consortium.
P3P was to have been built into browsers and servers and to have given consumers control over their data at the desktop level. But the spec has been in the works for years.
"It turned out to be a lot harder problem than we thought -- we underestimated how long it took to do it," says Lorrie Faith Cranor, co-chair of the P3P interest group. Furthermore, the spec is threatened by a closely related patent granted to a Seattle-based entrepreneur.
Cranor says that work on P3P is continuing, but observers say that the marketplace has stepped in and taken over.
"P3P ain't going anywhere," Davis says. "It is still too weak. It is still about the Web site declaring its standard to the consumer. I want to put the power back in the individual."
Catlett says the dawn of the infomediary will restore the balance that was lost years ago. "The sins of direct marketers against personal privacy are coming back to haunt them," he says.
"Now consumers are rebelling against the clutter and the intrusion, and the junk pushers may have to deal with corporate bouncers appointed by a weary, hassled populace yearning for a little peace and quiet."
Related Wired Links:
Zero-Knowledge: Nothing Personal
9.Feb.99
FAO Schwarz Springs a Leak
3.Feb.99
Sun on Privacy: 'Get Over It'
26.Jan.99
TV Site Reveals Personal Data
20.Jan.99
