Privacy and Security

It seems that basic rights of privacy are under assault. Data miners and consumer profilers are able to produce detailed pictures of the tastes, and habits of increasing number of consumers. The spread of intelligent traffic management systems, video security, recognition systems, and the gradual integration of information systems built into every appliance, will eventually make it possible to track every movement and purchase. Once a person has this information it is easy to make it available to everyone.

This is particularly true for the Internet because is not constrained by geographical boundaries and it is global in nature. Online merchants are able to compile complex behavioral data and catalog customer preferences in a manner never before available. Merchants who effectively analyze and utilize this data will be in the position to customize and personalize every shopper’s experience on their site. In this environment of increasing returns, those with the best customer data will provide the most value to customers.

Merchant Access

But battles over consumer privacy are now developing, and their outcome may deny merchants the total promise of rich one-to-one marketing. Ideally shoppers themselves will control merchant access to their information, but they may be willing to provide that information freely for better service. When merchant online stores acquire the ability to engage in price discrimination, consumers will of course seek ways of fighting back. One way will probably be to shop anonymously, and see what price is quoted when no consumer data is provided. Consumers can either attempt to prevent merchants and others from acquiring the transactional data that could form the basis of a consumer profile, or they can find anonymous intermediaries who will protect the consumer against the merchant’s attempt to practice perfect price discrimination by aggregating data about the seller’s prices and practices.

This leads to a growing category of info-mediaries, or parties who hold customer profiles, and make them available to appropriate vendors willing to pay for them. As ShopBots evolve, issues arise regarding the scope and limits of their functionality. A tremendous opportunity is opening for ShopBots to provide consumer quality functions, from service to advice; many ShopBots are already providing product information and recommendations. Soon, shopping services may begin to offer specialized retail environments, customer service, catalog maintenance, transaction processing, and other functions currently performed by retailers.

Collaborative Filters

Collaborative filters bring together consumers to exchange information about their preferences, and it lets you maintain your own interest database. Consumers may be able to use collaborative filtering techniques to form buying clubs and achieve quantity discounts. Or consumers will construct shopping personas with false demographics and purchase patterns in the hope of getting access to discounts. The approach called collaborative filtering is used to suggest other items you might like based on the combined experience of others who bought the item you want.

At the next level of complexity, the collaborative filter can be linked to a ShopBot. The truly interesting development comes when a customer’s personal preference data is available to every merchant that the customer visits. Upon the first visit, a merchant becomes able to tailor its virtual storefront to a fairly good model of a customer’s interest and desire.


The lost privacy is not without gain: every time a customer visits a virtual storefront that has been customized to their preferences, the search time is reduced, and they are more likely to find what they want – even if they didn’t know that they wanted it. Because ShopBots will aggregate powerful purchasing profiles of their user-base, merchants will be able to target customers much more deeply and cheaply than ever before. Thus, merchants will gladly purchase these profiles in order to discover new customers, bundle goods, develop cross-promotions, and create new products. More importantly, they will also be able to price discriminate. By connecting customers with the merchants who can best service them, ShopBots will act as powerful, value enhancing info-mediaries, and both the customer and merchant have the potential to benefit.

Author: David Jurus