Behavioral Data: Valuing Customers. Then Avoiding Them.

Summary:There’s little question that just about every profit-making company out there would like to know exactly what you’re doing on the Web, all the time.And that there’s a clear (profitable) market to be had in data that captures your “behavior” on the Internet.

There’s little question that just about every profit-making company out there would like to know exactly what you’re doing on the Web, all the time.

And that there’s a clear (profitable) market to be had in data that captures your “behavior” on the Internet.

There is in fact, a street value for behavioral information, as Gartner analyst Andrew Frank, points out. And it’s captured in “cost per thousand” calculations on data exchanges such as BlueKai and Exelate.

These relate to the anonymous IDs, aka cookies, that Web sites use to track sale, purchase and other activities. Advertisers pay ad networks anywhere from $1.50 a thousand to about $10 a thousand, for the information, which then lets them target their pitches better and get higher returns on the “cost per thousand” they in turn pay for placing ads.

The latest company to get caught in the crossfire of using this behavioral data is Sears, the once-proud retailer of all things American. Even kits to build houses (way back in its early catalog days).

Its current incarnation, the Sears Holdings Management Company, in fact, put a price of exactly $10 on being able to attach some sort of code that would track very precise details about a person’s “online browsing.” This, according to the Philadelphia Inquirer, included details about online shopping, drug-prescription records, video rentals, library-borrowing histories, names and addresses of e-mail correspondents as well as bank statements.

The recipient also would be able to take part in a "dynamic and highly interactive online community" where they could converse with Sears and its sister retailer, Kmart.

But Sears and Kmart did not tell their past, present or potential customers (about 5,000 of the) that their “online browsing” would be tracked in such detail. And the Federal Trade Commission took the company to task. The charges were settled, with undisclosed (surprise, surprise) details.

There are problems here that seem to be repetitive, among profit-making companies.

a. A desire to know everything about a person’s Web behavior. b. A desire to disclose as little as possible about what is being collected. c. A propensity to compensate the past, present or potential customer as little as possible.

But the biggest problem seems a combination of not fully disclosing what you’re doing or trusting your customer to understand that what you are doing is in his or her best interest.

If it was in the customer’s best interest, then it’d be an easy sell. You’d tell the existing or prospective customer that tracking his or her behavior would allow you to provide more useful features or services, or keep down subscription or other fees by allowing you to sell ads that would save them money, in the long run.

In effect, you’d be able to get every customer to “opt in” for the service you’re trying to provide. It’d be easy to explain, easy to get customer assent and easy to operate. It would be a win-win.

You wouldn’t have customers questioning what habits were being tracked, how deep the inspection of their packets went and what the uses were, a la the NebuAd kerfuffle last year. And you’d have, quite literally, buy-in from the customer for what you wanted to do.

You know, eventually, opt-in – getting customers’ agreement first – is going to happen. Has to happen. Google’s the quintessential behavioral ad company and it will increasingly come under the microscope. Cable operators, from Comcast to Time Warner to Cox, all want to get into very targeted advertising on TV, not just the Internet.

And yet, the Network Advertising Initiative that is supposed to be so mindful of customers and their rights to privacy is still opting for … opting out as the principle of the day. Put the onus on the customer to say they DON’T want to be watched, rather than putting the onus on the company to get permission that they DO.

What’s the problem?

That companies might actually have to listen to the customers they want to track and do more business with?

Yes.

What’s got to change?

The idea that interacting with customers, talking to and with them, is a hassle.

“The first mindset change has to be the customer is an asset,’’ said Anthony Nemelka, the president and CEO of Helpstream, a company that provides an integrated suite of customer support services over the Web. “The second is that the customer wants to be an asset -- and it is simply a matter of asking.”

What's holding them back?

The mass of customers they might have to actually deal with. Millions of customers who you have to ask for assent before you can market to them. Or begin to listen to them. It’s a hassle.

In effect, Nemelka says, companies want to be protected from the customer. Heaven forbid they should ask for something. Or provide feedback. They couldn’t handle “the deluge.”

But, you know, therein lies the power of blogs, tweets and other methods of instant publishing of experiences and sentiments. Companies who don’t realize they aren’t in control of their customers – that they have to get them to say “yes” in everything they do – aren’t in control of their own businesses.

"You can't deflect any more,’’ says Nemelka. “You deflect at your own peril.''

Topics: Privacy, Banking, E-Commerce, Google

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Related Stories

The best of ZDNet, delivered

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
Subscription failed.