We are about to witness the loud noise and mess that happens when an irresistible force meets an immovable object.
The irresistible force is personalization. This is the key to productivity. Personalization technology cuts through the clutter and saves time. The firm that delivers personalized content sits at the top of the attention economy food chain; all other content is “drive-by commodity”. Personalization leads to relevancy in advertising; and loyal customers.
The immovable force is privacy. You cannot do personalization effectively without knowing an awful lot of information about an enormous number of people. The privacy backlash is building. Today it is only techies who are aware of the issue and where it is headed, but when mainstream users get spooked by a few more high profile cases, we will see consumer backlash and then, with politicians on the bandwagon, more regulation.
This will make a loud noise and will be messy; and in that mess will be big opportunities for entrepreneurs. VRM (Vendor relationship Management) may be a key part of this, which we'll explore in this post.
Consumer backlash and regulation will take time to play out, but when it happens it'll change the rules totally. Look what happened to the Direct Marketing industry. The ease with which technology enabled us to build large contact databases and put them into the hands of traditional direct mail marketers led us to Can Spam and Do Not Call regulation. More importantly it encouraged all of us to find many different ways to block out the intrusive marketers.
People just got fed up with intrusive marketing. However, traditional direct mail will seem merely annoying compared to the intrusiveness of pitches that will seem to know precisely who I am, what I did yesterday and so on.
If there is any justification for that $15bn Facebook valuation (I don’t think there is, but that’s another story) it has to be based on the fact that the advertiser can know so much about you and all your friends, so that they can target incredibly precisely.
In the glorious world being presented by technologists, personalization will be so precise and so useful that nobody will question the privacy invasion. Yeah right -- that may be true by the time we get to Version 3.1. But well before then, we will get enough examples that are almost exactly right but wrong in some crazy, chaotic way, that it spooks and offends enough people to set the Blogosphere on fire. Then MSM will pick up on the story and then politicians and regulators will jump on board.
Yes, I know, the Attention Economy guys have been banging on about this for a long time and it all seems somewhat theoretical. The basic idea - that data about me is my data and I should be able to control it and benefit from who has access to it - is sound and resonates with people at a gut level. The problem is that the proponents have not yet come up with an alternative model that works in practice. Beyond a few people who live online, seeing the stream of stuff we look at online is about as interesting as watching paint dry. I once looked at my Google search history and it was “ok, now what?”.
There has to be a “show me the money” angle; either in cash, or more likely in productivity and cost savings. The model of paying people specifically to look at advertising is likely to catch lower income people with time on their hands - not the ideal target for advertisers.
It has been interesting to watch the thinking evolve:
1. CRM. That’s good, we can keep track of our interactions with customers.
2. One to One Marketing. Turned out to be a mirage. Mass marketers do segmentation. Genuine mass customization is years away. The front end for that is not hard, the back end is really, really tough and involves massive enterprise change.
3. Attention Economy. The basic issue around supply and demand (supply of content is exploding, demand is relatively static) is sound. Try explaining to somebody quite how this is different from “eyeballs” and what it means to them. Eyes tend to glaze over.
4. Intention Economy. Inferring Intention is why Google is valued at $200 billion. The trouble for the rest of us is: if Google has search all wrapped up, what is left as an opportunity?
5. Vendor Relationship Management. Doc Searls, who’s thinking evolved through Attention and Intention, is leading the charge on this. To quote their front page:
“VRM, or Vendor Relationship Management, is the reciprocal of CRM or Customer Relationship Management. It provides customers with tools for engaging with vendors in ways that work for both parties.
CRM systems until now have borne the full burden of relating with customers. VRM will provide customers with the means to bear some of that weight, and to help make markets work for both vendors and customers ‚Äî in ways that don’t require the former to “lock in” the latter.
The goal of VRM is to improve the relationship between Demand and Supply by providing new and better ways for the former to relate to the latter. In a larger sense, VRM immodestly intends to improve markets and their mechanisms by equipping customers to be independent leaders and not just captive followers in their relationships with vendors and other parties on the supply side of the marketplace.
For VRM to work, vendors must have reason to value it, and customers must have reasons to invest the necessary time, effort and attention to making it work. Providing those reasons to both sides is the primary challenge for VRM.”
VRM is still at the conceptual, evangelizing phase. It has yet to be built into a real service that offers real value to both buyers and sellers. There is a real entrepreneurial opportunity here.
In some respects, this looks like the old idea of “Infomediaries” being recycled. That concept was first raised by John Hagel in 1997 in the Harvard Business Review. Recycling is a good thing. Sometimes the timing simply has to be right.
The timing will be perfect when the privacy backlash really hits. A smart entrepreneur can get ready in anticipation of that. Of course it may never happen, but betting against buyer power in the Internet age is seldom smart.
One key to VRM is ID authentication and that is a tricky subject. It is technically fairly simple. All you need is something like the numbered bank account system which records that ID #1234567 is actually Joe Q Public, male, date of birth, zip code and other details that Joe Q Public controls. The linkage between the two has to be totally secure. The bigger issue is who can be trusted as that Infomediary?
For people to feel genuinely comfortable with privacy, personal data must be a) decentralized (a P2P model or federated servers) b) as secure as possible from hackers. With the number of high profile cases already public, people won’t trust a central database even if the provider has all the best intentions regarding privacy; they can change their mind or their data can be stolen.
The other key is order aggregation. Much as we like to see ourselves as the center of the universe, sellers need volume and are not set up to manage a stream of customized orders. It's a lovely idea but it won’t happen, because the seller’s systems are not ready.
Order aggregation is also not new as an idea. Again the timing might be right as companies tear down their command and control systems and everything moves to a retail model. What is the Purchasing Department (who loves ya Baby?) other than an order aggregator?
This may play out first in B2B and professional markets before it happens in the broad consumer market, for the simple reason that transaction value per individual is higher.
I like VRM as a catchphrase. It is dead simple to understand. It is intuitively appealing to people. Can we say Vroom?
What do you think? Is VRM a viable model? Where could it play out first? What are the alternative models that can combine the benefits of both personalization and privacy?
Listed below are links to blogs that reference this entry: Attention to Intention to VRM - Opportunities for Entrepreneurs.
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VRM:Sounds like what I use 37 signal's highrise for.
Posted by: Mike Trotzke | October 28, 2007 7:53 PMThere is an alternative model providing both personalization and privacy posted at http://replacegoogle.com
Doc Searls read it and left a very positive comment and featured it in two blog posts.
Posted by: Trey Tomeny | October 28, 2007 8:35 PMI couldnt help thinking about Microsoft's HealthVault and Google's Personal Health Record services while reading this post. Their models dont exactly match the idea you mentioned since all data is still centralized but it's interesting to note that obviously some people think there is a need for self managed data services.
Posted by: Jason | October 28, 2007 8:54 PMI don't mind a centralized store of personal data - in fact I think it's probably necessary to an implementation that's understandable by Joan Q. Public.
Now, we don't all have to use the same 'personal data aggregator'. But we do need to:
1) Be able to choose who stores it all (or store it ourselves) based on our own criteria.
2) Be able to see *exactly* who has access to our data - and who had access to it at any given point in the past.
3) Be able to see who has been accessing it. We must be able to see *exactly* what each accessor saw, and when they saw it.
4) Be able to make changes to who can continue accessing it.
5) Be able to correct it, and send corrections to those who may have accessed incorrect data. (Keep in mind that, once a third party has accessed our, we're not really going to be able to stop them from keeping a copy!)
6) Have some legal recourse against the personal data aggregator if they screw up.
It may be possible to provide a UI with all these cpabilities across a distributed set of data aggregators. But It will be a lot simpler if each person has one portable set of data they can lodge at the provider of their choice.
Posted by: Bryan | October 28, 2007 9:25 PMBTW. facebook 15b valuation is a fake ploy. MS gets a good deal any ways out of the contractual language. They are not interested in how much it shows on paper. No one else other than the unknowing public will buy it at any rate close to that.
Posted by: Joseph Pally | October 28, 2007 11:12 PMMicrosoft + Facebook = Facesoft is watching you! Serving ads based on our social stream, news stream call it what you want is creepy, it's like opening your mail when you know the mail man's already read it, he might even give you a quick precis.
What consumers need are trusted sources, silos of the web that are free from the fragile ad based economy that is rife at the moment, when did we start expecting everything for free? What if Facesoft charged $1 per week per user? Every user can afford that and relate to the social benefit derived from using Facesoft, if not don't pay, don't use, chuck in some exceptional apps and Zukerberg is pulling in $40 million per week.
The noise of technological advancement has replaced the signal of ad free content consumption.
Posted by: Adam Martin | October 29, 2007 3:20 AMSounds like a new use for a Co-Op. Lots of successful ones out there that focus on buying power (www.rei.com, for example) they take care of the VRM regarding quality and price. Seems like Web 2.0 could use a consumer protection organization that also leverages buying power and revenue share.
Posted by: Hart | October 29, 2007 6:33 AMOne of the issues the VRM / C2B movement faces is the possible suspicion that these services are fronts for fraud, money laundering etc etc if they are anonymised (for the user) in any way - yet if they are not, a lot of the value goes away
Posted by: alan p | October 29, 2007 6:34 AMThanks to everybody who posted.
Posted by: bernard lunn | October 29, 2007 11:55 AM# 1. I am a great admirer of 37 Signals but I cannot see the connection to VRM. It looks like a smarter variant of CRM.
# 2. Trey, good to see you getting your ideas out in the Blogosphere.
# 3. Yes, health records are the "elephant in the room". Healthcare is about 16% of GDP and growing to 25%, so you can see why Microsoft and Google are in this game.
# 4. Interesting thoughts. I was against centralized data stores simply because they are so easy to hack - as has been seen all too frequently recently.
# 8. That is taken care of easily if you have authenticated users. You can have anonymous and authenticated as long as the infomediary has credibility.
Bernard hi,
Posted by: Bernard | October 29, 2007 4:37 PMVery intresting posting and would be happy to continue the discussion privately as we're in a stealth mode still.
Thanks,
Ahikam
Many interesting names that might even be better than VRM:
CMR -- Customer Managed Relationships
I-Commerce -- Intention Commerce
V-Commerce -- Virtual Commerce, Versa Commerce, Generation V
Comments on names for this "movement"?
I am in stealth mode as well on one of the 1st commerically viable VRM concepts. It is really simpler than everyone is thinking and addresses all the issues. Bernard, please e-mail me if you would like to discuss.
Posted by: Jim Elliott | October 29, 2007 8:07 PM@ No. 9 - authentication is one thing, trust and credibility is another. I love this bit in Valleywag re Facebook:
What happens when you put twentysomethings in charge of a company with vast amounts of private information? Sheer madcap chaos, of course. Not to mention abuses of power. And that's what seems to be happening at Facebook. Valleywag kept hearing reports that Facebook employees had violated their users' privacy in a number of ways. The claimed abuses varied: Looking at restricted profiles to check out dates. Seeing which profiles a user had viewed. And, in one case, allegedly logging onto a user's account, changing her profile picture to a graphic image, and sending faked messages. Oh, and don't dare ask a Facebooker about any claims of misbehavior -- they'll report you to customer service for "harassment."
This is typical of the worry people have giving new startups their private data.
We look at the trust/credibility issue when designing potential "VRM" (to use the new TLA) services and it seems there are few organisations that every stakeholder will trust - banks, national telcos and non-profits scored highest.
Blogged a few thoughts about this issue on our blog here:
http://broadstuff.com/archives/489-Enterprise-2.0,-C2B-and-VRM.html
Posted by: alan p | October 30, 2007 3:14 AMI'm out of stealth mode working to build up my list of privacy-honoring companies before launching my consumer initiatives. I believe that VRM will have success if/when, as Alan P states, trust and credibility have been established.
How can you ask for all this data/information/intelligence without it?
PrivacyBuilders (www.privacybuilders.com) was created to do just that for a niche of the population that will embrace VRM once they establish control over their information.
I am interested in speaking with those that are developing a VRM solution as I will need to partner with a company for phase 2 of my business.
Visit my site and send me an email.
Posted by: TJ McDonald | October 31, 2007 8:33 AMI believe there is a social spin that can/should be added to this: what if the “VRM” went beyond helping me manage more my relationship with my vendors? What if it allowed me to manage my relationship with others that also have relationships with this same vendor due to the same products/services? What if, as a group, we decided to make ourselves available to address questions for potential customers for that same vendor/product?
Such aggregated power would be a force to reckon with; very interesting opportunity indeed.
Posted by: Filiberto Selvas | November 12, 2007 1:13 AM