The Evolving Technologies Of Internet Privacy

Policy Backgrounders | Privacy

No. 156
Friday, April 27, 2001
by Gregory F. Rehmke


Customer Preferences And The Internet

For millions of Americans the Internet is a tool for exchanging e-mail, researching distant databases, and purchasing books, tickets and a wide array of other products and services.

But the rapid expansion of electronic databases, e-mail and Internet commerce has dramatically lowered the cost of information about people as well as about products. Internet users are amazed at the amount of information about products and services available online. This same electronic magic can turn every online search and every purchase into new database records about the person who made that search or purchase.

This is accomplished primarily with "cookies," little data files that are saved to an Internet user's computer when the user visits a Web site. Cookies store information such as what the computer user does on that Web site and what other Web sites the computer user visits. The next time the user visits the Web site, the cookie makes it possible for the Web site to tailor what the site offers based on information about the user's interests.

Table I - PC Magazine Table of Personalization Software

"Cookies make it possible to tailor what a Web site offers based on information about the user's interests."

Imagine if Wal-Mart were to record the movements of individual shoppers in its stores, noting where they stopped to look at items and what they picked up and put back. Wal-Mart could use this information to improve product placement and display designs. But in the end an individual Wal-Mart store looks the same to each customer - even though each customer has different interests and preferences. Perhaps some futuristic Wal-Mart will be able to quickly rearrange shelves as customers walk down the aisles in order to offer goods according to each customer's known preferences (maybe, for example, a product you picked up and considered buying would turn up on shelves again and again as you walk through the store).

Until that time, however, people can only get such individualized treatment at online stores and only if online stores are allowed to gather information about customers and visitors to their Web sites. Amazon.com offers such personalized service. Return visitors to the Amazon Web site see books recommended on the basis of past books they have considered or purchased.

Netflix (www.netflix.com) offers DVD movie rentals on its Web site, and members can rate dozens of movies as well as choose the DVDs they want mailed to them. The Netflix software remembers the ratings and which movies have been rented, and suggests movies that its software determines users might enjoy.

Visitors to small-town video-rental stores can enjoy similar benefits from conversations with store employees who over time suggest movies. Shoppers in small stores in small towns are more used to being observed by store owners and employees concerned about providing good service. With analysis technology, online stores provide aspects of this small-store attention and can combine it with large-store selection and economies of scale.

PC Magazine recently reviewed the latest data-mining software.1 Analytics, e-marketing and what is called personalization software enable firms to identify shopping and other traits of consumers and adapt their Web sites to the interests and preferences of users. [See Table I for a listing of personalization software.]


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