Internet business news and analysis by Dylan Tweney

Getting personal

PERSONALIZATION COUNTS. If you don't believe it, just take a look at the $780 million recently paid by Excite@Home to acquire online greeting-card vendor Blue Mountain Arts. Here's a company that basically does nothing but create personalized Web pages all day. They stick someone's name and message on a piece of sentimental poetry with pretty pictures and MIDI music, assemble the whole thing into HTML, post it at a private URL, and invite the recipient of this "card" to visit that URL for a personalized message from one of their friends. It's simple, dumb, and popular enough that bluemountainarts.com has been one of the most highly trafficked sites on the Web for the past two years.

Now every savvy Web merchant worth his or her salt is trying to do the same thing by delivering messages, Web pages, and product offers tailored to each customer's particular interests. Hey, if people like getting electronic greeting cards from their friends, they're going to *love* getting personalized messages from Web merchants they've visited, right?

But there's no arguing with success: Even when they're obviously calculated to bring in repeat business, these targeted offers still work. When it comes to finding stuff you like, a good recommendation beats hours of shopping. If I bought Evan Schwartz's book Webonomics, there's a good chance I'll be interested in his next title, Digital Darwinism. So if the book merchant can find a way to recommend that book to me without being too obnoxious about it, I'm much more likely to make the purchase.

Naturally, a host of products have sprung up in the past few years designed to automate the process of personalization. Automated personalization -- sounds like an oxymoron, doesn't it? I'll come back to that in a minute.

To find out more about the state of the art, I spent a day at the "Personalization Summit" this week in San Francisco -- a conference sponsored by personalization software vendor Net Perceptions.

Based on what I saw, personalization technology has a long way to go. It's clear that the products offered by the likes of Net Perceptions, Broadvision, and others have enabled some real advances in Web publishing and e-commerce, not to mention measurable returns on investment for the companies deploying these technologies. And sure, it's good to be able to deliver customized pages through a "My Whatever.com" section on your Web site, or personalized content and product offers through any page at all on your site.

But I don't believe customers think of these technologies as especially "personal." In fact, it's pretty obvious that many such personalized pitches are little more than high-tech versions of the old direct-mail standby, the mail merge. And, like mail merges, personalization is often undermined by the insufficiency of the data it draws on. I quote: MR DYLNA TWENEY, you may already be a winner!!!

As David Weinberger put it, this isn't "1 to 1 marketing," it's "0 to 1 marketing." [1]

Weinberger's article appears on Personalization.com [2], a Web site that, like the conference, is sponsored by Net Perceptions. To the company's credit, they've given site editor Christopher Locke free rein on the site, so it contains articles critical of personalization (such as Weinberger's) as well as paeans to personalization and 1 to 1 marketing.

Locke is using his editorial license to extend the concept of personalization beyond 1 to 1 marketing to what he calls "open source marketing," a topic he spoke on at the conference this week. Open source marketing, per Locke, is what happens when companies stop trying to tell their customers what to buy, and start *listening* to them instead.

Rather than try to control the conversation, open-source-marketing companies create a space where customers can connect with one another, discuss things freely, and band together around the products and ideas they're interested in [3].

In a day when even presidential candidates are trying to jump on the "open source" bandwagon, you may be right to view this new coinage with a bit of skepticism. But I think Locke is onto something. If a Web merchant lets its customers organize themselves into communities of interest, it can deliver products and services tailored to those emerging markets -- rather than trying to define markets around the products it already sells.

As a traditional retailer might put it, you've just got to listen to the customer.

[1] 0:1 Marketing

[2] Personalization.com

[3] Open Source Marketing: Walking the Talk

See the future:
Next week's Tweney Report, now in progress at my new weblog.

It looks like the various INTERNET TAX FACTIONS are massing their forces in preparation for a battle royal early next year.

In one corner stand those vigorously opposed to Net taxes of any kind -- a group that appears to hold the upper hand on a commission appointed by the U.S. Congress to study the issue earlier this year [4].

As the Standard reports, the commissioners seem to be in agreement that Internet access should not be taxed, that there should be no international e-commerce tariffs, and that the U.S. government should abolish the 3% federal telecommunications tax. But how to tax e-commerce itself is another matter.

Most commissioners seem opposed to e-commerce taxes of any kind, while a few are reserving judgement -- and others are pointing to a potentially disastrous loss of revenues for state and local governments.

Meanwhile, Utah governor Michael Leavitt, together with the National Governors Association, has floated a proposal to collect e-commerce taxes -- but to simplify the process of doing so [5,6]. Through this plan, third-party entities would collect e-commerce sales taxes from online merchants, take a percentage of the revenue for their services, and forward the balance to the appropriate government agency.

The federal commission is scheduled to deliver its recommendations to Congress in April of next year. Meanwhile, expect to hear plenty from the NGA and other groups weighing in on this issue. Watch this space for updates.

[4] A Taxing Debate Over Internet Taxes

[5] Congress urged not to tax Internet commerce

[6] Leavitt Unveils Plan for E-Taxes

James P. Girard writes:
I think the more important problem, in the long run, is how you make online access available to those who can't afford to pay for it, without some kind of user tax? I have no doubt that online access is going to be as essential as electricity is now. ... Unfortunately, at the time in history when the Internet is becoming a central part of not just American but human life, a lot of Americans are in retreat from thinking in broad social terms, and are content to hold on to what they've got and let everybody else fend for himself.

Two big auction houses are STUMBLING ONTO THE NET. Christie's tabled plans to launch a spinoff company devoted to online auctions, but will instead concentrate on putting its full catalog online, a change in strategy which will delay the launch of its site by several months [7]. Meanwhile, Sotheby's is continuing with its online auction (in partnership with Amazon.com, which bought a $45 million piece of the auction house last year.

Both companies are faced with a dilemma: Their reputations are staked on small-volume, high-quality auctions, but the Net favors high-volume, EBay-style flea markets. Sotheby's wants to put hundreds of thousands of objets d'art on the block, but since its in-house appraisers can't possibly assess all those items, it's outsourcing much of the work. Christie's is taking the opposite tack, and will offer fewer items for sale, all of which will be appraised by Christie's prior to sale.

Meanwhile, EBay's market capitalization stands at $18.33 billion, while the typical item sold on the site is under $50. Christie's, which recently sold a $45 million Van Gogh, has a market cap of $1.46 billion. You've got to feel a little sorry for the bluebloods running the old auction houses.

[7] Christie's backs off online-auction venture

[8] Christie's, Sotheby's Meander to the Net

Maybe it's NOT COOL TO BE A DOT-COM any more? According to the Wall Street Journal, companies are starting to drop the suffix from their names -- and some Web merchants are even mailing paper catalogs for the holiday season [9].

A year ago, the surest route to a higher valuation was to change your name from "XYZ Company, Inc." to "XYZ.com, Inc." But now that you can hardly find a billboard or TV commercial without a ".com" on it somewhere, the ubiquitous top-level domain is getting a little overexfosed.When the Internet is everywhere, you won't notice it any more than you pay attention to the power grid or the highway system. This may be the first sign that is already starting to happen.

[9] Ubiquitous Dot-Com Suffix Is Dropped By Some Firms in Effort to Stand Out
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~ Back issues ~

Sorry sites: RealNetworks apologizes for privacy leaks; Amazon to sell hardware and software; AOL not accessible to the blind; banner ad deathwatch continues; updates to Tweney.com (11.8.1999).

Distributed merchandising: Farewell to InfoWorld; Levi's takes it offline; Consumer Reports rates e-commerce sites; Britannica.com and the public's thirst for knowledge; stop fixating on stores and start thinking about distributed merchandising (11.1.1999).

Mail slot marketing: U.S. Postal service wants to interface with e-mail; banner ads not dead yet, but they aren't looking good; Britannica debuts free online encyclopedia; unintended side effects of broadband may include video spam (10.25.1999).

Holiday spirit: HP learns the true meaning of E-Christmas; CompUSA shoots itself repeatedly in the foot; TicketMaster's thoughtful clarification on deep linking policy; billionaire poets; a flood of online shoppers may be disappointed (10.18.1999).

The whole blinkin' Tweney.com archive...