Computerworld - A cardinal rule for any successful business is to "know your customer." In e-commerce, a key way for companies to get information about their customers is through online profiling.
Online profiling data, which is information gleaned from a customer's use of a Web site, can be used to target advertisements, personalize Web sites and match services to a specific customer's needs.
But the practice of online profiling has come under intense scrutiny. Many lawmakers and privacy advocates say they're concerned that online profiling can be used to learn a customer's political and religious views, sexual orientation or medical conditions - information that can be sold and shared in a networked world.
Fearing government regulation, a consortium of nine network advertisers that collectively own 90% of the market are attempting to forestall privacy legislation through their recent adoption of self-regulatory guidelines. In new contracts that will be issued to Web sites by network advertisers such as market leader DoubleClick, specific terms will be set on how companies may accomplish online profiling.
For instance, Web sites that have agreements with network advertisers will have to obtain consumer consent to conduct online profiling. "Robust" notice and consent will be required before personally identifiable information can be merged with Web-browsing data. The guidelines also prohibit the use of sensitive personally identifiable information, such as medical or financial data, in online profiling. But the future is in a state of flux. Congress is considering numerous bills concerning online profiling, and it may well become a major issue in the U.S. presidential campaign.
In short, online profiling embodies both the promise and the perils of e-commerce. But, analysts say, one thing is certain: The practice is indispensable to any Web business.
Know Your Customer
"You have to do it if you are an online business. It's the critical element for evaluating the effectiveness of your site," says Chris Christiansen, an analyst at International Data Corp. in Framingham, Mass.
Online profiling begins once the host computer - the Web site being visited - places a "cookie" on the end user's computer. The cookie, which is a unique identifier, then transmits information back to the host computer. This information allows a business to track an end user's page views, the length and time of the visit and responses to advertisements. Purchases and search terms entered by the end user can also be tracked.
Companies can develop sophisticated profiles of their end users through personalization software.
This information can help customers use their time efficiently. For instance, officials at Saleoutlet.com Inc. say they know that the average visitor spends about nine minutes at the company's Web site.
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