About e-commerce part 2: US ISPs sell web analytics data

We’re still look­ing at Chap­ter 9 on e-commerce. My plan this week is to pub­lish at least one post per day that extends the mate­r­ial that I posted last Thursday.

In my Thurs­day class, I men­tioned web ana­lyt­ics as one pop­u­lar method that e-commerce man­agers use to gather data about cus­tomers. There are a few legal ways of gath­er­ing this data, includ­ing web server log analy­sis, cook­ies, and pro­gram­matic meth­ods. Web browse tool­bars are another pop­u­lar method of col­lect­ing this data. See slides 11 and 12 in this PPT that I orig­i­nally posted last Thurs­day.

How­ever, it’s much eas­ier to get this data from a trusted source: an Inter­net Ser­vice Provider (ISP). Most res­i­den­tial cus­tomers use an ISP to access the inter­net. It’s triv­ial for an ISP to col­lect infor­ma­tion about the web sites and pages that each cus­tomer visits.

Most cus­tomers don’t have a clue that, when they signed up for inter­net ser­vice, they also autho­rized their ISP to sell infor­ma­tion about their inter­net activ­i­ties. The legal notice is usu­ally buried deep in the con­tract or a pri­vacy notice, and US reg­u­la­tions require lit­tle if any dis­clo­sure to res­i­den­tial customers.

Wired mag­a­zine has been fol­low­ing this trend, and has two inter­est­ing reports from Ryan Sin­gel. Friday’s report dis­cusses a pre­sen­ta­tion by David Can­cel about click­stream sell­ing, as the prac­tice is called. Jeremy Rainer posted a fol­low up inter­view with Can­cel here. Can­cel is also the CTO of Com­pete Inc., a major US web ana­lyt­ics firm that works with a wide range of major US ISPs and US advertisers.

When ISPs sell this click­stream data, they can add $5 of mar­gin per sub­scriber to their value chain. Of course, ISPs love this found money. This addi­tional rev­enue is a con­ve­nient way to accel­er­ate the ROI for new lines, equip­ment and ser­vices. Sell­ing click­stream data has quickly become a key suc­cess fac­tor that major ISPs ignore at their peril.
Some ISPs might pass click­stream rev­enue along to cus­tomers as dis­counts, if these firms face pric­ing pres­sure in their mar­ket. On Oahu, Clear­wire has gained sev­eral points of mar­ket share in the last 6 months, mostly from for­mer cus­tomers of Oceanic Time Warner or Hawai­ian Tel­com.

Today’s report has a long list of ques­tions that Sin­gel sent to major US ISPs about their click­stream sell­ing activ­i­ties, focus­ing on pri­vacy and legal issues. Out­side the ISP and web ana­lyt­ics indus­tries, few peo­ple know much about this data. Is it anonymized so that user names are not asso­ci­ated with details about their web site visits?

Tagged as: e-commerce, Hawaii, Honolulu, ISP, key-success-factors, ksf, Oahu, ROI, security, USA, value-chain