About Me 0087: Making Money Internet

Several Engadget exiles are starting a new tech site. Its placeholder name was This Is My Next, but AllThingsD reveals that the real name will be "The Verge."

It will launch in the Fall under the aegis of content startup SB Nation, and its first sponsor will be BMW.

Finding names for things on the internet is incredibly fraught with peril. All the good domain names and trademarks are taken. That being said, this Paris-based writer can't help but note that "verge" is a French word for penis.

I hope they break a lot of news so I can have a juvenile giggle every time I see a link.

Please add the joke of your choice to the comments.

Flashback: Here's The Leaked AOL Master Plan That Pushed All These Writers To Leave →

Banks Cashing In On Data

If a person's primary method of payment is some type of credit or debit card, the banks know everywhere that person goes, what they spend their money on, what their preferences are, what locations they frequent and so on.

Selling that data is an interesting method of making money for banks. Federal regulations are strict on what customer data banks can share and with what entities. According to the Tribune story, the bank's system is set up in such a way that the deals are coming from the bank, not from the merchant. Data is processed between the merchants and the banks through intermediaries, such as Cartera or Cardlytics. Personally identifiable information is randomized and customers are given numeric codes, of which only the bank will know who the user truly is.

According to the Tribune, 58% of customers have redeemed at least one deal. The incentive programs are opt-out, which 2% of customers have chosen to do. Merchant funded incentive programs could be a $1.7 billion vertical for the banking industry by 2015, even with the banks only taking 25% of the fee for the incentive.

Privacy, Data, Money = Advantage Banks

Opt-in or opt-out is a tricky question when it comes to data and privacy. Companies like Facebook have gotten into hot water with privacy advocates by making changes to their privacy policy and settings opt-out in a way or place that a lot of users will not notice or check. Think of it this way - are you getting offers from your bank? Did you remember the bank asking you if it could share your information or was it in the fine print of your cardholder's agreement somewhere?

When it comes to the Internet, money is inextricably tied to user data. The companies with the most data about their users tend to make the most money. Banks are the perfect avenue for incentivized deals because they can offer merchants exactly what they are looking for.

For instance, a 29-year-old male with an income above $40,000 that purchases shoes three times a year would be a perfect target for a deal from Designer Shoe Warehouse or Footlocker. Groupon cannot give merchants that level of granular information.

What will this mean for the fledgling daily deals industry going forward? Groupon had a litany of risk factors in its filing for its initial public offering and "inability to stave off competition and clones" was one of them. Facebook and Google are secondary players in this market. Both have created various types of deals and "offer" campaigns, and they both pose a problem to the primary players since they already have significant amounts of user data.

Yet, the banks have more information about customers than any Internet company ever could. If the financial industry starts muscling into deals, do the likes of Groupon and LivingSocial stand a chance?

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Friday, July 29, 2011

Making Money Internet

Banks Cashing In On Data

Privacy, Data, Money = Advantage Banks

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