Content sites take cues from commerce

That was one of the pervasive themes at the Jupiter Communications Consumer Online Forum this week. Executives and analysts gathered here agreed that the data sites can gather by offering users more personalization will become a valuable revenue source.

E-commerce companies, most notably Amazon.com, have developed relationships with users that have resulted in more consistent usage and value. These firms take the information users give them and leverage it to sell more products--in the case of Amazon, for example, customers who buy books return to the site to find recommendations based on past purchases.

Finding different ways to gain revenue is becoming increasingly important as online businesses mature and mainstream media firms begin to escalate their Internet efforts. Unlike previous years, when operating in the red was considered acceptable, Wall Street has become more conscious of the bottom line where online ventures are concerned. And with the promise of more bandwidth and the increasing convergence between television and computing, media companies in particular are finding that the Internet and its revenue potential are going to play a large role in their futures.

Now content companies, which so far have been largely supported by ad sales, are finding that some practices employed by commerce companies could prove beneficial to them. This was noted in a study released by Jupiter during the conference.

"What is so excellent about commerce companies is they have a very concrete way of identifying who their customers are through credit cards, buying habits, and fulfilling orders," Jupiter analyst Anya Sacharow said. "So the challenge for content companies is to try to get that specific level of data through similar means."

Once a content site gathers data from a user through registration, for example, it can sell that information to an advertiser. A person who registers at a site and discloses that she is female, between 25 and 30 years old, and enjoys sports can be served advertisements targeted to her exact demographic. A site that can offer such data about its users can charge advertisers more for placement before a targeted audience.

Demographic data also can help drive sales of a product or service, of which the content site offering the targeted audience can take a percentage.

"Personalization has been sneaking up on us," Keith Benjamin, an analyst at BancBoston Robertson Stephens, wrote in a weekly email report. "Services now include email, instant messaging between friends, calendars, sports scores, stock portfolio pricing, news feeds, clubs and other forms for updated communication and information. The technology to integrate this quickly for tens of millions of people is not trivial and Yahoo continues to lead in ease of use, in our view.

"The idea is to make your Web life more productive. The more Yahoo is integrated into our daily lives, the more it will have value," he added.

"Yahoo has over 35 million registered users, which represent the core of its audience, and in our opinion, the key to its ability to make more money through better targeting," Benjamin wrote. "With all of its huge traffic volume, Yahoo is collecting more data about its customers than it may ever be able to use, but it should be able to push more targeted commerce offerings, with direct marketing evolving to be more powerful than having a branded mall."

With the trend toward "destination" sites that offer exclusive content along with the services offered by traditional portals such as free email and instant messaging, media firms are moving toward the use of reader data to drive sales and target ads.

The Go Network, for example--a joint project between Disney and Infoseek--offers universal registration, personalization, and navigation, a concept Infoseek chief executive Harry Motro recently called "creeping personalization." Users can navigate between Go Network sites--such as ESPN, ABC News, and Mr. Showbiz--and register as they go to get the specific information they want.

The advantage for the user is that the network is tailored to his or her taste. For the Go Network, the concept allows for ads and commerce pitches that are likely to be of interest to a particular user.

Warner Bros. Online also recently launched its own online venture, dubbed ACMEcity, which allows users to build home pages on the site using authorized material from the firm's television, movie, music, and animation properties. In return, users submit information about themselves, which can then be used to serve targeted ads.

The concept is catching on like wildfire; ACMEcity has 120,000 members, and signs up more than 3,000 members daily, according to Warner Bros. Online president Jim Moloshok. The Go Network, which launched in January, was among the top 25 sites in that month, according to Media Metrix.

Another advantage to getting user data is that offering more targeted content and services increases the "stickiness" of a site, meaning the site is more likely to attract the user time and again and the user will stay on the site longer. And nowadays, as companies learn about the Web and marketing techniques that work, advertisers and e-commerce partners are asking content sites not only how much traffic they get, but also how long users stay on the site.

"Users are getting smarter," said Yahoo chief executive Jerry Yang during a keynote this week at the forum. "The Web has become so much more action-oriented, in large part because our users have scaled up in savviness and sophistication. On the other hand, our partners, which we have counted on to build our company, have increasingly become more sophisticated."

However, as much as users apparently like the personalization features, the issue of trading privacy for bells and whistles remains a sensitive and contentious issue online. Many sites are careful to post privacy policies to address users' concerns.

America Online-owned instant messenger ICQ recently released its latest beta version, which executives said would allow for more e-commerce activities by letting vendors sell products to its members, and eventually letting members sell products to each other. Anyone who downloads the popular desktop software client agrees to terms of service that include the following:.

"Various data may be used for commercial purposes, including without limitation, for advertising, targeted advertising, marketing, coregistration to other services, promotional or any other activity ("Commercial Activities"), subject to the provisions herein."

Despite the benefits for sites that employ these techniques, some privacy advocates are raising their eyebrows at the trend toward data collection. Jason Catlett, president of JunkBusters, which advocates responsible email marketing and privacy practices, said that while many consumers are willing to divulge private information for access to commerce and content, most of them would be surprised at how much these sites know about their habits.

"In the 'Got to have it now' mindset of the average Web surfer, 1,000 little decisions to trade privacy for immediate gratification results in a large profile that they aren't really aware is being built, at which they can't typically see because the sites don't give them that opportunity to view the whole profile," Catlett said.

In terms of content companies adopting more of these practices, Catlett added that content sites are beginning to blur lines between their role as information providers and information gatherers.

"What is significant?is that not only the e-commerce sites like the Amazons, but the media sites like the newspapers, are now trying to get to individually know their customer," he said. "It is significant because it's changing the relationship between the citizen and the media. Media always had role of protecting the populace at large, and now it's getting an economic incentive to get into the private lives of each individual consumer."