Who owns the customer?

That annoying phrase marks the second phase of the debate over Internet middlemen: Who are they? Do we need them?

2 min read
Who owns the customer?

That annoying phrase, popping up in e-commerce panel discussions and interviews recently, marks the second phase of the debate over Internet middlemen. Who are they? Do we need them?

Phase 1 was dominated by that horrible term disintermediation, which basically means getting rid of the middlemen. Middlemen were thought to be dead meat on the Net because manufacturers and producers could go directly to users, cutting out the middlemen.

Disintermediation was wrong. Yes, the Net makes traditional middlemen vulnerable, but intermediaries that play useful roles can thrive on the Internet. The big question was whether Net intermediaries would be new entities like online shopping malls (which didn't work) or whether middlemen of the physical world would transfer their role onto the Net.

That question remains unanswered, though we're seeing both kinds of Internet middlemen.

Now that Internet commerce actually has customers, "Who owns the customer?" marks the next stage of the middleman debate. An example frames the issues:

Your Internet storefront is hosted by MyHub.Com. Customers entering your store are tracked in the usual ways--you collect valuable data about what they buy, look at, and ignore. That information is crucial as you personalize your Web store for specific individuals, welcome return visitors with special offers, and try to sell add-on products.

MyHub.Com actually collects that data for you, but what else does MyHub.Com do with your information? Share it with other cybershops? Market MyHub.Com's own products? Aggregate and analyze it anonymously with customer data from other shops?

And what if MyHub.Com is really Microsoft? Because for online software retailers, it is.

Microsoft makes the issue explosive. Nitro (New Interactive Technology for Reselling Online) is Microsoft's name for its "reseller referral program," and it's been a hot topic for months.

Here's how Microsoft says Nitro will work when it launches this fall: Virtually every page in Microsoft's vast stable will come with a "Buy Now" icon. Clicking on it will transport the visitor to a buying area. Serious shoppers will surrender personal information about themselves and what they're buying.

When it's time to check out, visitors can choose to buy the software from Microsoft at full price or go to a reseller for 10 to 25 percent less.