About Me 0014: Making Money on the Internet

Australian ISP Internode today released its pricing for plans running on the National Broadband Network, the nation-wide government fibre-optic broadband network that intends to bring lightning-speed Internet to 97% of Australian premises.

But Internode managing director Simon Hackett said that these prices are “vulnerable to upward pressure” due to flaws in the way NBN Co’s wholesale program is structure and the ACCC’s decision to require 121 points of interconnect.

The plans are slightly superior to Telstra Bigpond’s current unbundled ADSL2+ in value for money, and more expensive than iiNet’s current offerings, provoking mixed feelings as to whether the NBN is really fulfilling the goal of making broadband more affordable for everyday Australians.

The NBN is in the very early stages of rollout, with parts of Tasmania and a few rural mainland towns currently having access to the network, which offers potential top speeds of 100Mbps downstream and 40Mbps up.

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?

About Me 0014

Monday, August 1, 2011

Making Money on the Internet

Banks Cashing In On Data

Privacy, Data, Money = Advantage Banks

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