RE: [projectvrm] 3rd party vs. 4th party

[Katherine Warman Kern < >]

Doc, 

There are many different issues raised in your responses below. But I think
the most important is: If 4th party is the term then clearly establish what
the criteria for using that term is so you can call out those who attempt to
co-opt it for being a fraud and be willing to endorse anyone who meets the
standard.  

A company which shares individual's data with businesses on their behalf and
one which has a conflict of interest will look the same, superficially.  How
will we know the difference?

The assumption behind Cluetrain is that when people are free to communicate,
the truth will rise to the top.   

But the internet has proven that eventually, by necessity or by greed, money
enters the market and without any rules or framework (i.e., a purely free
market), the natural balance between buyer or consumer of information and
seller or publisher of information is corrupted.
 
For example, one of the biggest businesses on the internet is the selling of
words. Which means they can be co-opted and corrupted.  Especially words
that the general public doesn't really understands the meaning behind. 

The only alternative is government regulation, but the risk is that the deep
pockets will influence policy to protect current conflicts of interest - not
incent companies with integrity to serve the buyer who pays them. For
example, I'm not sure the Kerry bill isn't heavily influenced by businesses
who wish to protect conflicting revenue streams.

I respond to your comments below.

K-
  
-----Original Message-----
From: Doc Searls 
[mailto:
 ]
 
Sent: Thursday, April 14, 2011 10:20 AM
To: Katherine Warman Kern
Cc: Project VRM
Subject: Re: [projectvrm] 3rd party vs. 4th party

On Apr 14, 2011, at 7:53 AM, Katherine Warman Kern wrote:

> Credit cards are paid a fee by individuals. And the credit card companies
profit by selling their data.

They also get a piece of the sale. That's a cut out of the seller's side in
most cases. A seller makes less on a credit card sale than on a cash sale.
One could say for that reason that credit card companies are fourth parties,
in the sense that they help the buyer. I have been told this by people in
the business, by the way.

They also protect both the buyer and seller from fraud, and offer other
benefits (e.g. insurance) to both sides. 

>> They charge the seller a transaction cost and the seller builds that into
their pricing which is paid by the buyer. So the buyer pays for it all.  

>> If they didn't guarantee payment, credit cards would not exist.  It is a
cost of doing business for them to guarantee payment. In my opinion, saying
that they protect the buyer and seller from fraud is marketing puffery.   

I don't know enough about card companies selling data. Fill us in on the
particulars here. 

>> Hypothetical based on the observation that credit cards have been in the
direct marketing business from the start.  Do you remember when you used to
get all that stuff in the envelope with your bill?  Man was that annoying.
But at least it was transparent.  Now, it is my understanding that they sell
your name on a mailing list characterized by how they predict you will
behave in the future based on historic purchasing patterns. Since this is
not transparent I have no concrete evidence. But with some digging, I
suspect there is. 

> They rationalize this conflict of interest by saying they can keep
consumer fees down by selling personal data.

Evidence? Not saying there isn't any. I'd just like some. I'm writing a book
right now, and this kind of information would be very helpful.

>> Hypothetical, based on how business, in general, rationalizes (read:
talks to themselves about) monetizing personal data by arguing that it is in
the customer's best interest.  The reality is it is a lot easier to monetize
the data to sell it to a few businesses than use the data to offer a service
that one must convince millions of people to pay more for.  But it would be
great to get some actual quotes in the press or from lobbyists.

>  And they spend a lot of money on lobbyists to tell government regulators
this.

Sure.

> A fourth party doesn't improve this. 

How not? If a credit card company doesn't sell data (or, only sells data
with the customer's permission), and otherwise distinguishes itself by
working for customers in particular, rather than for other parties, why not
distinguish their position with a label? That's all the fourth party label
does.

>> So a credit card company can be a 3rd party and a 4th party? Or are you
saying, as in states where real estate agents have to disclose if they are a
buyer's agent or a seller's agent, that they choose between one or the
other? How does the credit card company set up a wall between their
traditional business, serving two masters, and this buyer's agent product?
How does such a company maintain accountability to the buyer or how does a
government agency enforce living up to this promise? 

> I want a better third party that serves one master and has no conflict of
interest, making more regulation less urgent, and shifting corporate dollars
from paying lobbyists to serving me better.

I suggest that would be a fourth party.

> I would pay more for a credit card that pledges to serve one master.  I
would pay more again if they made it simple and even kind of fun to make
sense of my own data.  I'd pay more again if they used all the consumer
research expertise they have to help me connect with peers and empower us to
leverage our information as a group in the marketplace.  I would rather have
a relationship with my peers and relate with business as part of a group,
anonymously.  
> 
> And I would cancel my other credit cards.  
> 
> Net:  I want a better 3rd party that serves one master, has zero potential
for conflict of interest.

Is "better third party" a good-enough label for that different kind of
credit card company? Maybe it is.

>> I think what's more important than the word are the specifics: the
operating principles, the method for accountability, and the business model
to assure zero potential for conflict of interest.  I don't care if it is an
existing company or a new one.  But if they are willing to live up to these
standards, I would trust them more than all the folks make empty promises or
offering free services with no transparent way to pay the bills.  

> The marketing campaign would be very simple.  "No Hidden Agendas" and an
image of a one sentence terms of use and privacy policy statement.

Sure. But marketing by companies and categorizing them for the purposes of
understanding them are different things. My interest here is making VRM
easier to understand, in part by bringing a customer-based understanding of
business to the fore. New words and phrases help for that. "Web 2.0."
"Tipping point." "Open source." "Really Simple Syndication." None of those
were in common use, or meant much, before 1998. Now they're unavoidable.

>> As discussed above, as long as these words can be bought they will be
co-opted for marketing purposes - especially new words which are popular but
the general population really doesn't understand.  

The hardest problem we've had to face as a community, so far, is the
assumption that improving business as usual is the best that can be done, or
good enough. We've seen that with CRM, and now with Social CRM.

I've attended two conferences recently wher smart and hip gurus and startup
CEOs sang the praises of Cluetrain, and saluted me personally, then took
some of what we've been saying in the VRM community about the rise in
personal empowerment in the marketplace -- and went on to say that "social
media" alone was behind this power change, and that what's needed next is
"better personalization" by the vendor side, and by third parties mostly
helping the vendor side.

So we have work to do here. It's the same work we were left with when
Cluetrain failed its full mission.

We thought, when we wrote The Cluetrain Manifesto, that "markets are
conversations" and "we are human beings and our reach exceeds your grasp"
both made clear that free customers were more valuable -- to themselves and
to vendors -- than captive ones. Instead understood Cluetrain came to to
mean three things:

1)  Marketing (and not just sales) now has to talk directly with customers; 
2)  Social media, because it's conversational, will improve the way
companies deal with customers; and
3)  Social CRM is what CRM needs to make "relationships" with customers
real.

In other words, what we got was better business-as-usual. Half a loaf.

>> I agree these ideas are half-baked attempts to co-opt the vision of
Cluetrain. I do not think they are transparent and all have a conflict of
interest problem.  What is needed is a manual for how business and customer
can contribute to and benefit from the vision of Cluetrain.     

Our challenge is to prove that free customers are more valuable than captive
ones, that freedom is native to individuals and not conferred by the grace
of companies, and that dependency is fine only when it goes both ways in the
form of agreements between parties of equal power.

That means we need whatever it takes to become independent on our own, to
break out of captivity, and to become better customers in the process.

As that happens, and as business changes, we will see new categories emerge,
along with new code, new means of engagement, new norms, and new names and
labels for this new stuff. "Fourth party" is an early move in that
direction. The fact that some companies already want to make that
distinction, and either look for fourth parties to emerge, or to become a
fourth party themselves, is meaningful. Could be we won't end up using that
term, and a better one will come along, or -- as you suggest -- we won't
need it. But as long as "fourth party" is current in conversations today, it
helps to get the best possible understanding of it.

>> there are individuals motivated to take the time and deal with the
frustration of figuring out how to do it on their own.  But most people want
a service which is transparently dedicated to serving their interests.  

>>This is what I have described here.  

>>Perhaps one way to realize the vision of Cluetrain is for those who want
to figure it out commit to what it looks like by outlining the operating
principles, business model, and method for accountability and then build a
community of people willing to pay for this service. Then you have something
predictable, scalable, and worth changing business models or investing in
from scratch.   

Doc

> Katherine Warman Kern
> 203.918.2617