The Emergence of the Infomediary

In their new book, Net Worth, John Hagel III and Marc Singer propose a new business will develop as a result of the internet. They suggest that digital networks "provide the tools necessary for customers to capture information about themselves and to deny vendors access to this information…we called it an "information intermediary" or "infomediary" - to help customers capture, manage and maximize the value of this information." In the book, Hagel and Singer argue that "companies playing the infomediary role will become the custodians, agents, and brokers of customer information, marketing it to business (and providing them with access to it) on comsumer’s behalf while at the same time protecting their privacy." The infomediary will act like a "consumer agent" by getting to know their needs, wants and preferences and using that knowledge to createa a "reverse market" each time the consumer wants to buy something.

What role would the infomediary play?

Lowering the cost of searching out the product or service that best suites the consumer’s needs.
Determining the best possible price for that product or service.
Shielding the consumer from unwanted intrusions by marketers, at the same time alerting them to new products that truly meet their needs or preferences.
Protecting the consumer’s personal information and, if the consumer so desires, marketing that information to vendors.

The net result: Lower interaction costs and increased privacy.

What is the management mandate from all of this change?

Don’t think of the internet as a way to business cheaper and faster; it is where the most important value creation opportunities exist and requires a fundamental rethinking of basic business assumptions.
Focus on the economic and strategic importance of customer information capture in on-line environments. Build customer profiles.
Take the customer’s side in matters of privacy and information capture and truly champion the customer.

What are the drivers behind the opportunity of the infomediary:

Marketers are wearing out their welcome. Each day we are hit by 3,000 different marketing messages.
Consumers are spending more time and money searching for the best possible product at the best possible price than they ever have.
Asymmetric information (sellers knowing more about a product than the buyer) poses risk to buyers.
Wide gulf of desires – marketers want lasting relationships with customers and customers want the best product for each situation.
Privacy backlash – consumers want to keep information about themselves confidential

Where will infomediaries emerge?

In markets where product lines are rapidly changing and complex
Where pricing models are difficult to understand or complicated
Where products or services have high information content
Where products can be delivered digitally

Markets that are ripe for infomediaries will have some or all of the following characteristics:

· Friction-filled markets

· High search and distribution costs

· Pricing distortions

· Widely varying customer profitability

· High information content

· Digitization and remote purchase

Markets that fit the above profile include insurance, housing, loans and transportation.

How big will the infomediary market be?

"Successful infomediaries could generate more than $4 billion in revenues by their tenth year of existence and more than $20 billion in market value."

Who are the leading candidates to be infomediaries?

Internet based candidates:

Portals AOL, Yahoo!, Excite, etc.
Virtual communities Parent Soup, Third Age, Motely Fool, etc.
Transaction aggregators Amazon.com, Onsale, E*Trade, Auto-by-Tel, etc.
Advertising Network Businesses DoubleClick, 24/7 Media

More traditional candidates

Fiduciaries Wells Fargo, Citibank
HMOs Kaiser Permanente, HealthNet
Retailers, Direct Marketers Wal-Mart, Home Depot, L.L. Bean, Fingerhut
Media companies Travel & Leisure, MTV, ESPN
Software businesses Intuit, Microsoft
Product evaluators Good Housekeeping, J.D. Power
Credit information providers Experian, Equifax, TransUnion

DRASTIC