E-Commerce Gets Personal

Way back when Internet hype was young, perhaps three years ago, many believed that the global computer network would wipe out middlemen, those presumably costly handlers of merchandise and services who are generally scorned as little more than necessary evils.

Following the mantra that “the rules have changed,” the hype promised that manufacturers would deal directly with customers, without distributors and retailers taking their cuts. Politicians would talk directly to the people, without the media interpreting and distorting their remarks. Musicians and actors would play to audiences without paying record companies and agents a percentage.

But the promise wasn’t worth its weight in bits, and retailers, stockbrokers and media outlets soon ventured onto the Net, performing online functions that are similar to those they provide offline.

At the same time, however, new types of intermediaries have developed to offer services that complement, rather than replace, both the real world and the cyberspace middlemen. These intermediaries, still in their infancy, promise to provide individualized services previously affordable only to the wealthy in the form of personal shoppers and private bankers.

“Back in the old days, only the wealthy could afford to have someone shop for them,” said Hal Varian, dean of the School of Information Management Systems at UC Berkeley. “Now everyone does.”

The combination of sophisticated new data-processing tools with the information-distribution power of the Internet has given rise to the “personal agent” business model. Instead of reducing the layers between producers and consumers, we have more, without increasing prices.

And if Internet economics has its way, many more are to come.

Companies such as Irvine-based Autobytel.com and RealSelect in Westlake Village are early forms of personal agents, focusing on the two biggest-ticket items a person is likely to buy, a car and a house. Extension into the recommending of services such as auto repair, landscaping and roofing may not be far off.

Amazon.com and others have already demonstrated their interest in stretching beyond merely selling products to recommending them. In August, the Seattle-based online bookstore acquired Junglee, which developed an online comparison-shopping tool that allows people to find the lowest price on a specific product by immediately surveying dozens of online stores.

Meanwhile, personalization technologies have become more sophisticated, blending a variety of tools into one instead of relying on any single method. Last month, for example, two San Francisco-based firms, Andromedia and LikeMinds, merged to integrate their technologies--one that monitors the movements of people through Web sites and another that recommends products based on a person’s expressed preferences. Together, the companies said, they will have a more powerful personalization platform.

While personal agent businesses promise to address a broad range of goods and services, for now they are confined to specific niches.

A potential car buyer might visit auto-referral services such as Autobytel.com, Microsoft’s CarPoint and Autoweb.com to gather information about cars and request price quotes on vehicles. The agencies, which collect fees from car dealers in exchange for access to the Web site visitors, will relay the requests to a dealer in the customer’s area, who would quote a nonnegotiable price to the customer.

Both Microsoft’s HomeAdvisor and RealSelect’s Realtor.com, which was developed with the National Assn. of Realtors, will sort through home listings according to potential buyers’ preferences, then guide them to real estate agents and mortgage lenders.

Neither the home-buying nor the auto-referral services replace Realtors or car dealers, but they do take away their role as the guardians of information such as home listings and car invoice prices.

And the profits of car dealers and real estate agents remain the same or even increase, because these referral services reduce the cost of acquiring customers by educating them about things like car features, prices and options, a function that car salesmen or agents normally would have to perform.

“Those four salespeople that you used to talk to when you walked into a car dealership imparted a lot of information that you needed to have in the decision process, but it was just way too expensive and time-consuming,” said Mark Lorimer, president and chief executive of Autobytel.com.

Salespeople Are Still Needed

By having computers take on the repetitive and computational information storage and distribution tasks, salespeople are free to perform higher-value functions--like giving customers personalized service--and getting better margins on their time.

“It’s very difficult for computers to deal with human behavior, and because there’s a human behavior element to the home-buying and -selling processes, you need people involved,” said Stuart Wolff, president and chief executive of RealSelect. “You need to read people’s body language during negotiations, understand what the home buyer’s true needs are versus what they say they are.”

As an impartial third party, referral services provide information on a broad range of competing products and services for consumers so they can comparison-shop. Conflicts of interest have prevented both producers and retailers from performing this function credibly.

The car-referral services have ambitions beyond just selling cars; they want to extend their reach into such areas as auto body repair. Microsoft’s CarPoint recently added a service that notifies customers when a recall is issued on their vehicle, and provides detailed information on what parts are required for specific repairs and how much those repairs generally cost in that person’s neighborhood. It’s a small step to begin relaying a person’s request for services to mechanics and auto body shops.

Computers and the Internet have led to a flood of information about every type of available goods and services. Whereas people were previously limited to, say, the number of different freeze-dried coffees that could fit on a grocer’s shelf, the Internet has brought a world of unlimited shelf space. Fully developed agent services could help consumers sift through the choices and convey their preferences to vendors.

In the agent-based marketplace, consumers would play a more direct role in asking for what they want and in what fashion, instead of producers of goods and services relying solely on their reading of the tea leaves of the marketplace.

“In effect, we’re creating reverse markets,” said John Hagel, a principal at consulting firm McKinsey & Co. “In conventional markets, we talk about vendors targeting customers and selling products and services to them. In the reverse market, you’ve got customers searching across vendors for the best deals.”

A Possible Privacy Guard

The new agent services might also take on privacy-protection roles, Hagel said.

“Most people even today are not aware of the amount of information that could be captured about them online and, if they understood the depth and detail of the information, they would be much more concerned,” he said.

Instead of the vendors collecting information about us, a trusted agent service would anonymously present our requests to vendors without giving them our identity until the goods or services were delivered.

Currently, businesses track, analyze and sell consumers’ data, with the benefits going primarily to businesses that traffic in personal information. Under the trusted-agents scenario, the consumers would control their data, surrendering it only in exchange for some kind of compensation, whether monetary or in the form of extremely customized products.

“For the first time, we have the potential for a tool kit to capture information about consumers, and deny access to other people except when offered something in return,” Hagel said.

The technology remains in its infancy, he added, and it may take five to 10 years to play out to its full potential.

“In the near term, what we’ll see are reasonably specialized agent services that will tend to concentrate in major clusters of purchase activities, such as Intuit in financial services,” Hagel said. “As this plays out, you’ll start to see consolidation across categories. Through acquisitions, full-scale intermediaries will emerge that represent customers across the full range of products and services.”

Then they’ll never have to ask if we want fries with that, because they’ll already know.

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Times staff writer Jonathan Gaw can be reached via e-mail at jonathan.gaw@latimes.com