Friday, August 04, 2006

Online identity verification and two-sided networks

Yesterday's Wall Street Journal had this on the top of its front page: "Building Trust Into Web Identities." When we interact online, it's increasingly important to know who is on the other side of the screen. There are many services emerging that provide various forms of ID verification, which are covered nicely in the article. The article goes just deep enough to give a quick nod to the forward-looking Higgins Project, which is being led by Parity Communications (mentioned here yesterday) with support from IBM and Novell.

It's important to note that ID-verification services are fighting to attract two completely different sets of users. They must enlist websites to license their technology and they must enlist users to register for IDs. Both sides are absolutely essential to any successful ID-verification service.

Several days ago I lunched with Marshall Van Alstyne as he explained this pervasive two-sided business phenomenon, which is old as the hills but only recently something specifically named and studied by economists. Marshall and his colleagues call it a "two-sided network." Stay tuned for a lot more popular business press on this topic in the near future. Meanwhile, you can see Geoffrey Parker's home page for his paper "Two-Sided Network Effects," co-authored with Marshall.

This work is licensed under a Creative Commons Attribution-ShareAlike 2.5 License and is copyrighted (c) 2006 by Connective Associates except where otherwise noted.


Anonymous said...

New Ways to Prove You Are Who You Say You Are Online

Copyright (c) Wall Street Journal
August 3, 2006

As Web-Safety Worries Grow, Range of Services Help Users Verify Each Other's Identities


ROB BARBOUR HAS found a new way of enhancing his reputation online: showcas­ing his newly verified identity. When he put up an eBay Inc. listing a few weeks ago, the Ashburn, Va., technology consultant embedded a link to his new online profile on verification ser­vice Trufina Inc.

He soon will paste the link in his emails and on a Web site where he sells software and offers programming advice. "I needed a tool that will prove to somebody that this is who I am," says Mr. Barbour, 39 years old.

Proving who you are is increasingly important on the Web, amid growing concern that pervasive In­ternet fraud is making it difficult to know whom to trust. In response, compa­nies are developing a slew of new tools to help people confirm their identities. The new services allow consumers to create and share verified personal profiles with people they

meet or do business with online.

In recent weeks, many of these services have an­nounced new partnerships with popular social-net­working, shopping and dating sites, which face par­ticular pressure to keep out cyber crooks. Trufina, which has recently joined up with dating sites like and, re­launched last week with a wider menu of verifica­tion tools. Opinity Inc., a new profile-sharing ser­vice that verifies a user's age, hometown and, in coming weeks, education and employment history, has recently announced partnerships with social­networking sites like, classified site and technology-news site IDology Inc., which performs age and identity checks on customers for high-end online mer­chants, will this week announce a deal with Zoey's Room, a networking site for girls, marking the first time its age and identity-verification technology will be part of a social-networking site.

Whether they're shopping, chatting, doing busi­ness or looking for dates, consumers are increas­ingly on edge about online safety. In 2005, 59% of Americans "completely or strongly" agreed that Internet-based financial transactions were se­cure, down from 70% in 2003 according to Informa Research Services. A recent report from the Pew Internet & American Life Project found that 66% of Internet users believe online dating is danger­ous because it puts personal information online.

Concerns about the safety of minors, in particu­lar, have exposed the need for more effective ways to confirm a person's identity than a user name and a password. Social-networking sites at­tempt to protect their members by impos­ing minimum age restrictions but can't easily enforce them. News Corp.'s, which requires members to be at least 14 years old, told Congress in June that it is looking at age-verification tech­nology but hasn't yet found any effective options.

Proposed solutions for protecting chil­dren from online predators are controver­sial. Last week the House of Representa­tives passed a bill that bans social-net­working sites and chat rooms from schools and libraries that receive certain federal funding. The bill, which has been criticized as too broad and blunt by some online-privacy groups, has been referred to a Senate committee.

A growing number of businesses, too, are using online verification services to check out their customers. Wine company Kendall-Jackson uses IDology's age-verifi­cation technology to confirm that new cus­tomers on two of its e-commerce sites are at least 21 years old, and it plans to implement more-comprehensive identity verifi­cation soon to help combat credit-card fraud., an online jeweler, uses IDology's tools to authenticate buyers whom it flags as high-risk, which include those with particularly high transaction volumes or mismatched addresses.

Microsoft Corp. is addressing online­safety concerns by constructing its own identity technology from scratch. The tech­nology, called Windows CardSpace, is in a very early stage but will be built into its up­coming Windows Vista operating system. CardSpace allows users to log into Web sites by clicking on different digital cre­dentials, or information cards. Users could create their own information cards or they could get the credentials issued to them by a trusted party, like a bank. (Mi­crosoft doesn't host or store the identity in­formation; it just provides the technology for its transfer.) CardSpace is meant to be more secure and useful than passwords be­cause information cards can hold more in­formation, like an address or a credit-card number, and can he backed by a third party.

International Business Machines Corp., Novell Inc. and various other aca­demics and vendors are working to­gether on a similar project. Their technol­ogy, dubbed "Project Higgins," would be open-source.

But radically new tools like these won't be rolled out widely before next year. In the meantime, current services tend to fo­cus on creating a trusted profile that can be used across sites or shared. The ser­vices, which collaborate with background­-checking companies of the sort corpora­tions use to research future hires, often check attributes like age, address, gender, education, employment and whether a per­son has a criminal record. Most services provide a basic verification of name, email, and sometimes address free of charge. Anything more can cost up to around $15 a year. The information is typi­cally checked against credit-bureau records and other publicly available data, like property listings and databases of known criminals and sex offenders.

To sign up, users enter their personal data and are sometimes asked to answer a series of tricky multiple-choice ques­tions no one else will likely be able to answer, such as the size of their last mort­gage payment. Some details are con­firmed automatically; others take time. On Trufina, a basic verification takes two to three minutes, with a background check usually taking less than 10 min­utes, says Christian Madsen, chief execu­tive of the College Park, Md., company.

Users can sign up through the services' own home pages or through a partner site, where some of the costs are absorbed into other membership fees., an online-dating site with two million members, charges customers 5145 for a year of its premium service, which re­quires a Trufina background check.

Currently, the services aren't in wide­spread use. Indeed, some consumers com­plain that their verified profiles aren't yet particularly helpful. Max Markidan, a 26-year-old management consultant in Arlington, Va., says he doesn't find it useful for professional networking be­cause few users beyond dating sites ap­pear to have adopted it. "I am married, so I can't really use Trufina at this point," he says.

The companies' partnerships with pop­ular sites will make or break their adop­tion, analysts say, by providing them with necessary revenue and more users.

While many of the services aim to assuage privacy concerns, they may run up against them, too. Briana Doyle, a 24-year-old from New Westminster, Brit­ish Columbia, joined Opinity last month hoping it would help her aggregate per­sonal information about herself she wished to share with other people online. But she stopped short at divulging details like her address, verifying instead her user names on other Web services like Yahoo's photo-sharing site Flickr, which the service also verifies. "I didn't see any reason to put my address front and cen­ter," says the Web editor.

The companies stress that they don't store personal information about their us­ers. But consumers may still shrink from a service they think knows too much about them. "The minute you aggregate identity information you aggregate risk," says Jamie Lewis, the chief executive of the Burton Group, a Salt Lake City re­search firm. With hackers out looking for financial information, "you create a tar­get," he says.

Anonymous said...

The Verification Chain

How new identity-verification services work. (Source: WSJ reporting)

· Users sign up for a new account on a classified, social-networking or dating site and are prompted to click through to the site of an identity verifier.

· Verification service prompts users to create profiles with details such as their age, address, and occupation.

· Verification services-- or a separate company-- electronically check data in public-record databases to verify assertions.