Online Identity and Online Commerce

This is a post for TechCrunch (August 2011) about how Facebook’s drive for real identities online will make them stronger in commerce.

Last week, Facebook’s marketing head, Randi Zuckerberg, caused a stir when she asserted that online anonymity has to go away. But the reason large, powerful networks are pushing for a world in which our verified and authenticated identities exist online isn’t simply to stop cyber-bullying and to create incentives for users to behave more nicely. This is about money. Part of the company’s drive is also to help users leverage their online identities to transform and accelerate online commerce.

The topic of online identity and anonymity is polarizing. Powerful interests have strong incentives to build a web where real identities rule. Other powerful interests will fight relentlessly to protect and preserve spaces for users to interact, either anonymously or through pseudonyms. These kind of statements bring out vocal arguments on the other side, and this being Facebook, those voices get louder. There’s a nice, short post on the topic by Jillian York that’s on the website of the Electronic Frontier Foundation—she quickly covers the arguments for and against using real identities.

Unfortunately, none of these debates address the heart of the matter in this specific context, which is that for networks like Facebook, the game is to encourage its users to leverage their real identities online so that Facebook can accelerate its ability to power online transactions.

I don’t mean this in a cynical way. We could argue until we’re (Facebook) blue in the face about whether or not the web needs real identities or spaces for anonymity. There’s no right or wrong answer. My own personal view, in order to frame this piece, is that I think the notion of privacy online has been dead for years, and that I’m willing to give up a bit of my privacy and use my real name so long as it can make modern life more interesting and save me time and/or money.

We know the deal by now—Facebook knows our friends and family, our interests, and scores of other pieces of bio-data. As we keep the Facebook tab open in our browser, or as we launch the Facebook app on our phones, they can start to pinpoint advertisements to us based on a constellation of personalized variables. Launching the Facebook mobile app at a shopping mall and getting personalized information is helpful, but this is still only about boosting the speed of commerce—helping us locate, decide, and transact in less time. What about fundamentally transforming and driving commerce through identity authentication and payments?

Think about what happens when you purchase an airline ticket to travel. You have to visit the airline or travel site, login to the site (assuming you have an account with them), then select a route on specific dates, select seats, and then finish the transaction by entering payment information (usually a credit card), your billing address, and sometimes additional verifications imposed by the TSA. Before the flight, you’ve got to “check-in” and print out your boarding pass (or send it to your phone). At the airport, you may have to check luggage and then everyone has to go through a battery of security checkpoints, each time showing a boarding pass and/or a form of  government-issued identification, all the way to when you get to your seat. When you deplane, assuming you checked luggage, you have to wait around for your bags (assuming they’ve arrived where you have), and oftentimes sit around with no idea where it is or when it’s coming. Then you have to wait in long car rental lines or navigate your way to various shuttles or modes of public transportation. Lather, rinse, repeat.

There are literally thousands of these types of transaction mazes to which we constantly subject ourselves. But, it doesn’t have to be that way forever. Imagine, for instance, being able to pay for an airline ticket by just hitting a Facebook button on the airline’s site while you’re logged in or on your mobile phone. I would argue that most users would be willing to sacrifice a bit of privacy and anonymity in exchange for having their identity and payment information authenticated such that it compresses the time it takes to initiate and complete a series of transactions when we travel. It’s just that today, we don’t yet have the choice. (And Facebook would need to go further than it does today to verify people’s real identities and tie into real-world payment systems).

Compressing these transaction steps and making commerce more efficient is made significantly easier by being able to leverage real identities online. While Facebook may have good intentions in publicly advocating for an eradication of anonymity online as it will help make the web a nicer place, I believe the real reason is that the company has a rare opportunity to make much of our lives easier and save us time by helping accelerate traditional commerce—and that they can capture a piece of the economic value of each slice. I certainly don’t mean to suggest that they will succeed automatically in doing it, nor that the task is not fraught with myriad risks, but this is an opportunity worth pursuing and we should expect the company to fully do so.

As the web is slowly being washed and cleaned up, real identities will have to be a big part of the equation. Of course, there will also be places were we can interact online either through pseudonyms or anonymously to freely discuss ideas, though in each case, it’s more likely that the site owner will know who’s been naughty or nice. As comforting as it may sound, there’s no such thing as anonymity online—there’s only pseudonimity. And while we can use pseudonyms to help protect our identities in some online fora, to actually drive commerce and make those transactions more efficient (both for buyers and sellers), transactions need to be backed against real identities.

If the last decade of “social networking” is actually going to create massive economic value, sites like LinkedIn and Facebook are going to need to do something with all of our individual and collective data—and I don’t mean showing users hyper-targeted display ads.

The real economic potential these types of companies have is in verifying and authenticating our identities so that they can provide us with an interesting and fun online experience, connect with parts of our professional and personal lives, and potentially power a new type of commerce that could generate massive sums of revenues and profits while saving us all a tremendous amount of time, money, and stress.