A Look at Dynamic Pricing (the dark side of user targeting)

I’ve been a fan of ad-blocking browser extensions since I can remember, and the result is that I haven’t seen an advert on a webpage on my own computer in almost 10 years. However, the implications of this were pointed out to me recently, in an article on Ars Technica explaining how free websites rely on revenues from showing ads to stay in business.

With all of this in mind, I was interested in a new tool called Do Not Track Plus, developed by a company called Albine. It’s premise is to allow ads to be shown on pages (and thereby still allow sites to collect revenues), but to prevent the ad companies behind the ads from tracking you across the various websites you visit.

After only a few days of having this tool installed, it had prevented over 500 attempts at tracking me. It is very enlightening to see how many companies do this. Did you know that if a website has a facebook ‘like’ button on or Twitter ‘tweet’ button, those companies are tracking you, whether you click on the buttons or not?

The moral and financial implications of these tools is a hotly discussed topic, but for now I want to concentrate on a single point made by Albine on the DNT+ “What is online tracking?” page:

Based on all they know about you, they can change the ads you see, and charge you different prices than other people for the same things.

Now, showing different ads is standard practice and I’m not fussed about it. But charging different prices for the same product, based on your collected profile? Now that was something I was not aware of and was very surprised to hear about.

It is known as ‘dynamic pricing’, and is fairly standard practice according to those I’ve asked in the industry. It is the concept of altering the price of a product in real-time, based on data gathered about the buyer or general trends in the marketplace. This could be a simple supply-and-demand type situation, whereby a retailer increases prices when traffic or demand is heaviest, or it could be something more nefarious.

Case in point: Amazon

Amazon were well and truly busted doing this in 2000, where they were caught selling the same DVDs to different people for different prices. In January 2007, David Streitfeld of the Los Angeles Times noticed that the majority of items in his basket, if left unattended, would go up in price. Blogger and scientist Michael Eisen also noted that 3rd party sellers within Amazon were using algorithms to maintain price advantages over their competitors, driving the price of a science book up to $23,698,655.93.

Despite the fairly heavy implications, there doesn’t seem to be a lot of public information available on which companies use dynamic pricing, and to what extent and Amazon have never fully admitted doing it.

Whitney

Well what do you know? As I was putting this post together, Whitney Housten died and Sony hiked the price of her album in the UK on iTunes by 60%! If that isn’t a clear demonstration of dynamic pricing in active use today then I don’t know what is. Sony of course denied it (what an incredibly coincidental mistake that was) and reverted the price back, but I expect this is simply a case of over-stepping the moral boundary that brings corporate maliciousness out of the blind-spot and into the public domain.

If true, imagine how many other companies are doing this who are still getting away with it. Ok its all a bit Enemy of the State, but for lack of a better annoying cliché, “there’s no smoke without fire”. I’d love to find out more.

So now what?

These days I don’t really resist the concept of targeted advertising on the web (yes I do see the hypocrisy as I am trialling DNT+). At the end of the day, if I’m going to be shown an advert anyway it may as well be useful. The key to making this acceptable is in establishing where to draw the line. Data collected about me should be used to tailor adverts and deliver more appropriate services, but if it is being used to manipulate my experience to the point where I pay more for a service than someone else, that just doesn’t sound right.

I am certainly not an expert, or even vaguely knowledgeable, on this subject matter, so I’m not going to take this any further. However, I felt it was worth raising as I’m a believer that web users should be educated about online marketing practises so we are able to make up our own minds about how much of our personal information we want to be used by others.

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