{"id":1203,"date":"2011-10-17T13:27:23","date_gmt":"2011-10-17T21:27:23","guid":{"rendered":"\/?p=1203"},"modified":"2011-10-17T22:51:26","modified_gmt":"2011-10-18T06:51:26","slug":"disintermediation-an-amazon-parable","status":"publish","type":"post","link":"https:\/\/www.identityblog.com\/?p=1203","title":{"rendered":"Disintermediation: an Amazon parable"},"content":{"rendered":"

New York TImes Technology ran a story yesterday <\/a>about the publishing industry that\u00a0is brimming with implications for almost everyone\u00a0in the Internet economy.\u00a0 It is about Amazon and what\u00a0marketing people\u00a0call “disintermediation”.\u00a0 Not the simple kind that was the currency of the dot.com boom;\u00a0 we are looking here at\u00a0a much more\u00a0advanced case:<\/p>\n

SEATTLE \u2014 Amazon.com<\/a> has taught readers that they do not need bookstores. Now it is encouraging writers to cast aside their publishers.<\/p>\n

Amazon will publish 122 books this fall in an array of genres, in both physical and e-book form. It is a striking acceleration of the retailer\u2019s fledging publishing program that will place Amazon squarely in competition with the New York houses that are also its most prominent suppliers.<\/p>\n

It has set up a flagship line run by a publishing veteran, Laurence Kirshbaum, to bring out brand-name fiction and nonfiction…<\/p>\n

Publishers say Amazon is aggressively wooing some of their top authors. And the company is gnawing away at the services that publishers, critics and agents used to provide…<\/p><\/blockquote>\n

Of course, as far as Amazon executives are concerned, there is nothing to get excited about:<\/p>\n

\u201cIt\u2019s always the end of the world,\u201d said Russell Grandinetti, one of Amazon\u2019s top executives. \u201cYou could set your watch on it arriving.\u201d<\/p><\/blockquote>\n

But despite the sarcasm, shivers of disintermediation are going down the spines of many people in the publishing industry:<\/p>\n

\u201cEveryone\u2019s afraid of Amazon,\u201d said Richard Curtis, a longtime agent who is also an e-book publisher. \u201cIf you\u2019re a bookstore, Amazon has been in competition with you for some time. If you\u2019re a publisher, one day you wake up and Amazon is competing with you too. And if you\u2019re an agent, Amazon may be stealing your lunch because it is offering authors the opportunity to publish directly and cut you out. ” [Read whole story here<\/a>.]<\/small><\/p><\/blockquote>\n

If disintermediation is something you haven't thought about much, you might start with a look at wikipedia<\/a>:<\/p>\n

In economics<\/span><\/a>, disintermediation<\/em> is the removal of intermediaries<\/span><\/a> in a supply chain<\/span><\/a>: “cutting out the middleman”. Instead of going through traditional distribution channels, which had some type of intermediate (such as a distributor<\/span><\/a>, wholesaler<\/span><\/a>, broker, or agent<\/span><\/a>), companies may now deal with every customer directly, for example via the Internet. One important factor is a drop in the cost of servicing customers directly.<\/p><\/blockquote>\n

Note that the “removal” normally proceeds by “inserting” someone or something new into transactions.\u00a0 We could call the elimination of bookstores “first degree disintermediation”\u00a0– the much-seen phenomenon of replacement of the existing distribution channel.\u00a0\u00a0 But it seems intuitively right to call the elimination of publishers “second degree disintermediation”\u00a0– replacement of the mechanisms of production,\u00a0including everything\u00a0from product development through physical manufacturing and marketing, by the entities now predominating in distribution.\u00a0\u00a0<\/p>\n

The\u00a0parable here is\u00a0one of first degree disintermediation “spontaneously” giving rise to second degree disintermediation, since publishers have progressively less opportunity to succeed\u00a0in\u00a0the mass market\u00a0without Amazon as time goes on.\u00a0 Of course nothing\u00a0ensures that Amazon's execution will\u00a0cause it to succeed in\u00a0a venture\u00a0quite different from its current core competency.\u00a0 But clearly the\u00a0economic intrinsics stack the deck\u00a0in its favor.\u00a0Even\u00a0without displacing its new competitors it may well skim off the most obvious and profitable projects, with the inevitable result of underfunding what remains.<\/p>\n

I know.\u00a0 You're asking what all this has to do with identityblog.<\/p>\n

In my view, one of the main problems of reusable identities is that in systems like SAML, WS-Federation and Live ID, the “identity provider” has astonishing visibility onto the user's\u00a0relationship with\u00a0the relying parties (e.g. the services who reuse the identity information they provide).\u00a0 Not only does the identity provider know what consumers are visiting what services; it knows the frequency and patterns of those visits.\u00a0\u00a0 If we\u00a0simply ignore this issue and pretend it isn't there, it will\u00a0become an Achilles Heel.<\/p>\n

Let me fabricate<\/em> an example so I can be more concrete.\u00a0 Suppose we arrive at a point where some retailer\u00a0decides to\u00a0advise consumers to use their\u00a0Facebook credentials to log in to\u00a0its web site.\u00a0 And let's suppose the\u00a0retailer is super successful.\u00a0 With\u00a0Facebook's redirection-based single sign-on system,\u00a0Facebook\u00a0would be able to compile\u00a0a complete profile of the retailer's customers and their log-on patterns.\u00a0 Combine this with the intelligence from “Like” buttons\u00a0or advertising beacons and\u00a0Facebook (or equivalent)\u00a0could actually mine the\u00a0profiles of users almost as effectively as the retailer itself.\u00a0 This\u00a0knowledge represents\u00a0significant leakage of the retailer's core intellectual property – its relationships with its customers.<\/p>\n

All of this is a recipe for disintermediation of the exact kind being practiced by Amazon, and at some point in the process, I predict it will give rise to\u00a0cases of\u00a0spine-tingling\u00a0that extend much more broadly than to a single industry like publishing.\u00a0 <\/em><\/p>\n

By the time this becomes obvious as an issue we can also predict there will\u00a0be\u00a0broader understanding of\u00a0“second degree disintermediation” among marketers.\u00a0\u00a0This will, in my view,\u00a0bring about\u00a0considerable rethinking of some current paradigms about the self-evident value of\u00a0unlimited\u00a0integration into\u00a0social networks.\u00a0 Paradoxically disintermediation is actually a by-product of the privacy problems of social networks.\u00a0 But here it is not simply the privacy of end users that is compromised, but that of all parties to transactions.\u00a0<\/p>\n

This problem of disintermediation is one of the phenomena leading me to conclude that minimal disclosure technologies like U-Prove and Idemix\u00a0will be absolutely essential to a durable system of reusable identities.\u00a0 With these technologies, the ability of the identity provider to disintermediate is broken, since it has no visibility onto the transactions carried out by individual users and cannot insert itself into the relationship between the other parties in the system.\u00a0<\/p>\n

Importantly, while disintermediation becomes impossible, it is still possible to meter the use of credentials by users without any infringement of privacy, and therefore to\u00a0build a\u00a0viable business model.<\/p>\n

I hope to write more\u00a0about this more going forward, and\u00a0show concretely\u00a0how this can work.<\/p>\n","protected":false},"excerpt":{"rendered":"

A spine tingling story with a sequel about reusable identities<\/p>\n","protected":false},"author":68,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[52,6,10,40,74],"tags":[],"_links":{"self":[{"href":"https:\/\/www.identityblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1203"}],"collection":[{"href":"https:\/\/www.identityblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.identityblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.identityblog.com\/index.php?rest_route=\/wp\/v2\/users\/68"}],"replies":[{"embeddable":true,"href":"https:\/\/www.identityblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1203"}],"version-history":[{"count":0,"href":"https:\/\/www.identityblog.com\/index.php?rest_route=\/wp\/v2\/posts\/1203\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.identityblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1203"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.identityblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1203"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.identityblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1203"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}