The Claim Broker (IP Explosion, pt 3)

In my last post I introduced the diagram below that identifies a larger “stack” of services that would be necessary for a full-fledged Identity Metasystem :


I also indicated that whereas the lavender roles receive a lot of attention in the community, the other colors do not. In this post, I’d like to take a look at what I’m calling a “Claim Broker” by outlining what a Claim Broker might do, why it is necessary, and some of the challenges a business like this might face.

As I wrote in part 1 of this series, much of this thinking was spurred by a talk Bob Blakley gave on the role of Relationships in the Identity industry at Burton’s Catalyst this summer. In that talk, he focussed on the need of what I’m calling a “Claim Holder” to develop a strong relationship with the Subject whose claims they are responsible for. This, of course, makes sense, because the stronger the relationship, the better the claims will be. When I began to think about this, however, I began to wonder if the MAJOR barrier to a broader adoption of Identity technologies was the weakness of THIS relationship.

To give an example of this, I have a pretty strong relationship with Netflix as my “movie” Claim Holder. I also have a strong relationship with Fandango. Now the question is, do these organizations really need to improve their relationships with me? They could (and probably should–particularly Fandango), but my relationship with THEM isn’t what’s preventing me from sharing the claims they have about me with other organizations. The relationship that is missing, is the relationship between THEM and OTHER ORGANIZATIONS.

Now there are good reasons these sites don’t have relationships with other websites (or each other as far as I can tell):

  1. It’s not their core business. Their core business is and SHOULD BE fostering a relationship with ME.
  2. The other organizations that would be interested in their data are likely competitors.
  3. Establishing these relationships is expensive and doesn’t scale for a single Claim Holder.
  4. There is no obvious financial incentive for establishing these relationships.

The point being, if the Identity industry waits around for Claim Holders to rise up and become Identity Providers, the Identity industry will be waiting for an amount of time approaching never. It makes no sense for a Claim Holders to enter into this business. The above conditions are PERFECT, however, for a Claim Broker:

  1. A Claim Broker’s core business IS to establish relationships between Claim Holders and Claim Consumers.
  2. A Claim Broker can act as a NEUTRAL broker of trust between competitors.
  3. The economies of scale work for a Claim Broker by multiplying the value of each relationship they create.
  4. Part of a Claim Broker’s job is to assess supply and demand and to set prices.

Let me unpack these points above beginning with the idea that this industry needs a strong sales organization DEDICATED to building relationships between Claim Holders and Claim Consumers. I see a real gap between these two kinds of organizations that is going to take a TON a sales work to close. Claim Holders often view their customer data as the core of their business that provides them with a competitive advantage against existing businesses and a barrier to entry for new ones.

Claim Consumers, on the other hand, are ill-equipped to make use of these claims and don’t fully-understand the value of the data they would receive. Not only that, but this is all a very new and weird idea for both of these businesses, and any time you have to explain a NEW business model, you are facing an uphill sales challenge. The point being, this is an entirely non-trivial sales challenge that will need to be handled by a large and sophisticated sales organization.

The second point is that this sales organization can’t be an existing Claim Holder. There is no way that Netflix is going to convince Blockbuster that they, as Netflix, could act as a fair and neutral broker for Movie Claims. Google won’t convince Microsoft. Facebook won’t convince MySpace. If there is any hope of these organizations forming relationships, it will have to be through a neutral third party whose ONLY job is to maintain those relationships.

The third point is just a classic example of Network dynamics. If I’m Netflix, and I go out and establish a relationships with every website that could consume my Movie Claims, there is no way I can justify the cost. If, as a Claim Broker, however, I represent Netflix, Fandango, Moviefone, Blockbuster and every other movie Claim Holder, each Claim Consumer relationship I establish is MULTIPLIED in value by the number of Claim Holder relationships I have.

The fourth and final point is that before any Claim Holder will ever pay attention to this industry, someone will have to take the risk to develop relationship with Claim Consumers and establish a market price for the data the Claim Holders have. This, I believe, is the most pressing issue facing the Identity industry and one that is receiving WAY too little attention.

The industry continues to gloss over this fundamental question with the same tired examples of Credit Scores, Age Verification, and Address Verification. Certainly there are businesses here, but the one (Credit Scores) is already established and at best subject to slightly better margins using Identity 2.0 technologies and the other two (Age and Address Verification), in spite of reassurances that regulation will drive adoption, have been functioning across the entire spectrum (youth social sites, porn, and liquor for Age and e-commerce for Address) for a decade now without strong verification.

I am NOT arguing that these industries wouldn’t benefit from stronger claim validation, I’m simply saying that I haven’t seen enough leg work done on the sales side to give me any comfort about how MANY interested Claim Consumers there are or how MUCH these organizations would pay for stronger claim verification. And this is the state for the OBVIOUSLY valuable claims. What about the more esoteric visions that are driving much of the energy around Identity technologies?

How many Claim Consumers are there for Movie Claims and how much would they pay? What about for my music preferences? Or my Social Graph? I’ve seen virtually no work done on this and the little I’ve done hasn’t been encouraging. The basic idea, is that the Claim Consumers could use these claims to provide a more tailored experience to their visitors. To do this, they would need to incorporate this into some sort of recommendation engine technology. I’ve spoken to some of the recommendation engine companies and their customers. The picture I get is this:

  1. Explaining the value of this technology even to large sophisticated Claim Consumers is VERY challenging.
  2. The technology is non-trivial to implement and a major integration headache for Claim Consumers.
  3. The QUALITY of the recommendations mean very little in terms of lift (the increase in sales post implementation).

In fact, if I were a recommendation engine company, I’d build a simple web service that was easy to implement that recommended socks and underwear at the end of each purchase. The point being, that for these more general “customized web” use-cases for Identity Claims, there is little indication that ANYONE is willing to pay ANYTHING for the data.

So what are some of the tough questions facing a fledgling Identity Claims Broker:

  1. How much value can Idenity 2.0 technologies provide to the more mature Claim Holder/Consumer relationships?
  2. Will the gap between the value of the Claims to the Holders and the value to the Consumers ever narrow sufficiently?
  3. When will the adoption of recommendation engine technology be widespread enough to provide a large and ready market of Claim Consumers.
  4. How expensive will it be to sell Claim Holders/Consumers on a novel business that they both have reason to be skeptical of?

As I hope the above makes clear, there is a LOT of work to be done on the relationship between Claim Holders and Consumers. Furthermore, it is my opinion that this work should be done PRIOR to building a ton of great technology to enable it. I’ve built revolutionary technology before assessing the need for it WAY too many times before to do it again. Nothing is more depressing than spending the inordinate amount of care that it takes to build quality software only to discover that there isn’t enough pain to justify the expense of convincing entrenched industries to use it.

What do you think? Does anyone have a better sense of how many Claim Consumers are eagerly awaiting validated claims? Does anyone know how much they will pay? Drop me a note or a comment if you do.

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