How Tracking Cookies Work (How to Control Your Privacy Online)

Fascinating piece at WSJ, "On the Web's Cutting Edge, Anonymity in Name Only":

You may not know a company called [x+1] Inc., but it may well know a lot about you.

From a single click on a web site, [x+1] correctly identified Carrie Isaac as a young Colorado Springs parent who lives on about $50,000 a year, shops at Wal-Mart and rents kids' videos. The company deduced that Paul Boulifard, a Nashville architect, is childless, likes to travel and buys used cars. And [x+1] determined that Thomas Burney, a Colorado building contractor, is a skier with a college degree and looks like he has good credit.

The company didn't get every detail correct. But its ability to make snap assessments of individuals is accurate enough that Capital One Financial Corp. uses [x+1]'s calculations to instantly decide which credit cards to show first-time visitors to its website.

In short: Websites are gaining the ability to decide whether or not you'd be a good customer, before you tell them a single thing about yourself.

The technology reaches beyond the personalization familiar on sites like Amazon.com, which uses its own in-house data on its customers to show them new items they might like.

By contrast, firms like [x+1] tap into vast databases of people's online behavior—mainly gathered surreptitiously by tracking technologies that have become ubiquitous on websites across the Internet. They don't have people's names, but cross-reference that data with records of home ownership, family income, marital status and favorite restaurants, among other things. Then, using statistical analysis, they start to make assumptions about the proclivities of individual Web surfers.

"We never don't know anything about someone," says John Nardone, [x+1]'s chief executive.

Capital One says it doesn't use the full array of [x+1]'s targeting technology, and it doesn't prevent people from applying for any card they want. "While we suggest products that we believe will be of interest to our visitors, we do not limit their ability to easily explore all products available," spokeswoman Pam Girardo says ....

Its technology works like this: A visitor lands on Capital One's credit-card page, and [x+1] instantly scans the information passed between the person's computer and the web page, which can be thousands of lines of code containing details on the user's computer. [x+1] also uses a new service from Digital Envoy Inc. that can determine the ZIP code where that computer is physically located. For some clients (but not Capital One), [x+1] also taps additional databases of web-browsing history.

Armed with its data, [x+1] taps consumer researcher Nielsen Co. to assign the visitor to one of 66 demographic groups.

In a fifth of a second, [x+1] says it can access and analyze thousands of pieces of information about a single user. It quickly scans for similar types of Capital One customers to make an educated guess about which credit cards to show the visitor.

And check the interactive page, "How to Control Your Privacy Online."