Briefs

Aug 25, 2006 (Extracted from: The Wall Street Journal)

Economists and Search Gurus Fill New Research Team; Data-Rich Fantasy Land Looming Privacy Concerns

Michael Schwarz earned an economics doctorate from Stanford University before spending five years as an assistant professor of microeconomics at Harvard University. His research papers include, "Synchronization Under Uncertainty."

These days, Mr. Schwarz is thinking about how to use economics to save attractive women from unwanted solicitations on an Internet dating site. One idea employs the concept of "scarcity," rationing the number of free messages each lothario can send. Another uses full disclosure, by displaying how many people a suitor has already approached.

The Russian-born theorist, 36 years old, is at the leading edge of a push by Internet giant Yahoo Inc. to beef up its business by hiring prominent academic economists and other researchers. The company, which offers consumer services ranging from email to fantasy sports, is betting that sponsoring fundamental research will help it tackle some of its biggest challenges, including battling the technological prowess of Google Inc.

The research push, "has huge consequences for the business if we do things right," says Usama Fayyad, Yahoo's chief data officer.

Central to Yahoo's goal is its ability to record what millions of consumers do every day, and to study how changes to the company's Web services affect their behavior. Internet companies in the past have largely lacked the systems and focus to mine data for research, but now they're viewing it as a key competitive pursuit. For economists, Web operations are data-rich fantasy lands where they can observe in real-time the behavior of millions of consumers in varied marketplaces far more effectively than ever before.

One potential obstacle to collecting and analyzing a vast amount of data is customer privacy, particularly in the wake of concerns stirred up by Time Warner Inc.'s AOL unit earlier this summer. It inadvertently released a slew of information relating to users' search queries.

...

Read more.