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Today, there was a flurry of annoucements about new identity efforts: MySpace is launching semantics as part of MySpaceId; ABC is looking to provide authentication for TVEverywhere; Apple is rumored to be converting AppleIds, used to purchase songs on iTunes, to a broader payment system.

As I blogged a few days ago, online security is broken: the username/password credential system is too brittle to continue for much longer. Today, there was a flurry of activity related to identity and online security.

To replace the username and password system, a new model is evolving of rights and responsibilities based permissions rather than a distributed system of usernames and passwords. For example, today I can log into FriendFeed using your Google credentials. In this case, Google has the responsibility for keeping you data secure and FriendFeed has the rights to access this data. Of course, I had to authorize Google to provide the data to FriendFeed. This is identical to the way that Facebook apps ask to use your Facebook profile data.

There are several benefits to this model

  1. There is a single point of failure for username and password, instead of hundreds
  2. Identity becomes portable. Most of your data can be syndicated to different networks and applications at the click of a button.

From the perspective of the security provider, Google, Facebook, MySpace and Apple, there is a huge amount of value in owning this relationship with a user. Understanding behavioral patterns of a user online can be used very effectively for advertising.

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from Wired

However, far more lucrative, is the potential to tie a payment system to a username and password the way Paypal, Amazon Payments and Google Checkout have done. Having purchase data about a user, or controling the distribution of products to a given user base, the way mobile carriers did before the iPhone, is a powerful position to be in.

To that end, Facebook is launching a virtual currency, Apple is bringing to bear the existing billing relationship from iTunes and so eventually may the cable companies.

There seem to be three categories of companies racing to provide identity and payments:

  • Social networks: Facebook, MySpace, Google/GMail, Twitter
  • Payment providers: Paypal, Amazon, Google/Checkout, Apple (rumored)
  • Other billing relationships: cable companies (still early)

In all likelihood, there will be no dominant player. After all, millions of users have accounts at all these corporate behemoths and the market will likely segment based on different use cases.

My bet is social networks will focus on gaming related transactions. Payment providers will focus more on ecommerce and offline transactions and others will focus on pure content related transactions. Users will continue to associate the brands of Facebook with gaming and it will take significant marketing muscle and dollars to change that perception.

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