In short, online profiling embodies both the promise and the perils of e-commerce. You have to do it if you are an online business. The cookie, which is a unique identifier, then transmits information back to the host computer. This information allows a business to track an end user's page views, the length and time of the visit and responses to advertisements. Purchases and search terms entered by the end user can also be tracked.
Companies can develop sophisticated profiles of their end users through personalization software.
This information can help customers use their time efficiently. The information is gained through an analysis of clickstream data combined with demographic and psychographic data, which looks at the behavior of other end users. This data can be used to anticipate a customer's actions. For instance, if it looks like a customer may abandon a shopping cart because of the particularly high shipping cost of a product, and if other customers have shown a pattern of doing the same thing with the same product, the Web site may provide an incentive, such as a discount, to buy the item. Proceed With Caution Experts advise businesses to be up front with their customers about their online profiling practices.