Online identity verification and two-sided networks

Yesterday's Wall Street Journal had this on the top of its front page: "Building Trust Into Web Identities." When we interact online, it's increasingly important to know who is on the other side of the screen. There are many services emerging that provide various forms of ID verification, which are covered nicely in the article. The article goes just deep enough to give a quick nod to the forward-looking Higgins Project, which is being led by Parity Communications (mentioned here yesterday) with support from IBM and Novell.

It's important to note that ID-verification services are fighting to attract two completely different sets of users. They must enlist websites to license their technology and they must enlist users to register for IDs. Both sides are absolutely essential to any successful ID-verification service.

Several days ago I lunched with Marshall Van Alstyne as he explained this pervasive two-sided business phenomenon, which is old as the hills but only recently something specifically named and studied by economists. Marshall and his colleagues call it a "two-sided network." Stay tuned for a lot more popular business press on this topic in the near future. Meanwhile, you can see Geoffrey Parker's home page for his paper "Two-Sided Network Effects," co-authored with Marshall.

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