Electronic Commerce: Cookies That Tell the World Your Fortune Information from a Tiny File Implanted in Your Computer Gives Companies the Low-Down on Your Lifestyle. Ian Fried Reports

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As chief information officer for Virgin Interactive Entertainment, Jody Giles knows a little something about e-commerce. But his real lesson in Internet marketing came as a consumer, after he went online and bought a T-shirt of blues legend Muddy Waters.

A few weeks later, an e-mail arrived from the virtual shop. Seemed they had just got in some new Muddy Waters T-shirts. And, oh yeah, some Stevie Ray Vaughn ones, too. Tempting, but Giles took a pass.

Soon another e-mail arrived, offering a trivia contest where the first right answer would win a free T-shirt and a 15 per cent discount. It was a blues question - and an easy one to boot. Sure enough, Giles was the first with the right answer. Giles wondered how he could be so lucky. So he called the store and found out. "It was a loaded question and it was very targeted," Giles said. "It wasn't going to the whole world - it was going to me." And so it goes on the Internet. Or at least it can. Technology allows Internet retailers to monitor the patterns of those who shop, but the software needed to process the data is still in its infancy. So far, most online retailers say they make little use of the data they collect. Still, the possibilities are staggering. Already, there is a great deal of information being collected, even if the pieces are, for the most part, not being put together. The Minneapolis Star Tribune took a random individual and collected all the information they could about him using the Internet. They found out his address, phone number, birthplace, favourite type of beer, occupation, employer, favourite restaurants and how he felt about the state of Indiana (socially repressive). "These tools are so theoretically powerful that I could ask you 10 questions about movies and figure out your sex life, or whether you like pepperoni pizza," said Stuart Skorman, founder of the Internet movie retailer Reel.com. Skorman was an early pioneer of so-called collaborative filtering - using consumers' data to offer targeted marketing. In the 1980s, Skorman set up kiosks in video stores that attempted movie-matchmaking. The idea of using technology to create one-to-one relationships has long been a goal of Internet marketers. But Skorman admits that today's offerings - including the ReelGenius feature on his site - have yet to offer much of value to the consumer. Today's tracking technology relies on something called a "cookie", a tiny file implanted on the user's hard drive. While a cookie doesn't identify the name of the Internet user, it can identify when that individual returns and what they are browsing. …