StumbleUpon is a webservice which allows users to surf interesting sites based on links it feeds users via a browser toolbar. While this is clearly not the same exercise as searching for websites based on content, it does provide users with a way to find relevant information about certain channels which are popular within some social context… and in many instances when users don’t quite know what they want, this can be very useful.

Many times, search can be so generalized that even a small amount of social context (friend or user recommendation) can improve content search drastically.  Ebay must have thought along these lines because earlier today it announced that it would acquire StumbleUpon (for ~$40 mn).

Ebay is also not alone in acknowledging this value. After Ebay’s announcement today, Google announced a new feature in their toolbar with similar functionality in that it helps people to find websites they may find interesting based on prior searches (loose direction). While this does not explicitly use a social model, the algorithms which power this feature are probably trained on the logs of the searches of similar users. In addition to the feature itself, this is clearly a signal to StumbleUpon acknowledging the potential importance of this type of context.

This post stems from today’s lecture on the Market for Lemons and my initial research for my paper. I’m interested in the effectiveness of modern recommendation engines, especially in the digital music market. Our discussion today came to the conclusion in that a simple market where buyers and sellers have imperfect or asymmetric information the expectations of the buyers can become self-fulfilling prophecies. We’ve also seen how cascades can develop that will perpetually attract buyers to a product that is not optimal if the buyers do not interpret their signals correctly.

It seems you could tie these two concepts together to explain why a poor recommendation engine fails, or, to look at it from a slightly more optimistic perspective, to determine the characteristics that are necessary to ensure that a recommendation engine is effective. We have discussed how recommendation engines are a form of digital information cascade. Users are drawn towards highly recommended songs which in turn offers many more opportunities for more positive recommendations; likewise, a song with only a small amount of recommendations might never get the number of clicks necessary to make it very popular, even if it is intrinsically very good. If a recommendation fails to promote naturally good songs (or does so at too slow a rate), then, given today’s lecture, it seems that the site or store would be doomed.

I can see how users would quickly become disillusioned with the recommendations and come to the conclusion that the recommendations are worthless. In this case the user’s value of the site’s recommendation engine drops, and depending on the user’s reliance on recommendations, the user might deem the cost of navigating the site to be more than its value, and either switch to a site where the recommendations are more trustworthy, or only stick to the songs that they know to be good. This would then lead to even worse recommendations since now users aren’t bothering to use the recommendation engine at all or not even using the site.

It might be a bit of a stretch to relate these two ideas, but it came to mind during today’s discussion. Recommendation engines are a huge factor in the success of an online business. Chris Anderson, author of The Long Tail, talks extensively (and often repetitively) about the need for accurate recommendation engines, and this article reinforces his sentiments. Millions of dollars are spent to make recommendation engines as useful as possible, and I think that we can tie together some of the concepts of this class to see what really goes on as a network of users determines which engines sink or swim.

            Earlier today a friend of mine told me about a small argument he had with someone in a linguistics class about political correctness, its motivation and its effect on everyone.  From what I gather, the whole episode started with someone expressing displeasure with the ever-present influence of censorship that he/she feels limits the things that he/she is “allowed” to say during a given day.  My friend, who is not one to shy away from expressing his own opinions, responding by directing a rather crude comment at his classmate and then saying something to the effect of, “See, I can say whatever I want.  So can you.”  I don’t remember what happened after that, but it got me thinking about the role of political correctness in our society and the ultimate reason for its growing influence on our behavior as a culture.

            I can’t help but think that the pressure of being politically correct has been catalyzed by the general population’s overwhelming concern with “saving face” and somehow controlling what everyone else thinks of us rather than protecting the feelings of those who may be offended by “politically incorrect” statements.  Considering this alongside the advent of internet-based networking tools like Facebook and MySpace and the technological advancement of transportable communication (i.e. cell phones, laptops, BlackBerries, etc.) I can’t help but notice our culture imposing growing pressure on us to constantly maintain, protect and expand our social networks.  I wonder what drives this.  By the definition proposed in class, popularity can be thought of as a measure of the size and extension of our social networks.  Perhaps the mere feeling of power and importance that accompanies social popularity is responsible for our society’s desire to build and improve the devices that allow us to communicate so easily. 

            I must admit that, on some level, this bothers me.  I find nothing wrong with popularity and political correctness or those who pursue it, but I sometimes question and worry about the influence it has on everyone.  I think some of us are tricked into thinking that if we do what is expected of us, say what we think others want to hear and try to establish social-links with as many people as possible we will feel the sensation of accomplishment and the reward of popularity.  But if being universally recognized or trusted is something you want out of life, consider those individuals who have achieved immortality in our minds by doing things differently.  I find it somewhat ironic that while we celebrate certain individuals for protecting their rights and refusing to do things that were expected of them, the influence of our society discourages people from being different or speaking their mind.

http://www.usatoday.com/money/advertising/2007-03-26-alpha-mom_N.htm

Where there are networks there are trends and where there are “alpha mom’s” there are networks. “Alpha mom’s” are modern mom’s who work, have money to spend, and also want to be the best moms they can be without sacrificing their own identities, and they have become a major target for marketing. This article from USA today talks about why These mothers are so influential and who has figured out the trick to catching their attention.

Alpha mom’s know how to use technology. On average they spend more than an hour on the internet every day. They administer web sites, write blog posts, and use e-mail consistently. They have an insatiable desire for products to make their lives more pleasant, like facials, and more efficient, like blackberries. Best of all, they are all connected. Not only do they write their own blogs, but they read other Alpha mom’s blogs looking for new information, especially recommendations for products or services. Companies have recently discovered that if these Alpha mom’s like a product it goes far. They buy the product (or get a free sample from a smart salesman), they rave about it on their blog posts, they link to it’s website. They do all the things that you want customers to do to give you visibility on the internet. Hurray for cheep, self-propagating advertising.

The article mentions a few specific companies that have started marketing to Alpha mom’s. There are the ones you would expect, the ones that might surprise you for a moment, and the ones that you wouldn’t expect. The makers of swiffer sweepers are obvious candidates for targeting Alpha moms. Though it may seem funny to advertise escalades to mothers, since 75% of Cadillac buyers are men, but it’s estimated that 70% of car choices are influenced by women, so getting their approval is actually a very beneficial strategy. Some mothers want a little luxury while they’re driving their kids to school. Then there’s Nintendo. Nintendo carefully selected a group of 35 high influence women (who have websites with large audiences) and treated them to a day of gaming and good food. Apparently it paid off. Good reviews of the wii reached hundreds of other people directly through the women who went to the convention, and a high proportion of those people soon became customers.

http://press.princeton.edu/titles/8435.html

http://www.amazon.com/Snipers-Shills-Sharks-Human-Behavior/dp/0691127131>

Princeton University Press has released a new book by Ken Stieglitz, a professor of computer science at Princeton. His book, “Snipers, Shills, and Sharks: eBay and Human Behavior” is being marketed as an introduction to auction theory in the form of a mass market book about eBay. The book’s introduction, available on Amazon.com, outlines the differences between ascending and descending bid auctions, first-price and second price, and begins to explain some of the features unique to eBay. For example, a “Dutch auction” on eBay is different than the traditional meaning of the term in auction theory, and Stieglitz doesn’t know why eBay chose to use the term to mean something different. The introduction also talks about the history of auction theory, which is a relatively young field, less than 50 years old. The book would probably serve two interesting purposes to students in this class - one, it allows us to look at auction theory in a practical environment instead of simply through models, and two, it gives practical information about eBay behavior that many of us would not have known. The connection between why people make choices the way they do in auctions (human behavior) and the mechanics of the auctions themselves (auction theory) looks like it would be fascinating reading.

One commonly cited example of the network effect is the battle between two video formats in the 1980’s: VHS and Beta. We are lucky enough to be in the middle of a similar battle right now, in the form of HD DVD versus Blu-ray. Unlike VHS vs. Beta, neither of the two new formats is technologically superior, and other formats (such as regular DVD and VHS) are available to those who want to wait and see which lands on top. Recently many theories have been discussed in the news as to which way the cascade will tip, but there is no way to predict which will win in the end.

Theory 1: The influence of adult entertainment

http://www.ciol.com/content/news/2007/107040701.asp

It has been predicted that the winner in this case, as in the first case, will be the technology that is chosen by the makers of adult films. Currently, Blu-ray has left this segment of the market entirely untapped, since Sony will not allow it. Disney is also unwilling to use manufacturers who also produce pornography, so any current Blu-ray manufacturer who decided to try would likely lose a large portion of its market. This situation is likely to force studios into using HD DVD, making this the preferred format of those who enjoy this type of entertainment. These first purchasers will become the trendsetters, showing their friends and families that HD is preferred. These people will then also act as examples for their friends and families, who will see an even larger network of HD users, and will be even more confident in the choice to purchase HD over Blu-ray. As more and more buy based on personal connections, more people will want to choose HD, and a cascade will begin. Winner: HD DVD

Theory 2: Price and availability

http://www.tvpredictions.com/adultview040907.htm

http://www.businessweek.com/technology/content/apr2007/tc20070406_288377.htm

These articles claim that adult films will not have the power that they had in VHS vs. Beta. With the availability of movies on television, internet, and standard DVDs, nobody is going to be in a rush to buy a new system. The cascade that is starting is not only one of one format over the other, but also one of high definition over current standards. It is likely to be many years before everyone switches over (movies have been available on DVD for approximately ten years, but it is only in the last year or so that it has become difficult to find VHS movies and players). In the end, consumers will choose based on which format has an inexpensive player and the movie selection that they want. Currently, Blu-ray has the business of the majority of the major movie studios, giving it an early lead in this department, but neither has a reasonably priced player out… yet. It is likely that the first to put out a low priced player will get a surge of customers, but will it be enough to start a cascade? Winner: Blu-ray

Theory 3: Why choose?

http://www.cpilive.net/v3/inside.aspx?scr=n&NID=1325&cat=GLOBAL%20NEWS&pub=COMPUTER%20NEWS%20MIDDLE%20EAST&k=Samsung

My personal favorite theory is that neither format will win, at least without a major change in the way the battle is going. In our class discussions about instant messaging systems, we assumed that users would choose one for the sake of argument, but in reality people will use both. Companies are currently in the process of developing dual players, which will cost somewhere between $300 and $1000. Maybe these will do the job of replacing the old technology. At the moment it’s HD vs. Blu-ray vs. DVD, and the inferior technology is winning. Winner: Everyone!

Of course, right now this cascade is in the early adaptor stage. Since most consumers are followers, not leaders, maybe we should take the advice of this article: http://technology.guardian.co.uk/weekly/story/0,,2039119,00.html

The majority of initial hits on Google returns for “Schelling’s Segregation Model” link to websites containing applets allowing you to watch the model at work. Not only is this tool entertaining to play with but it also offers insight into deeper cultural questions. In particular, three professors from UCLA, Sander, Schreiber, and Doherty, were interested in using Schelling’s model to explain the evolution of housing segregation from the 1970s to now. From a historical context, the beginning of the 1970s marked a change in the housing market. The Civil Rights Act of 1968 was passed banning bias in the housing market and many people increased their tolerance levels. Despite these changes, however, the amount of segregation dropped slightly and remained high overall. To better understand this result, the UCLA professors modified Schelling’s to account for a few other variables determining whether or not someone would be willing to make a move. These additional factors included housing cost, distance from existing home, racial composition of neighbors, and racial composition of community. Each of these parameters were weighted and attempted to mirror the statistics present in 1970. After the model was run, they found the result to be similar to what occurred in history. They found that the housing cost actually had little to do with this result and the neighborhood identity threshold level governs the city’s ability to become desegregated. This result is not too surprising, but it explores the use of multiple parameters to learn from Schelling’s Segregation Model. This model could even be adapted to model Cornell University’s Program House system. The system itself allows students to choose to live in a residence hall promoting either a specific cultures. The houses, Ujamaa (African American themed), Akwe:kon (Native American themed), and the Latino Living Center, are the ones subject to the most debate on campus. While they exist to promote and create interest in each of the different backgrounds, the large majority of the students living in these units share the same ethnicity as the theme of the house. Despite Cornell’s efforts to admit a diverse applicant pool and to offer opportunities to learn about other cultures, the program houses have become pockets of segregation. As we have learned from Schelling’s model, Cornellians’s high threshold value may be the contributing factor to this result or as the professors at UCLA highlighted, other reasons could exist. In fact, the model can be re-adjusted to account for Cornell’s Program House situation. Perhaps this would lead to new findings and new solutions. After all, may be Cornell needs a new strategy to force our diverse student body to interact with each other and overcome the conditions that promote segregation.

To read the paper written by Sander, Schreiber, and Doherty of UCLA, follow this link:

http://www.econ.iastate.edu/classes/econ308/tesfatsion/Schelling.Empirical.pdf

In class we discussed the need for a business to create a cascade by forcing the demand for the product past an early critical point. If such an accomplishment is reached, then users will most likely continue demanding the product until another critical “point of saturation” is reached. The key issue was how to get a new product into the mainstream. We brainstormed ideas and one such idea was to give away the product to early users. That could prove to be difficult if there isn’t an actual product a company is trying to promote because the company wants to provide a service. For example, a wide range of new “Web 2.0 companies” are trying to gather users they service via the internet.

Instead of giving away something, these companies use other incentives such as providing some payment to the users. However, this presents an interesting question as to the legitimacy of intentions. In the recent post on VentureBeat, certain companies are featured for their questionable campaigns to overcome the first critical point towards a cascade. In fact, the post questions these companies as outright pyramid schemes that don’t provide actual substance.

Sometimes the pyramid scheme concern is fair. The case for KushCash as a pyramid scheme is convincing. The follow-up post, regarding Weblo, also makes a compelling case. But using a legitimate marketing campaign, how does a company avoid even the mere impropriety of such a pyramid scheme? It is hard enough to focus on the business and creating path dependence so that the second critical point is attained, and then to throw in the obstacle of differentiating its marketing from pyramid schemes just makes everything even more difficult. I suppose that makes a true cascade all the more impressive.

Schelling’s neighborhood model tells us that the integration of groups in unstable given that two types of people do not want to be in a minority the size of which is somewhere around less than one third of the population. This was said to be the force at work in urban neighborhoods which were becoming increasingly segregated during his studies in the 60’s. Forty years after the Civil Rights Act and in a world much more tolerant and compassionate, is the racial segregation in neighborhoods still prevalent? Is “white flight” and “black flight,” the two terms referring to minorities leaving after the tipping point has been reached still occurring in integrated neighborhoods?

Such was the topic of a paper by Rawlings, Harris, Turner and Padilla published by the Urban Institute entitled Race and Residence: Prospects for Stable Neighborhood Integration. They examined 25,134 neighborhoods from 69 metropolitan areas and looked at the demographics from 1990 and 2000. What they found was that there were many integrated neighborhoods that were essentially unchanged demographically and more strikingly that Blacks were moving into predominantly white and virtually exclusively white neighborhoods, suggesting that perhaps the critical mass needed to sustain the neighborhood model is very small or even a non-issue. This suggests that the threshold for Blacks living in a neighborhood is quite small. Interestingly enough, however, they found that fewer neighborhoods that were predominantly Black became whiter than the other way around, suggesting the threshold size for Whites as the minority in a neighborhood may be larger. At any rate, it seems as though signs are positive and that across the board and that racial segregation in neighborhoods is becoming less of an issue. Hopefully there will come a day when Schelling’s model no longer applies to Blacks and Whites.