I have been enjoying reading the blog of Seth Godin. In a recent post he wrote the following.
It’s quite possible that the era of the professional reviewer is over. No longer can a single individual (except maybe Oprah) make a movie, a restaurant or a book into a hit or a dud.
Not only can an influential blogger sell thousands of books, she can spread an idea that reaches others, influencing not just the reader, but the people who read that person’s blog or tweets. And so it spreads.
The post goes in another direction after that, but I started thinking about this conventional view that the web reduces concentration in the market for professional opinions. No doubt blogs, discussion boards, web 2.0 make it easier for people with opinions to express them and people looking for opinions to find those that suit their taste.
But does this necessarily decrease concentration? If everybody had similar tastes in movies, say, the effect of lowering barriers to entry would be to allow the market to coordinate on the one guy in the world who can best judge movies according to that standard and articulate his opinion. Of course people have different tastes and the conventional view is based on the idea that the web allows segmentation according to taste. But what if talent in evaluating movies means the ability to judge how people with different tastes would react to different movies? A review would be a contingent recommendation like “if you like this kind of movie, this is for you. if you like that kind of movie, then stay away from this one but you might like that one instead.”
In fact, a third effect of the web is to make it easy for experts to find out what different tastes there are out there and how they react to movies. This tends to increase centralization because it creates a natural monopoly in cataloging tastes and matching tastes to recommendations. Indeed, Netflix’s marketing strategy is based on this idea and I am lead to hold out Netflix as a counterexample to the conventional view.
Cheap Talk 
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March 19, 2009 at 9:06 am
michael webster
I think that our preference for status will remain unchanged; individuals will still seek to associate themselves with someone who appears to have high status.
The dinosaur part of our brain isn’t going away because of the internet.
March 19, 2009 at 9:47 am
Anshu
There are already many examples where decentralization has worked. For movies, Rotten Tomatoes provides an aggregation of individual reviewer data (many of the reviewers are unpaid bloggers). I personally find this decentralized approach more trustworthy than any individual reviewer.
Similarly, Tire Rack provides end-user review data from hundreds or thousands of regular consumers, and aggregates this into a composite score. Again, compared to using an expert review source, such as Consumer Reports, my experience has been that the masses provide better information once you have a large enough sample.
I suspect more people check Amazon customer review scores than rely on any major newspaper’s in-house book reviewer…
March 20, 2009 at 11:34 pm
jeff
I came across an interesting article related to this discussion.
http://www.uie.com/articles/magicbehindamazon
March 19, 2009 at 9:49 am
mkayser
Indeed. The real importance of the internet in this area is the decrease in importance of the expert. Collaborative filtering doesn’t work for every problem but for movies and music and books it does a pretty good job.
But if we disregard collaborative filtering and focus only on human reviewers, then as you suggest, the effect of the internet will depend on various factors:
– For a randomly chosen consumer, what is the expected popularity ranking of the optimal reviewer?
– How easy are the popular reviewers to find (via Google, etc.)? How easy is the optimal reviewer to find (if he/she is not generally popular)?
– How easily can a consumer determine the goodness of a reviewer’s advice by reading the advice itself, vs. how much do they use proxies like the reviewer’s popularity?
– How much time does the average consumer spend searching for the optimal reviewer?
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BTW, you can think of collaborative filtering (which is roughly what Netflix and Amazon.com use) as a form of highly decentralized advice-giving. The computer automatically selects people who have bought the products you have, and “asks their advice” by looking into their purchasing histories to see what else they would “recommend buying”.
In effect the computer is helping you get advice from thousands of other people.
March 20, 2009 at 11:33 pm
jeff
Yes, one of the basic observations from mechanism design theory is that, at a formal level at least, there is little real difference between centralized and de-centralized decision making. But at an intuitive level i think we can draw a distinction between those in which all communication takes place through a center and those in which multi-lateral communication plays an important role.
March 19, 2009 at 10:24 am
investorblogger
I remember some old timers out walking in the hills of Scotland one day many years ago lamenting the bygone days of the BBC, the only TV company in the UK, and the role it played. They wistfully thought of how you could turn on BBC1 and watch what one group of individuals in society thought was important in terms of the news, politics and society. Then you could turn over to BBC2 and watch what they thought of science, education and all that high fallutin stuff. If that was not enough, you could choose from any of four different national radio stations: radio 1, 2…4 or PERHAPS local BBC radio. If you were lucky.
My friends sometimes still hark back to the golden age of TV+Radio. Personally, I can’t imagine anything worse. Having 500 channels where I can choose not to watch seems much better than suffering the predominantly powerful class’s views of society broadcast on several TV channels. Yes, there’s a lot wrong with modern media. But it serves a far greater audience, far more successfully and in far greater variety than the BBC ever did.
Perhaps the only thing my friends really miss: the ability to talk and share what they watched on TV BBC1 last night. Given that the choice was between East Enders, Panorama, and BBC nine o’clock news, I’m afraid I’ll take my MTV any day. Or CNBC or Discovery or… Any of the dozen channels I currently enjoy.
Kenneth
September 25, 2011 at 1:43 am
Jace
I could watch Schindler’s List and still be happy after readnig this.