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Power Bloggers and Information Cascades

According to a survey done by research firm Pollara, buyers do not make decisions based on the advice of a small number of powerful influencers like well-known bloggers. That is, people do not rely on online social media to make buying decisions but rather they trust the advice of their real-world friends and family.  Robert Hutton, executive vice president and general manager at Pollara, said, “this shows that popularity doesn’t always equate to credibility.” Marketing strategies have usually targeted those well-known bloggers and everyone else was expected to fall like dominos. The study by Pollara suggested that the strategies were falsely anticipated.

However, Dan Zarrella suggests the domino effect is still valid in buying decisions. An informational cascade occurs when people make decisions sequentially, latter people observe the actions of those ahead of them and they abandon their own information and instead, follow behavior of those earlier people. The phenomenon that a less knowledgeable person imitates a more knowledgeable one is not so surprising but informational cascades actually develops even if the early decision maker does not have a high precision in making decisions. Simply making a choice before others can become influential to the rest of the people. Zarrella supports this idea by referring to a 1980 paper by John Conlisk titled “Costly Optimizers and Cheap Imitators”: imitating your peers is safer and more efficient to let someone else figure out what is safe and good.

According to a survey by Pollara, only 23% of people polled reported that they were very or somewhat likely to buy a product recommended by well-known bloggers. Why aren’t power bloggers as influential as the advertisement even though they have a great number of subscribers and informational cascade are very likely occur between them? For instance, bloggers sometimes publish something that compromises the blogger’s credibility in request of product representatives. Some buyers are well aware of this and they no longer infer from blogger’s choice which is not much more powerful than their own private information. Or buyer may have specific requirements and real-world friends and family near them are more knowledgeable about those requirements. Again in this case, a blogger’s choice is no longer powerful than their own private information. However, power bloggers can still serve as powerful advertisements if there exists a direct benefit by copyng behavior of others. For instance, you benefit more from choosing Facebook over MySpace because you can infer from other’s choice that Facebook has a larger user population.

Sources:

http://danzarrella.com/informational-cascades.html#

http://readwrite.com/2008/04/03/study_there_is_no_tipping_poin

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