Cascading Network Behavior in Electronic Books (E-Books)
With the rapid development of mobile and computer technologies, electronic books (e-books) have become an increasingly popular alternative to traditional hard-copy books for occasional to avid readers all around the world. E-books account for over 20% of the U.S. trade book market, and in the U.K., over 80 million e-books, worth $514.5 million, have been sold. Major e-book services in the U.S. include Oyster, Scribd, Kindle Store, iBooks, and Google Books, and these companies give readers the opportunity to purchase e-books individually or subscribe to a expansive library of e-books with unlimited access. Many of these companies have begun to integrate their services into different mobile platforms such as Android and iOS to increase their reach, and some of them have even begun to offer their own line of e-readers such as Amazon’s Kindle.
As when making most purchase decisions, one’s decision will be influenced by two elements: one’s own comprehension of relevant information and other people’s choices. When a user’s knowledge is inadequate to make informed decisions and others’ behaviors can be observed, information cascades tend to occur; this is extremely characteristic of the e-book market.
Readers often lack the time and knowledge to make an optimal decision among thousands of e-books, and rankings offer a quick and convenient source of information for readers to filter through books. Additionally, with the increasing interconnectedness of social media and e-book platforms, others’ book choices can be easily observed and shared. In a recently study done by two Chinese researchers, it was found that an e-book’s ranking, total votes, and total clicks had a significant impact on its market share, as predicted by the informational cascade theory; however, review volume had no impact on the market share of popular books. Although these conclusions may not be surprising, this confirms that certain signals such as a book’s ranking can cause an information cascade among readers.
There are undoubtedly many limitations to this study such as the inseparability of many of the variables, there are several business insights to be gained. There will be even more e-books available in the years to come, and this study shows that e-book platforms need to carefully consider their ranking algorithms, as they significantly impact the readers’ decisions and can affect total consumer welfare. Additionally, authors and publishers should package and market their e-books to maximize total votes and total clicks if they want to maximize market share.