I’m currently undertaking research to probe demand shaping in the long tail. Interestingly, an HBR article presents another alternative to explain demand (rather than supply) effects of the long tail: network theory.

Duncan Watts and Steve Hasker, in Marketing in an Unpredictable World (you’ll need a subscription), explain why it’s difficult to build formulas to predict hits. Namely, social influence creates very complex interactions that are hard to parse and predict in a reliable way. This is interesting because, as Chris Anderson claims, the “free” digital supply of the long tail removes the barriers that shaped the markets of scarcity of old economics, leaving behind a market of abundance. Perhaps, beyond decreasing friction and cost of supply, new forms of communication technology have also turbocharged mechanisms of social influence.

The article is based on research published in Nature of a study of the roles social influence plays in driving aggregate consumer demand. The findings “suggest that the success of a particular entertainment product cannot be explained by any measure of intrinsic quality or even by ‘appeal’ — the fit between the product’s attributes and consumers’ preferences.” At face value this may be an artifact of the constrained markets of scarcity in that the supply is artifically small and therefore true demand is unable to emerge. While the study design does limit choice sufficiently that this may be the case, there is another paradoxical implication.

Matthew J. Salganik, Peter Sheridan Dodds, and Watts report in the Nature study: “when individual decisions are subject to social influence, markets do not simply aggregate pre-existing individual preferences.” What may be happening is that when social influence is apparent in a system of choice, true individual preference/demand is not revealed. This seems obvious enough — any high schooler can verify the claims of peer influence and social editing. However, this may cast shadows on the democratic nature of the filters, discovery engines, rating systems and aggregation platforms of Web 2.0.

Social networking, social ranking and rating, and other collaborative forms of content generation and communication may be governers to long tail and niche growth. If I make it easier for social influence to take effect — the most diggs on digg.com, the most listens on last.fm, or the most popular books on Amazon, all made more viral through email, IM, blogs, social networks, message boards, etc, peer influence may take on more powerful and demand-stifling forms.

Therefore, some of the same technology that is helping to create the long tail may be making it HARDER for individual’s to 1) understand what they desire and 2) act on that desire — due to hypercharged social influence mechanisms — those same systems and filters that drive demand into the long tail.

This entry was posted on Monday, August 28th, 2006 at 9:30 pm and is filed under Web, Thought, Business, Media. It is further classified using the following tags Business, chrisanderson, economics, longtail, Media, research, science, sociology, Thought, Web and web2.0. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.