It’s not just giant market movements that turn a profit

Silicon Valley Watcher: Uncovering the madness of crowds…the flickrliscious effect on research labs:

Spotting potentially large aggregate social behaviors and being the first to monetise them is going to be the name of the game in the consumer digital space.

Yes, and that’s why Persuadio exists. The adjective “large,” however, is a relative one. Being large in one’s own small market is an excellent condition whereas the assumption is that only really large social behaviors that transcend niche markets are visible today.

Seeing deep

Following up on my comments about meeting Chris “The Long Tail®” Anderson and talking about the complexity in the slope of the curve describing the power law of all media, an excellent post from Anderson, Microstructure in the Long Tail, pointed to by Christian Crumlish.

…the Long Tail is in fact made up of many “minitails” (below), all adding up to the powerlaw (“Pareto”) shape we know so well.

This is important because it explains why a very effective network-effect (viral word-of-mouth) recommendation system, which is essential in driving demand down the tail, does not actually do the opposite: drive content up the tail to further amplify hit/niche inequality. The explanation, I argue, lies in the only semi-permeable membrane between niches and mass-markets. Popularity exists at multiple scales, and ruling a clique doesn’t necessarily make you the homecoming queen.

Anderson goes on to ask whether all the mini-tails look like the bigger curve they are part of, which is an important question. He finds an answer—one possible answer to the question—that suggests “no.” But the answer comes from a look at a single type of distribution, wealth, in this New Scientist article about econophysics. However, I’d like to point out that this suggests some continuity between the various mini-tails, but I believe it is the two-dimensionality of the curve that is most deceiving.

The different curves within the tail are not of a piece and we can understand them separately as being of many different configurations rather than being like or unlike the bigger curve of the power law. They aren’t aligned, they are an aggregate that is tossed and turned conceptually but still susceptible to being gathered into a single curve that describes a general distribution of market power. But each mini-tail is a case on its own and I stand by the suggestion that the best metaphor is a broad topology.

We’ve got such a long way to go in understanding all this. The long tail is a great start, but the reality is deeply convoluted and probablistic—we can’t make a blanket statement about all mini-tails nor suggest that one mini-tail will act the same way at all time—it’s an important view of the economy today. The reality beneath that grand theory is comparable to confusing quantum world that underlies our physical world (currently our Einsteinian world, but it is Newtonian in the terms most of us think), and that’s why I started working to build Persuadio’s analytics system.

It’s just going to get more interesting. Investors are supposedly clamoring for views into networked markets. Heck, call me.

Bolstering our maps

Jason Timmerman‘s hoping to add more nodes to his MyDensity map…. We’re hoping this becomes an art of social network; after all, we make pretty pictures of one’s growing social network. He writes:

Why I really blog this? As you may have guessed, the primary reason for this post is to attract Mitch’s attention. I would hazard a small bet that he notices. Maybe this post will help increase Echo Generations popularity. I guess I will just have to check in from time to time using MyDensity to see if it does.

Thanks, Jason, for noticing MyDensity!

Let us be Krill Shrimp and Sea Bass….

Pitt chimes in on my metaphor for the insight we get when we start looking up from the bottom of the data sea…. Tech-n-Tunes: I’m Just a Plankton: I never took your comments on the show as an insult, but more as a perspective on where I stand in the blogosphere. I’m a late adopter to blogging who is still trying to build a readership and refine my writing style. I think it’s good to start out as a plankton, and hope to become at least a sea bass one of these days.

Pitt sees the future through MyDensity…. I’m aiming to be a Blue-fin Tuna one day.

Bryan comes out

netmeme:

I have also put in time over the last few weeks advising (and some coding) over Mitch Ratcliffe’s free MyDensity service (based upon his company’s Persuadio analytics platform). I’ve never had the opportunity to play with visualizing tools before, so this has been a fun learning experience.

I’m so grateful to have Bryan on board with Persuadio. He’s going to help us achieve great things! Bryan came in and took Persuadio’s architecture to build MyDensity in just a few weeks.

Most abused phrase of the year

Rick Segal predicts the death of the phrase that dominated PC Forum: “The long tail,” which is a trademarked term of art owned by Wired Editor-in-Chief Chris Anderson. I don’t think it will die, but it is certainly the most abused phrase of the year.

It’s the way the phrase is often used that is wrong-headed. The basic idea, that there is a huge inventory of products available to a huge market with very low transaction costs, is correct. I talked with Chris Anderson at PC Forum and asked him about the abuse of the phrase, because it is simplified by many people—probably including me when I was asked to define it before having enough coffee—to mean that all products are on a level playing field but some are naturally advantaged because of existing traffic or relationships.

The Badlandsit was good to hear from Chris Anderson that he believes the term is being over-simplified. He just had a talk with Joe Kraus at ETech about the mini-tails within the tail; in other words, there are millions or billions of niche markets within the curve of a power law that encompasses everything in the economy or the political economy. Joe Kraus summarized the conclusion of the talk: “Markets of Dozens.”

“Being at the top of the techno dance mix market is very different than being Britney Spears,” Anderson said during PC Forum. But people tend to treat the two markets, techno and pop music, are somehow the same when they refer to the long tail. There are a lot more small but good livings to be made in the long tail, and hopefully fewer massive fortunes for bottled talent (I could provide links galore on this topic).

I describe what’s happening not in terms of a single power law curve, which I’ve been arguing against for a long time, but as a broad topology; the curve of a power law doesn’t convey the real challenge of these markets, because they are concatenations of curves that accumulate into something that for the most part looks like the Badlands.

The Badlands were famous as a hideout for Old West bandits because the terrain was so rugged that it was impossible for horseback-bound pursuers to track anyone without stumble into an ambush.

In the broad topology, you have to know whether you’re down in a gully or up on a hilltop with a good shot at the competition.

If you don’t have any idea where you are relative to your direct and indirect competitors, you’re dead in the market badlands of the broad topology. Consider the situation of a rising music distributor competing with the major labels to dominate a niche market or a Web site attempting to take a lead in coverage of something of very high value to relatively few people, like PHP coding—O’Reilly has done this—they face an incredibly complex challenge, as competition can come from nowhere and almost overnight.

What it means….

Here’s the problem with introducing a free Web service that demonstrates just a tiny fraction of what we hope to sell to enterprise customers, media companies and others: Now, we have to distinguish between what Persuadio, the company, does and the features of MyDensity.com.

John Robb speculates Persuadio’s business is “a system for helping small companies connect their product/company blog to influencers (bloggers, discussion boards, etc.) in the community that matters to them — or at least measure their success or failure at doing that (which is half the battle).” We’re building for a lot more than small business, and we’re going to help customers win the whole battle, including building feedback into their marketing, editorial and conversational decisions.

The way I would summarize it, now that I’ve had to explain it for two days straight, is that we are building Kai’s Power Tools (KPT) for data. Just as the Adobe plug-ins in KPT had to know an awful lot about the data in a Photoshop image in order to manipulate it, Persuadio’s tools are built to be aware of the nuances of social network information or whatever data they visualize. Add one of Kai’s filters to Photoshop and you suddenly get a whole slew of new Photoshop image manipulation capabilities; our stuff will support a wide range of data, analytics and visualization features.

Our software, which will be offered as a hosted service, is what folks might call “extensible.” But in this case the term isn’t just marketing bullshit (and, believe me, I’ve heard that word more than you can imagine as a reporter). We’ve created something that has a lot of ability to grow; it took only a few weeks to build MyDensity when we realized there was an opportunity to put it in the market.

MyDensity is a demonstration of the most basic aspects of an architecture we’ve been working on for most of the past year. The system visualizes data from a variety of sources and that can be customized to very specific analytic needs, such as identifying key influencers and tracking sentiment. Each layer of our system is abstracted from the others so that we can add new data sources, new analytics or new visualization capabilities without disrupting other functionality. At the top of the stack, we’re working on how to integrate our system with CRM and other systems that allow customers to act on the data and measure the results.

What you’re seeing in MyDensity is all the inbound and outbound links in the first and second degrees of the network around the URL you searched. We’re not displaying the direction of links or their frequency, which can be used to assess strength of social ties. When you add in these other dimensions, it becomes possible to see who makes ideas flow as well as how quickly and in what direction (positive or negative sentiment) they are moving through networks. The Fengshuinator actually does something constructive, though we mostly like the name. It uses a simulated repulsive force to reorganize the network based on which nodes are most densely connected. In a really dense map this can disclose nodes and interconnections that can be instrumental in understanding the relationships.

So, all in all MyDensity is just a free demo of a little bit of what we can do. Our enterprise services will, we think, be very powerful tools for companies that want to understand where they stand in conversational markets.

Back to John Robb’s comments about the value of coverage by the mainstream press…. We’re seeing a lot of leads to customers come out of the first couple articles that have appeared about us. Yes, we’d love to raise some money and are engaged in an angel round now, but I’ll take the ink and the bits from the mainstream press any day.