Informtion Cascade in Blogging

Lets Stop the hype cycle

TechCrunch writes an article discussing how many startups get pulled into the same cycle. The company will first be a small one that nobody knows/pays attention to. After an incubation/dev period, it gets a huge amount of attention and everyone is talking about it - the most amazing thing to appear. Then, as the hype started to plateau, many people would describe it as a dead company that nobody had an interest in. A bad company would tank just like the populace fortells. A good company can keep on going, until it becomes a huge company that can sustain growth and be worth lots of money.

What happens in our current situation is that because the internet is so readily available to everyone, everyone can be a reporter. Secondly, because information is easily redistributed (trackbacks, retweeting, linksharing), we get into the information cascade mentality. Many people talk about how some company is not going to be able to monetize, and that it will tank as soon as it IPO's. The citizen blogger dutifully reports this, as this is the "general knowledge", even if the actual statistics show something to the contrary.

Good examples are Twitter, Facebook, and Myspace. Many people fortell the demise of myspace because of facebook's growing dominance. However, when looking at graphs, one can see that even though facebook's numbers are growing, myspace's numbers are not dropping. As new technologies gain foothold, they often can augment, rather than replace. Twitter's valuation is another big topic. People say that twitter can't figure out a way to monetize, but it can fail. However, the general public is following the information cascade, and not looking for other reasons that show that indeed, Twitter could make a lot of money.