The Economics of the Blogosphere, 19/07/08, PPE Blah!

July 19, 2008

The Economics of the Blogosphere

The Tipping Point can be seen in my subscription to various Economics blogs. Student or new blogs (ie: me) with no real theme or new information will have less than one hundred subscribers. Niche blogs or established blogs such as Game Theorist or Angry Bear have five hundred subscribers. As you move up to more serious Academic blogs, such as Crooked Timber or Greg Mankiw’s blog, you hit more than one thousand subscribers. And then there’s a massive gap until you reach MarginalRevolution’s blog where you have 127,494 subscribers. A one thousand percent increase.

That. Is the Tipping Point.

Why did the MarginalRevolution become popular? Google Trends shows a spike of activity sometime in 2007, but the data isn’t sufficient to draw a conclusion. It’s a good blog, but “The Economist Blog” has 170,000 subscribers. Maybe it’s safe to assume that popularity is not necessarily correlated with quality.

Perhaps blogging is simply a complex pyramid scheme. In Network Theory the popularity of blogs coincides with the emergence of “centers”. Hub blogs that smaller blogs link to. Indeed, the study concluded that both links and reporting influenced blog popularity. In the end what you have is an oligopoly in the Blogosphere. Computer Science actually predicts this. Maybe the latter is why the competitive Economic blogosphere won’t shut up about the sub-prime mortgage crisis. Moreover, in such a competitive environment it’s no wonder that there’s so much parasitic blogging, bloggers that engage in fisking which is essentially saying “My fellow blogger said this today. I agree.”

The Economics of blogging is complex. There are no direct entry costs for blogging- there’s simply an opportunity cost of time. However there are expected returns. Some of the most popular blogs earn up to $10,000 a month, but the vast majority of blogs- hardly earn anything at all. Therefore, what you have a system with only a few individuals earning from blogging on a specific topic. If you want to break into the system, you need to have your blog linked to. In order for that to happen, you need build up your own reputation by linking to other blogs yourself. However, all this does is firmly entrench the few blogs that earn money by making them more popular which simply exacerbates Harvey Liebenstein’s bandwagon effect making the blog even more popular.

It’s a competitive and difficult market to break into. What you need is a tipping point. Some event, some factor, that will shift your blog from four thousand to one hundred thousand subscribers. And this is where my theory comes in. Individuals choose which blog to read dependent on the its popularity. People will only read your blog if its popular, and the only way to make your own blog popular is to make popular blogs even more popular. It’s a vicious cycle.

Economics Bloggers must be the most depressed people in the world. The Dismal Science indeed.

More information: The Law and Economics of Blogging

http://www.blogcatalog.com/directory/economicblogs

Daniel Corradi Stevens : 19 Jul 2008 14:38 | Comments (0) | Report a problem