Gurus and Oracles

Gurus and Oracles: The Marketing of Information

Miklos Sarvary
Copyright Date: 2012
Published by: MIT Press
Pages: 192
https://www.jstor.org/stable/j.ctt5vjp4n
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  • Book Info
    Gurus and Oracles
    Book Description:

    We live in an "Information Age" of overabundant data and lightning-fast transmission. Yet although information and knowledge represent key factors in most economic decisions, we often forget that data, information, and knowledge are products created and traded within the knowledge economy. In Gurus and Oracles, Miklos Sarvary describes the information industry--the far-flung universe of companies whose core business is to sell information to decision makers. These companies include such long-established firms as Thomson Reuters (which began in 1850 with carrier pigeons relaying stock market news) as well as newer, dominant players like Google and Facebook. Sarvary highlights the special characteristics of information and knowledge and analyzes the unusual behaviors of the markets for them. He shows how technology contributes to the spectacular growth of this sector and how new markets for information change our economic environment. Research in economics, business strategy, and marketing has shown that information is different from other goods and services; this is especially true in competitive settings and may result in strange competitive market outcomes. For example, Sarvary points out, unreliable information may be more expensive than reliable information; information sellers may be better off inviting competitors into their market because this may allow them to increase their prices; and competition may lead to increased media bias--but this may benefit consumers who want to discover the truth. In Gurus and Oracles, Sarvary explores the implications of these and other peculiarities for information buyers and sellers.

    eISBN: 978-0-262-30117-6
    Subjects: Marketing & Advertising, Business

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Introduction: The Information Industry
    (pp. vii-xvi)

    In 1850, a young entrepreneur called Paul Julius Reuter started to use carrier pigeons to relay stock market news across a seventy-six-mile gap in the telegraph line between Brussels and Aachen, in neighboring Germany.¹ Reuter’s competitive advantage was speed: carrier pigeons beat the train by seven hours. While the concept was simple the details of the implementation were remarkably sophisticated. Reuter used over two hundred pigeons to ensure extra capacity in case unexpected news would require it. In other words, he was worried about proper bandwidth and network availability. He also backed up each news item, sending multiple pigeons with...

  4. I The Economics of Information
    • 1 Is There a Market for Information?
      (pp. 3-8)

      Imagine the problem of Joe Smith, a young software engineer who, one day, discovers that the mainframe computer of his employer has a fatal design flaw. Being a capable computer scientist, Joe immediately recognizes that his discovery has major consequences and is wondering how to capitalize on it. The options are limitless. He could start by reporting the news to his boss, which could lead to a hefty reward and a promotion, not to mention becoming a hero among his colleagues. He could also report it to the press, seeking broader fame, which would definitely help with his girlfriend. After...

    • 2 Decisions and Information
      (pp. 9-26)

      Imagine three identical doors. One of them hides a treasure; the other two are doors to empty rooms. The doors are closed and your job is to guess which door hides the treasure. You can open only one door. Without any further information you will randomly point to a door and open it. Your chance of finding the treasure is 1 in 3. Now imagine that a “fairy”—who knows where the treasure is—decides to “help” you. Once you have pointed to a door (but before you have opened it), she opens one of the remaining two doors—always...

    • 3 Competitive Pricing of Information
      (pp. 27-48)

      How will information sellers react to the consumers’ choice patterns described in chapter 2? We have seen that the nature of competition is quite different depending on the information’s characteristics. If competing information is accurate or highly correlated, or both, consumers are likely to treat it as a substitute and competition is harsh between vendors. In fact, most product markets are like this. People need only one item from the multiple options that firms offer and they choose the best “value.” Value in turn depends on the product’s quality and its price. In markets for substitutes competitors tend to undercut...

    • 4 Why Information Sellers May Lie
      (pp. 49-68)

      We have been assuming that information providers are honest. When we considered “low-quality” information our assumption was that the information provider does her best to provide the right information, but is susceptible to making mistakes. On average, however, she is right and if we had access to enough independent providers we would eventually get close to the truth. In the language of statistics, we assumed that the information providers were “unbiased.”

      When buying information or evaluating its quality, knowing whether the information is biased or not is of crucial importance to the decision maker. But what isbias? Common usage...

  5. II Bringing Information to Market
    • 5 The Information Value Chain
      (pp. 71-90)

      The word “information” has many synonyms including “data” or “knowledge.” How do these relate to each other and to the idea of a single product category, product market, or industry? Data may be used to help decision making as do knowledge and information, and all of these may be purchased and paid for. So far, we have considered all of these as “information products.” For a firm, however, it is important to decide in which of these businesses it intends to compete.

      Data and knowledge are extremes on a continuum, which measures how much value the product adds to the...

    • 6 Networks, Interfaces, and Search
      (pp. 91-114)

      In chapter 5 we discussed the various product formats that information sellers should explore when developing value propositions for their clients. Once the product is defined, bringing products to market requires another critical task: designing the distribution system. In information markets, this means designing how the information is physically brought to the buyer or user. This aspect of information products is often difficult to separate from other aspects of going to market. In fact, many times it is intimately linked to production as well. A firm’s decision to sell knowledge, for instance, almost entirely depends on its production technology and...

    • 7 Branding Information
      (pp. 115-130)

      This chapter addresses two closely related steps of going to market: branding and communication. Branding and communication are actually quite elaborate topics treated in dedicated textbooks. Our goal here is not to reproduce these texts but to point to the topics’ particularities in information markets. In a nutshell, branding is the art of encapsulating complex meanings and connotations in a word or a short fragment of a sentence. Once a formal value proposition has been developed for the information product (see chapter 5) it needs to be translated to a simple form that consumers can remember and transfer to each...

    • 8 R&D for Information and Knowledge
      (pp. 131-154)

      In early 2010,The Economistpublished a special report on managing information, in which it estimated the total amount of information on Earth to be about 1.27 zettabyte.¹ This is an unimaginable amount of information that continues to grow at an incredible rate, leaving far behind our capacity to store it, let alone make sense of it. For example, in retailing, five billion bar codes are scanned every day throughout the world. The largest retail chain, Wal-Mart processes more than a million customer transactions every hour. On the World Wide Web, Google handles about thirty-five thousand queries every second and...

  6. 9 Conclusion
    (pp. 155-158)

    Roughly fifty to one hundred thousand years ago, the evolution of the human race suddenly underwent a discontinuous change. Archeologists call this short time period a “cultural revolution” because it is the first time that evidence of “culture” (worked stone tools) appears in archeological data. After this “event,” the development of the human race proceeded very rapidly. Human cooperation became much stronger and more sophisticated in literally all aspects of life. Proper societies took form. Major innovations, from construction to agriculture and weapons were quickly developed. Abstract domains such as art and religion emerged.

    One of the mysteries of this...

  7. Notes
    (pp. 159-166)
  8. References
    (pp. 167-172)
  9. Index
    (pp. 173-176)