Good Incentive / Bad Incentive

Posted by Jenia Cherkassky on June 14, 2008
Filed Under Search Engines, incentives, SEO |

In the concept of NooTag we often mention the use of economic incentives. We believe that incentives are the most effective measure for getting users to maximize public welfare, or in more simple words to make sure that users would act in a way that would leave just about everyone better off, rather than acting in a selfish way or even, god forbid, in a destructive way. Here’s a good example from something that is very dear to me – Poker. A lot of people like to play Texas Hold’em with their friends, not for the sake of the profit but just as a way to socialize and have some fun (by the way, for some reason Texas Hold’em has gained huge popularity in Israel in the past few years). Now here’s a question – have you ever tried to play poker without money? I mean with chips, but without any money at stake. If the answer is “no”, than allow me to describe what would happen. During the first 2-3 hands, 40-50% of the players would say “all in” and the game would end in about 10 minutes. The reason is evident. If there’s no money then there’s nothing to risk or gain, and when nothing is at stake there’s nothing to motivate the players to keep playing and to try actually winning. The common good in this case is making the game interesting and making it last longer, the incentive of money serves this very objective. So as you can see, there’s actually more to it than gambling.

My partner, Alex, often likes to mention the poor quality of information on the Internet. And in this case also, just like in the game of Poker, a major reason for the poor quality of information is a lack of incentives. But here’s a surprise! – the Internet actually does offer incentives. You may have hared one of these incentives referred to as “Google Adsense”…. Oh, actually it’s not a surprise at all. So OK – there are incentives, however they do not seem to achieve the goal of maximizing public welfare. And in fact, they increase the level of inequality among various Internet users. I promise to get back to that point later on, but right now I’d like to ponder on a possible explanation for why the incentives on the Internet do not seem to be beneficial to most Internet users.

First, let’s examine an imaginary scenario in which the incentives that currently exist on the Internet for producing a high quality of information would actually be effective. In order for this to happen, there must be a certain mechanism that would make sure that only “high quality” web pages would get to the top of the SERPs (Search Engine Result Pages). Than, those pages would include ads and the mechanism that I’ve mentioned would make sure that information providers would be motivated to create the highest quality webpages in order to get to the top of the SERPs and benefit from the ad revenues. If you believe that this imaginary scenario actually works on the Internet than you either don’t know the Internet well enough or you are delusional. The reasons for this entire scenario not working well on the Internet are many. For now, let’s focus on one of the most important one – The lack of an effective mechanism to make sure that only high quality webpages would get to the top of the SERPs. The mechanism that is now in place to take care of this objective is the search engines’ spiders and ranking mechanism. And the problem of these mechanism is the fact they are way too vulnerable to manipulation by users (information providers).

One of these manipulations, which in my opinion can be considered as a market failure in the current model of the Internet information market is SEO or Search Engine Optimization techniques. I will not dwell upon the explanation of what these techniques are. As if you are not familiar with them, you can look up “SEO” on Wikipedia. However, I should mention that there are 2 major directions in SEO – these are often referred to as “White Hat SEO” and “Black Hat SEO”. Both of these directions focus on making SE spiders and ranking algorithms think that a certain webpage is actually more relevant and important than it probably actually is. White Hat SEO is considered to be a very legitimate practice, although in my opinion it is a market failure. However it is one that has became almost a necessity in the current model of the market. Because if the quality of a webpage is high enough, why the hell would someone need to use various “techniques” to make it look “better” in the eyes of the SEs?! So maybe the real market failure here is just the way that SEs evaluate information… Now if White Hat SEO is a minor market failure, Black Hat SEO is a very major one. This practice engage in dubious techniques that are no less than deceit and fraudulence of Search Engines as well as Internet users. The application of these techniques results in poor quality webpages, often with a malicious hidden agenda appearing on top of the SERPs. Of course it does not necessarily happen for all keywords, however it very often happen for highly competitive keywords, namely keywords for which appearing on top of the SERPs is most likely to produce really high revenues. And this is what creates what I’ve preciously referred to as “inequality”. Think about it – honest, hardworking folk can create really great webpages with relevant and high quality information and than be cheated out of the SERPs and the money by practitioners of unfair techniques.

As I’ve started talking about incentives, I’d like to get back to this point. In order for the public welfare of all Internet users to be maximized, incentives must be in place to make sure that users who produce information would create information of high quality so that users who consume information would benefit of this information. Such an incentive would definitely be a “good incentive”. However, right now there are too many incentives to produce poor quality of information, As a webpage with a poor quality of information can still reach the top of the search results and make money (usually by selling whatever there is to sell for the keyword or search term in question). In my humble opinion, one of the incentives to create those low quality commercial webpages is the field of affiliate marketing, well at least for some products. I promise to further explain this statement in my next article.

Comments

2 Responses to “Good Incentive / Bad Incentive”

Johan on June 17th, 2008 6:52 am

People need incentives to do stuff… well, this is pretty obvious. But, I oppose the notion that people always need extrinsic incentives to act. Sometimes intrinsic incentives, like pleasure or self-fulfillment, are just enough to set a person in motion. My only conclusion from your example is that Poker suck!!! Since people can’t enjoy it, like they do in many other occasions (sports, other cards games, computer games) without involving gambling in the process.

Google rips people off and not the SEO. Without the SEO you would not be able to find anything with Google. They just suit the content to a form that the search engines can handle.

Regards
Johan
Jenia Cherkassky on June 22nd, 2008 2:42 pm

Hi Johan,

I’m sorry that you feel this way about poker, because it’s a great game and I like it. As to incentives, you are right that they come in many forms but not all incentives are evenly effective. I believe that if I offered you 50$ to participate in a survey, you’d be more eager to do so than if I asked you to do it for your own satisfaction.

as to SEO - that’s exactly the point! In a perfect world an SE would know how to tell between “better” websites and “worse” websites without the need of manipulation techniques. The fact that people have to use SEO is a major drawback in the current generation of Search Engines.

Jenia.