Thursday, October 14, 2004

In Answer to Will's BlogShares Question

Will had a very good comment about BlogShares where he voiced concerns about blog valuation. I'd like to answer him, as well as others who share a very common, very easy to formulate, misconception about the game. First, the question from Will:
Though I'm not sure how I feel about BlogShares. Admittedly, I'm not much of a player, my site is listed.

I fear that some of the premises of the stock market, namely, its a corporate popularity contest, ends up with the valuation of a blog site being higher with more external links attached and volume of traffic received to the site.

While I believe that many of the top sites are well put together, some seem spare on content at times, though they are well visited.

So what's the dif?
BlogShares values blogs based on incoming links, and only for blogs. In other words, if Kos links to your site, it affects your blog's valuation, but a link from Google News does not. Because the game relies solely on incoming links from blogs to determine a value point, the game acts as a very clever social network experiment, with the game layer taking place around these connections.

Also, since incoming links from blogs are the sole source of value, outgoing links to other blogs naturally affect value as well. If Kos links to your blog, using the same example, and hundreds of other blogs link to Kos, the value added by Kos's outgoing/your blog's incoming link is higher than the same outgoing link from my blog since fewer people provide my blog with incoming links. Kinda circular to imagine, but since bloggers often thrive on incoming links, it is a keen method of charting the evolving social network, much like the Ecosystem, only with a fun game attached.

BlogShares does not base anything on site traffic. In fact, the only means of affecting blog share prices are incoming links and player actions. You can buy and sell shares in each blog, changing the price per earnings (P/E) and share price, plus there are tools called "artefacts" which allow players to increase/decrease blog share prices, among other functions. As such, many of the top players often battle each other to control shares in the top blogs in the game. However, there are so many blogs (over 1.6 million at last count), there are never enough buyers for all the shares.

Unfortunately for many BlogShares veterans, whose days go back to the game's beginning in early 2003, the game has changed greatly from being focused on blog shares to a derivative of these blogs known as Ideas. Many purists, and I'm among them, want the game to refocus on share trading and strategy. Admins are working to bring the game back to this point, but a majority of game play continues to take part in a very neat product of blog valuations, the Ideas.

Ideas are a bit complicated to explain if you haven't played the game, but here's a quick summary. There is a large index of categories in the game. Players vote blogs into such categories (Law, Politics, etc...), over 1000 at the current moment. Once blogs are in categories, they have the potential to produce ideas. However, they will only do so if two conditions are met:
    1. The blog must have incoming links.
    2. There must have been some activity on the blog
The BlogShares spiders rely on a quick parse of the blog site to identify and update links, and use for activity updates, although the spiders can also read activity during the parse.

Basically, the ideas market is separate from the share market. Although they are both generated from the blogs in the system, ideas are created in two steps.

First, blogs are reindexed by using spiders to parse the site.

Then, once every 15 minutes or so (its random), an idea production script is run. For blogs which are voted into industries and were indexed since the last idea production (and also had some activity on the blog based on a ping during reindexing), the script will produce ideas. For example, a blog in the India, Journal, and Hinduism industries would cause those ideas to be produced. The ideas are released on the market upon production.

Generally, they are the major part of investment and play once you pass several hundred billion dollars, but can be fun under that amount too.

The way the prices are determined has recently changed to reflect a more supply-demand relationship. Basically, if ideas are rarely produced, rarely sold on the market by players, and always bought before the next idea production, the prices will continuously rise. See Petroleum Engineering as an example of a rare industry (although "rare industry" changes based on when blogs are voted into them).

Most prices now reflect the rarity, although there are few exceptions. Industries which just start producing ideas are priced very low and are likely to stay that way for quite some time (See Conservadox for example). However, these rare industries have value to collectors who are trying to garner ideas in all the industries available.

Blogs can only be reindexed once in every 24 hours. and premium members can reindex an unlimited number of blogs, though still subject to the 24 hour limit for each blog. So, rare industries will be produced only 1 or 2 times a day, if at all, and thus, many of the rarest industries often sell at $100Million/idea for 10 ideas. Some even go for more than that on occasion.

The other reason for ideas is to create artefacts. In general, artefacts which are the most common (for Weblogs or English) for example are the most useful in the game since they can be used to drive down prices of blogs then acquire the shares and boost up the price prior to selling. You can literally make billions a day with only 30 or so artefacts (and a premium membership due to transaction limits). However, richer players also like to collect artefacts, of which there are currently 204.

So basically, ideas are to build artefacts, for investment, or for collecting.

So, to put it a bit more succinctly, BlogShares tracks links between blogs only, and determines value based on which blog links to other blogs. It cannot be manipulated by site traffic or links to other web sites, but players in the game can affect blog values, at least temporarily, by using artefacts or buying and selling shares. Ideas are produced through a player-voting system and a production script run after blogs are reindexed in the system.

Hope this answers your questions, Will! :)

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