Algorithm: a scary word, a simply amazing impact

By Tami Ben-David
Published on August 28, 2013 | 726 views

Algorithm--a-scary-word

In 2013, algorithms are everywhere.

In his recent book, Automate This: How Algorithms Came to Rule our World, Christopher Steiner explains how, having first ‘taken over’ Wall Street, algorithms have started mini revolutions in all fields, including medicine, sports, music and even psychology.

What exactly is an algorithm?

According to the Merriam-Webster online dictionary, an algorithm is a ‘procedure that produces the answer to a question or the solution to a problem in a finite number of steps.’ In other words, an algorithm is a set of instructions written in computer language that informs a machine what to do with a piece of information.

Algorithms can be incredibly useful since they produce accurate, computer-generated solutions for issues that would be far too complex for the human mind to solve. And the more information we can put into the algorithm, the clearer the instructions will be and therefore the more likely the solution is to be successful.

Algorithms and the Internet

The best examples highlighting the impact of algorithms are in the online sphere.

1. Search Engines

The way we access information these days has grown in leaps and bounds since even five years ago. Whether we need the phone number of a local restaurant, driving directions to a faraway destination or medical information about a particular drug we are taking, all we need to do is head to a computer, tap in our query into one of the many search engines that exist, and out pops thousands, if not millions, of pages containing helpful information.

There are nearly 150,000,000 active websites on the internet today and therefore the task of sifting through it all to find useful information is enormous. That?s why search engines use complex algorithms that tell computers how to sort through all this information.

Google’s algorithm searches out web pages that contain the keywords you entered, and then assigns a rank to each page based on several factors, including how many times the keywords appear on the page and how many other high-ranked pages link to it. Higher ranked pages appear further up in Google’s search engine results page, meaning that the results you see are, in theory, the best links relating to your search.

2. Social Media

Even our favourite social media sites use algorithms to determine what information each individual user sees on their screen.

EdgeRank is the Facebook algorithm that decides which stories appear in each user?s newsfeed, as they log into Facebook. Edgerank hides boring stories, so if your story doesn?t score well, nobody will see it.

Every action a person takes is a potential newsfeed story, which Facebook calls an ‘edge’. So whether someone tags a friend in a photo, RSVP’s to an event, pokes someone, likes something, or posts on someone’s wall, edges are generated.

It would be completely overwhelming if your newsfeed showed every single action of every single one of your friends so Facebook created an algorithm that predicts how interesting each story will be to each user. It?s called EdgeRank because it ranks the edges. Each user’s newsfeed is then filtered to comprise of the top-ranked stories for that specific user.

In response to criticism from both the media and Facebook users about the lack of transparency surrounding how the social media site ranks content, Facebook recently revealed how it determines which content get displayed in users’ newsfeeds and also announced changes to its algorithm. At the press event held in early August, Facebook promised to make information about future changes more visible.

3. eCommerce

When it comes to eCommerce, algorithms have proven to be pretty useful too.

On Amazon, for example, sellers compete to win the Buy Box an invaluable asset to sellers as it is a strong contributor to increased sales. The Amazon Buy Box itself is determined by a complex algorithm that takes into account different factors about each product and seller. Based on all these factors, it then works out which is the best overall product for the customer.

Although Amazon doesn’t reveal details of its algorithm, merchants have a good sense of what it entails. This includes seller ratings, the number of return claims against the merchant, shipping times, and of course, price.

Many people, however, mistakenly think that price is the only one that counts. They feel that in order to win the Buy Box, they need to lower the price of their product so that it ?beats out? the competition. This often leads sellers to drive down the price of their product and therefore incur depleted profit margins.

In truth, since the Buy Box algorithm looks at a variety of factors, not just price, sellers can often set the price of a product higher than they think and still win the Buy Box.

Feedvisor’s repricing software utilizes a unique algorithm that takes into account the different factors the Buy Box is based on, including shipping options, seller options, and available stock, in order to determine the pricing ‘sweet spot’ that will win sellers the Buy Box. This means that sellers can achieve their goal of winning the Buy Box and thus maximize sales, without sacrificing on profit margins.

It may be an intimidating word, but the algorithm has really impacted our experience of the world.

About the Author

A British ex-pat, Tami been writing and content-strategizing for Israeli tech start-ups for the last 5 years. When she's not writing nerdy content, you can find Tami on open water charity swims or traveling to far-flung countries.

Read some more of their incredible blog posts

You may also like: