Forecasting is important in every aspect of life and in business in particular. Grossly simplifying, the last two decades' academic research came to the general conclusion that crowds do better than individuals, the so-called "wisdom of crowds (WOC)" hypothesis. One of the resulting 'innovations' is the idea of prediction markets where people trade securities whose payoffs are tied to specific outcomes/events. Market prices provide 'superior' forecasts for the likelihood of the events in question. With social media broadly available to large and distributed populations, prediction markets are thriving...
Recent research conducted by IARPA seems to indicate that the WOC insight might be challenged - at least to some degree. Clearly, prediction markets do much better than the average expert participating in them. But it also seems to be the case that the top 2% of forecasters can beat the market by a relatively large margin. First, it seems that the elite forecasters do seem to do better systematically over time, so their performance is not just luck. Moreover, if you team them up, then together, they can beat prediction markets by 20-35%.
Prediction markets are cool forecasting tools but their weakness is that they give away the forecast, so in business where one wants to generate superior insights it is hard to discover proprietary information this way. But what if firms ran forecasting tournaments to discover the few experts that can provide sustainable advantage for them? Of course, the question then becomes: at what price will these experts share their views with the firm!
Monday, 25 November 2013
Here is a link to the HBR article we have just published on mobile ads. Examining a large number of mobile campaigns across many categories, our main discovery is that - somewhat surprisingly - mobile ads seem to work for products that are "utilitarian" (e.g. they fulfill a practical need) and "high involvement" (they represent an important choice, e.g. they are expensive). The real learning from our study however, is that mobile ads seem to work by reminding consumers of the product and/or campaigns about the product, thereby making higher bandwidth communication (e.g. TV ads) more efficient. We believe that now is the time for really talking about integrated marketing communication.
Thursday, 7 November 2013
And on multiple fronts...... First, the so-called Rockstar Consortium and Netstar Technolgoies have filed a major patent infringement lawsuit against Google and some of its mobile partners at the end of last week. More details can be read about the case here. The group is, essentially, a patent troll with some of the major tech companies behind it, including Microsoft, Apple, Blackberry, Sony and Ericsson. It has over 6 thousand patents related to mobile telecommunications technology, which were acquired with failed Nortel in 2009 for $4.5 billion. Google lost that bid against the consortium but later bought Motorola Mobility for $12.5 billion amassing some 17 thousand patents. Will this war chest be strong enough to defend itself in the lawsuit that attacks its hugely successful Android operating system in its very fundamental functions, such as "the ability to send advertising to people related to a search query"? Google has also been attacked on the content-side, held responsible for "not doing enough against piracy" by Senator Chris Dodd who has emerged as the main lobbyist of the Motion Picture Association of America. While nasty (as attacks are meant to be), this initiative is also pretty dumb as it completely misses its target, namely the companies who actually pirate the content and allow free streaming for everyone. These are just two of the recent major attacks against Google in the US. Hundreds of other claims are pending abroad, namely in Europe (see for an example here) where media companies are losing the plot of the Internet age. Not easy to be successful....
Thursday, 31 October 2013
This video by The Economist is a great summary of the evolution of tablet operating systems, showing how successful Android has been in this domain as well. Given the competitive dynamics, Android's share growth is likely to continue as it benefits from the cutthroat competition among tablet manufacturers. Moreover, it is built on the previous success of Android as a mobile operating system. The i-phone was launched in 2007 but even that year may not represent the beginning of the story. Rather, it is 2005, when Google purchased Android, a small mobile start-up at the time, with the goal to make search available on mobile devices. From the beginning, the idea was to make it an open system (even making the source code available), giving it away for free (with Google search embedded in it of course) and making it open for app developers. Even before the first Android phone appeared, there were already many apps available for Android. This strategy required quite some foresight from the Google founders on the evolution of the mobile Web.
Wednesday, 30 October 2013
With advertising dollars quickly migrating from traditional media to the digital world it is reasonable to expect that ad agencies will change as well. Digital marketing is all about measurement - goes the newly discovered 'big data wisdom' - so ad agencies need to adapt and acquire serious analytic and data-mining skills. To be fair, they all have been doing this in the last years, acquiring small boutiques or developing in-house digital analytic capabilities. For the industry it is more worrisome that, increasingly, large data-driven consulting firms seem to make a strong move in the digital advertising business. Deloitte, Accenture and Booz-Allen, the largest operations consultants have all developed capabilities in this area or picked up ad agencies specialized in digital marketing. The most recent such acquisitions are by Deloitte, which purchased a Seattle-based social media agency as well as another firm from Brisbane, specialized in Web development. Do consultants represent a threat to traditional ad agencies, given that they naturally have strength in data analysis? To some extent they always did. Professional services firms have invaded each others' territories before: accountants got into consulting, as did ad agencies themselves. Most consulting firms had marketing practices before and wouldn't shy away from 'strategic branding' projects. However, the current focus on data is missing the key issues in digital marketing: (i) creativity and (ii) integration. In a context when a large number of new tools are available for marketers, these aspects of value creation are far more important than analytics, much of which can be subcontracted to small data-mining boutiques. The point is not to say that "analytic capabilities do not matter" - they do - but that creativity and integration matter more than before with the proliferation of new media platforms and non-standard marketing vehicles. Do consulting firms have an advantage in these critical domains? Probably not.
Tuesday, 22 October 2013
|Release data plotted over time (MPAA represents majors)|
Thursday, 3 October 2013
Luis Cabral at the first meeting of the NYC Media seminar series (which I highly recommend to media-minded academics). The full paper can be seen here. The X axis measures the box office performance of each movie shown at its opening week compared to the second best performing movie that week. The graph clearly shows that being # 1 on the opening week has a disproportionate effect for the intake of the movie over its full life-cycle. Concretely, while the average box office revenue is about $22 million, the #1 movie takes in on average $93 million. This boost comes from two effects. One is the effect of 'surprise', i.e. the revealed information that the movie is good. More importantly, the much larger second effect (accounting for about $45 million on average) is an awareness effect, i.e. free advertising for the movie in the press and elsewhere. The data contains about 10 thousand feature films released in U.S. theaters between Jan 1, 1982 and Dec 31, 2009. It is important to realize that this advantage only counts the box office revenues. If we were to count all derivative revenues for the movie, the advantage of being # 1 is probably much higher.