Making Sure Bets On Online Prediction Markets

Predictions

from the psst-i-have-a-tip dept

Online prediction markets like Intrade have started to make a name for themselves in this year’s exciting political arena. By trading futures on political outcomes like the Democratic and Republican presidential nominations, the idea is that the efficiency of the market will ultimately serve as a better predictor of outcome than traditional methods like exit polls. However, as some traders are starting to find, prediction markets still have many inefficiencies in their current state, allowing shrewed traders to make tidy profits as a result. In the Intrade market, a political future is worth $10 if the political outcome occurs, and $0 if it does not occur. Therefore, a $5 market price on a particular future is supposed to correlate with a 50% prediction of that future to occur. However, in practice, certain factors push these prices out of the range of their realistic probability. For example, contracts for Ron Paul’s predicted as high as a 9% chance of him being selected as the Republican nominee, when in reality, his chances were probably closer to nil. Perhaps driven by a small cadre of Paul supporters, the Intrade market was able to be swayed by a small number of trades. Even today, Intrade shows Paul at a 1.2% — which is a great opportunity for someone to make money on taking the short side of that contract. On the Democratic side, Al Gore supporters have put a 1% chance on his head, who never even appeared on the ballot — wishful thinking indeed. That said, the limited amount of volume on these contracts precludes anyone from actually making a crazy amount of money on them, but it does remind us of an important fact about markets — while they do tend to come up with the right answer in the long term, in the short term, they are incredibly susceptible to very human factors like optimism and group think.

Filed Under: accuracy, politics, prediction markets

Perhaps The Paperless World Isn't Such A Myth

Predictions

from the mythbusting-the-myth? dept

At the beginning of the personal computer revolution, there were plenty of predictions concerning things like the “paperless office.” However, during the 90’s it was widely decided that the paperless office was a myth — and, in fact, the use of computers had actually generated even more demand for paper as there was more stuff than ever before to be printed. Perhaps, though, the myth of the paperless office was a bit of a myth itself. Or, at the very least, it was merely off by a decade or so. The younger generation is less interested in using paper and more and more people are figuring out that they really don’t need paper any more. This won’t mean the end of paper over night, but it certainly appears that we’re finally reaching a point that some had predicted decades ago, where people are recognizing that it’s easier to store things digitally than on paper.

Filed Under: paperless

Bill Gates Joins The Growing Social Network Exodus

Predictions

from the nothing-lasts-forever dept

Extrapolation of what’s happening “now” is one of the most dangerous things in trying to predict the future. If something is growing quickly today, it doesn’t mean that will last. Take social networks for example. Historically, they have a pretty standard pattern. There’s a huge rush of growth, as people think it’s new and neat, and they sign up all their friends. Then there’s a flat period where people are still using it, but some begin to question why. Then people start to realize that, beyond reconnecting with some old friends and acquaintances, there really isn’t that much to do there — and that realization may come even sooner if they’re getting bombarded with advertisements. It happened way back in the ’90s with Six Degrees. It happened with Friendster in the first half of the decade. Yet, some people and companies believed that MySpace and Facebook would be different. Certainly, both companies recognized this problem to some extent, and have worked to add more things that you can “do” on their sites. Both still get a ton of traffic and usage and aren’t going anywhere soon. However, there are some worrying signs. Google recently noted that the ads it’s put on MySpace don’t perform very well (which is something of a problem, since Google has guaranteed at least $900 million in ad revenue to MySpace). And, now, reports are coming out that users are, on average, spending noticeably less time on both MySpace and Facebook, with some leaving it behind. And, what better way to amusingly drive that point home, than to point out that even Bill Gates has killed his Facebook page just a few months after Microsoft dumped $240 million into the company?

Filed Under: bill gates, growth, social networks
Companies: facebook, myspace

What Happened To The Expected Boom In Airport Security Tech?

Predictions

from the the-gov't-doesn't-do-innovation dept

After 9/11, there was a lot of talk about how there was going to be a new boom in the airport security technology sector. People expected that investment would go into that field and we’d be seeing a lot of new innovative technologies to keep us all safer. Yet, here we are, over six years later, and there’s very little in the way of new technologies hitting the market. Jim Harper points out that part of the problem is that the TSA, as a big gov’t operation, has little incentive to improve security. Instead, he suggests, if the airlines themselves were responsible for security and liable for security failures, we’d suddenly see a lot more innovation.

Filed Under: airport security, privatization, security technology

Everything Old Is New Again: The Return Of Push

Predictions

from the this-ain't-your-father's-pointcast dept

Recently I mentioned that I think services like Twitter are likely to help stitch together the variety of short-messaging options that are becoming available to mobile users. There’s another story here, though: the shift in net architecture that’s taking place in order to support these new services.

Jive Software has an interesting blog post about one of these technologies: XMPP, aka Jabber (ReadWriteWeb also has a thoughtful post on the matter here). Jabber is an increasingly popular XML protocol that powers instant messaging services like Google Talk — and many other things. As the Jive post points out, Tivo is beginning to use XMPP to notify its customers’ set-top boxes of schedule updates. The old alternative involved each Tivo polling a central server every so often to check for updates, the same way that email and RSS clients do. But that’s inefficient, particularly if the polling needs to be done frequently. An IM protocol is ideally suited to delivering messages with little latency and in a lightweight manner (and will know how to traverse users’ NAT routers, too). XMPP is particularly extensible and comprehensive, making it useful for many different applications.

And XMPP isn’t the only technique being used to solve these problems. Comet is another emerging technology with a similar purpose, but focused specifically on the web. Instead of repeated polling, a Comet app keeps one very long-running HTTP connection open, along which messages can be sent without waiting for the browser to ask for them. This lets applications like Gmail and Meebo deliver performance that’s virtually latency-free.

Although I’m tempted to avoid the baggage that comes with it, this trend does fit pretty comfortably into the push/pull paradigm of the late 90s. I have good reason for that reticence: as anyone who’s lived through periods of both thin and fat client triumphalism knows, enthusiasm for different technological approaches is cyclical, driven by whatever applications people consider most exciting at the time, and along the way shoehorning a lot of ill-suited apps into the hot paradigm du jour.

But this time the demand for push protocols is more than just a fad. It’s also a sign of our increasing technological sophistication. Polling is no longer an option for a lot of reasons, but all of them have to do with computing’s ubiquity: there are too many users, too many devices, and no patience for less than immediate performance. Broadcast was fine when technology was just entertainment; pull was fine when technology was just a supplement to our lives. But now it seems that the network is driving our daily activities, and we can’t wait around for it to do so.

Filed Under: comet, push, xmpp

Would Udi Manber Work for MicroHoo?

Predictions

from the trouble-in-the-HR-department dept

There may be nobody that knows the excitement of joining the hot-Internet-company-du jour better than Udi Manber: Chief Scientist at Yahoo, 1998-2002; CEO of A9.com, 2002-2006 (A9 was hot for a minute or two, right?); VP Engineering at Google, 2006-present. Udi’s resume exemplifies the aspirations of many a talented computer scientist and/or software engineer, all hoping to work for the next bright star in the Silicon Valley sky. And Udi is probably just one of many who have successfully leapt from one hot, cool company to the next. The New York Times thoughtfully considers the consequences of this pattern in light of the proposed Microsoft-Yahoo merger.

It is indeed unlikely that a combination of these two giants would be very appealing to those finicky tech workers who are looking for the next big thing. However, it’s been awhile since either Microsoft or Yahoo has been the next big thing, and yet neither have shown much trouble filling their ranks; clearly plenty of workers are content to have a well-paying job at a stable company. It is also probable that some employee attrition would follow on the heels of a completed merger. But this is not the case of start-up being acquired, where the start-up company’s technology is often in the early stages of development and the buyer is paying as much for a smart, ambitious team as it is for the lines of code that have been written. In fact, part of Microsoft’s plan may be to trim the fat beyond the 1,000 layoffs already announced by Yahoo, and some of those jumping ship may simply be sparing the efforts of the executioner’s blade.

The human resources challenges associated with the evolution of a company from hot stuff to yesterday’s news have already been priced in to this deal. Those challenges are certainly correlated with Yahoo’s underperformance over the past few years and, subsequently, to the price of its stock. And Microsoft has no doubt considered how these challenges might continue or be aggravated by a merger; their offer reflects such considerations. Yahoo is a mature brand with a very large audience and, recruiting and retention problems notwithstanding, Microsoft believes that they can wring greater profits out of those assets than Yahoo’s own management has been able to. Don’t expect MicroHoo to become an exciting upstart that appeals to the likes of Udi, but don’t expect that this fact will deter Microsoft from pressing forward with their plans.

Filed Under: hot companies, recruiting, udi manber
Companies: microsoft, yahoo

Can Dropping Fees Revitalize eBay?

Predictions

from the time-to-reinvent dept

Over the past few months, more and more people have been noticing that eBay seems to have stagnated. Sure, it’s been making plenty of money and still gets a ton of traffic, but it’s not growing as fast as people would like, and there are numerous signs that it’s starting to plateau. With Meg Whitman stepping down and John Donahue stepping up to the CEO position, the company has now announced lower fees and “tightened” seller standards to try to cut down on the rampant fraud that has managed to scare off many potential eBay buyers. Amusingly, this lowered fee comes just a day after new research hyped up how much eBay was saving people. The researchers behind the report suggested that, if the economy does go into a real recession, eBay should benefit as people switch to eBay searching for bargains. If that were truly the case, though, then it would seem eBay wouldn’t have to be cutting fees.

The real problem may simply be that eBay is too constrained by its own success. It’s attempts at branching out with things like Skype and StumbleUpon certainly haven’t done much to help eBay, as the eagerly prayed-for synergies turned out to not exist. eBay’s own attempts at revitalizing its core business have been equally pointless. So, it seems like something of a desperation play to lower fees, but it’s difficult to see it having much of an impact. Certainly, it will make eBay sellers happier, but the transaction fees aren’t the barrier eBay is facing in staying relevant. In fact, eBay itself should know this. When Yahoo tried to compete with eBay, it’s key selling point was lower transaction costs for sellers, and that didn’t do much to attract users.

eBay finds itself in a tough position. If it changes anything in its core business too drastically, it risks alienating those who helped bring the company to its current position. But, not changing will continue the stagnation process and certainly make the hole it needs to dig itself out of that much deeper. In figuring out a new path, it may want to take a few lessons from Amazon, which has been successfully reinventing itself from the inside with its web services offerings, while still striving to keep its core userbase satisfied. Amazon recognized that it could expand into a non-competing business that leveraged its strengths. While some might say that’s what eBay tried to do with Skype, that was an acquisition, rather than a ground up offering, and it’s still never been clearly explained what synergies there are between the two. In contrast, Amazon’s web services offering clearly builds on its experience managing large scale backend operations, as well as its ability to handle a massive number of transactions. eBay probably should be trying to become the “Kinkos” of the web — a small business’s ideal partner — but has yet to figure out how to do so.

Update: As noted in the comments and elsewhere, this isn’t so much a cut in rates as a change in rates. For many sellers, the fees will actually be higher.

Filed Under: auctions, fees, growth
Companies: ebay

Where Does The Internet Rank As A Utility?

Predictions

from the air-water-food-shelter dept

Network World has written up a somewhat interesting article speculating on what the world would be like if the Internet was taken away somehow, asking various “futurists” what the ramifications would be. Fortunately, most of the respondents don’t see such a thing happening — unless a major catastrophic disaster occurred in which losing the Internet would be the least of our worries. But from there, they go on to predict the failure of web-based businesses such as eBay, Google and then just about any business that processes credit cards in a modern way. The futurists also discuss how society has become dependent on offshoots of the Internet, citing examples such as people’s addiction to email, online dating and MMORPGs.

None of the predictions are particularly surprising, but the story does bring up the question of how vital the Internet is (or isn’t, depending on your point of view). A couple examples come to mind where the Internet has been shut down temporarily. In mid-2007, the tactics of cyberwarfare were demonstrated against Estonia. After those cyberattacks, though, attention focused more on who was responsible rather than on the damage, since the actual effects to the country were pretty minor given that the interruptions only lasted a few hours, and not days or weeks. Closer to home, there was the 2003 power outage in the Northeast — but that was electricity, not just the Internet. So based on these examples, it seems like the Internet isn’t quite as important as water, gas or electricity, but perhaps it could be gaining on the power grid. Additionally, it’s reassuring to know that futurists aren’t projecting a ‘Max Headroom’ dystopia where telecommunications are more important than Maslow’s hierarchy of needs.

Filed Under: cyberattack, estonia, internet