The Key to Keeping your Prediction Marketplace Active and Successful

This post is about a key, maybe THE key, to keeping your prediction marketplace active and successful. The short answer?

Create markets more frequently.

Prediction markets are just like any other social media community. For example, the most popular use of social media is blogging. Assuming you already have something interesting to blog about, what is likely the number one way of starting a blog and a community of people who follow and participate in it?

Blog more.

You don't see many vibrant blogs where the author only blogs once a month, or creates 10 blog posts in one day then doesn't touch the blog for a month or two.

Likewise, you can probably expect, that as an administrator of a prediction marketplace, it's important to keep the frequency of posting new markets high and consistent.

One particular client from an analysis we describe below was found to be creating markets about once a week, and they get great participation.

On the other extreme, a very promising marketplace that had a ton of early participation hasn't created any new markets since the second week it launched and participation has flatlined. They want to keep the marketplace going but they're essentially starting over to get people interested again.

So a good rule of thumb to take away from this: put a date on your calendar at least once a week to make sure a new market is created.

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When people first explore using prediction markets they still ask: "Do they actually work?" and "Will people understand them?" I think we've done a pretty good job addressing that they do indeed work:

http://inklingmarkets.com/homes/dotheywork

And from our interaction with both users and administrators using the thousands of Inkling powered marketplaces out there, people from all demographics understand and enjoy them. Here's a quote from SwelJoe at news.ycombinator.com on startups that got started with Y Combinator:

"...A couple of others have really impressive reach outside of the usual Web 2.0 set and into the 'real world' (Loopt, in particular, though Inkling Markets is everywhere, too...my dad has used Inkling's product, and he just got broadband for the first time last week)."

But to avoid the problem described above of the marketplace languishing, administrators should perpetually be asking themselves: "How do I keep our prediction marketplace active?"

We've blogged and written about incentive strategies and know that people need SOME form of incentive to participate in a marketplace. And as we've said before, most people we talk to immediately think of awarding prizes to top traders. But we've found the biggest incentive in prediction markets, and more broadly in any social media, is simply to create an interesting place to go. "Interesting" means participants will get something out of it either by communicating with others, learning something new, or feeling good about contributing. It is not just about giving prizes or having a slick interface.

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But words are words and proof is proof. We decided to see if we could analyze some Inkling data to see if there is a real correlation between how often markets are made and user participation.

We randomly picked 40 Inkling powered sites to start analyzing.

Since Inkling marketplaces that are largely about elections and sports behave much differently than markets predicting revenues and project deadlines, we picked all private marketplaces run by companies.

We wanted to make sure we had marketplaces that were making a serious effort to invite people and get market questions made. So these sites all had 15 or more users, and 20 or more markets created during their lifespan.

These 40 sites span various industries (energy, consumer products, real estate, gaming, entertainment, etc.) and they were created at various points during Inkling's history. Some of them are currently active and some of them are not.

A further selection criteria was then applied. The average trader had to be at least 90 days old in the Inkling system. We did this because we wanted to look at continued participation in the marketplace 2 months after their first trade and not have this study influenced by the novelty effect, which you'll see below.

Following this filter, 15 sites made the cut. The 25 other sites either didn't run their pilots long enough or were too new to be included.

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What's a good variable to determine how active a prediction marketplace is? Well that can be a bit arbitrary. But let's choose something that has a low bar that seems worthy of improving.

How many people in your marketplace make a trade 2 months after their first trade?

This allows the novelty to wear off.

The other variable chosen is the percentage of an Inkling marketplace's "lifetime" spent creating markets.

"Lifetime" is defined as the time in between a marketplace's 5th trade and it's last trade. This was picked to avoid the kicking the tires phase where someone signs up for a pilot and makes a few test trades before taking some time to really launch the marketplace.

We created a scatterplot of these 2 variables.



And it does seem that there is a linear relationship between the two variables with a Pearson correlation coefficient of 0.73.

The correlation coefficient also appears to be statistically relevant. If our null hypothesis is that the two variables are not correlated, we look at our T statistic, and it's 3.84. 3.84 with 13 degrees of freedom (a sample size of 15 sites), has a p value less than 0.01, which is definitely smaller than the popular cutoff of 0.05. So we can reject the null hypothesis and accept the alternative hypothesis that the two variables are indeed correlated.

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This exercise was fun and informative, but correlation doesn't mean a cause and effect relationship was found. Both of these variables could be dependent on a third variable that isn't analyzed here.

It could be surmised that both of these variables might be equally influence just by time. For example, both administrators and traders are influenced by a company's holidays and business cycle.

However, we might be able to anecdotally disprove that from our interactions with the sites analyzed here. Most of them represent large international businesses, where the Inkling administrator is not tied to the same projects and timelines as most of the traders.

To prove a true cause and effect relationship here, it would be necessary to perform a well designed experiment, and maybe this correlation could inspire one. Perhaps an experiment analyzing this type of relationship has already been performed, even about other social media systems like blogs.

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Prediction markets are like many other systems. You get what you put in. If an administrator puts in the effort making questions, cashing markets out on time, communicating with traders via the discussion boards, announcements, newsletters, etc., the traders of a prediction marketplace return that investment by continuing to come back and offer their wisdom in the form of trading and discussion.

And making more markets doesn't have to mean more work for an administrator. Inkling makes it easy for all participants to create their own markets and we encourage every administrator to keep this feature turned on. And if you're plumb out of ideas for new markets this week, you can always just borrow some from our public site.

Managing multiple Inkling sites

Having purview over lots and lots of Inkling marketplaces means we get to see meta-trends in how people use our product.

One trend we've been mindful of for awhile is the duplication of questions in many of these marketplaces. While our clients are busy asking questions related to their business operations, competitors, and industry segment, they also ask timely, "fun" questions according to what's going on in popular culture and business across the globe to keep their marketplace fresh and active. For example, questions on public policy and politics, financial market performance, industry-wide metrics, who is going to win American Idol, and soccer match results in Europe and Latin America are concurrently being run across dozens of marketplaces .

Coincidentally we also have a vibrant public marketplace where many of these questions are being asked every day and where the same traders and administrators who are using our private marketplaces are registered because that's where they first experienced Inkling.

Finally, add to the equation the terrific publicly available Inkling marketplaces that have their own niche audiences that many of our public marketplace users also enjoy participating in.

Taking all this in to consideration we decided to introduce two new capabilities:

• A "marketplace switcher" allowing you to hop from any marketplace you are registered in, to another; and
  
• The ability to replicate a market from one marketplace in to another
  

Marketplace Switcher

If you belong to multiple Inkling marketplaces and use the same email address or openid amongst those marketplaces, you'll now be able to click on the marketplace's name in the upper right hand of the screen like this:

And a drop down will appear like so:

When you click on a marketplace in the menu, you'll be taken to it. Simple as that. And if you've discovered open-id you don't even have multiple usernames and passwords at these different marketplaces. Sweet.

And of course each person will have different marketplaces available in their marketplace switcher depending on where they've already registered and what email address they used. If you belong to multiple marketplaces but used different email addresses, you can always go into settings and start using the same email address to take advantage of the marketplace switcher.

Replicate Markets From Any Marketplaces

If you have multiple marketplaces in your switcher, now you can replicate any market from one marketplace to another.

Let's go through an example. Just like many of our clients do, we run a private marketplace (The Inkling Labs Marketplace) where company employees, friends, and colleagues trade on the performance of features and project ideas we're thinking of rolling out. Sometimes we even ask some of these questions in our public marketplace first, then ask them in Inkling Labs.

A week or so ago on our public marketplace, we published a market about how many people would use a feature called "pages" or "spaces" that would allow someone to group a bunch of markets together and provide meta data and a discussion area about that group of markets:

We thought this would be a great market to run on Inkling Labs as well. So all we have to do is hover over the market listing:

Hover over the options menu and select "Create Replica..."

And a box pops up letting us choose which marketplace we can replicate this market to:

Assuming we're logged in to the target marketplace, we're sent to a confirmation screen:

We click continue and the market is replicated on another marketplace!

Make any other tweaks needed (e.g. expiration date, further details, etc.) and we can then submit it for publishing or publish it directly if we're administrators.

This obviously can also work the other way. If you're from ACME Corp. and have a question you would like to pose to the general public, replicate it to our public marketplace and submit it for publishing.

We've been using these new features ourselves quite a bit the past couple days and hope you'll find them valuable as well - especially since publishing new markets on a regular basis is one of the keys to a successful marketplace. We've made it dead easy so no more excuses!

The Logistics and Freight Industry

Given the popularity of the case studies we shared on our corporate web site a couple months ago, we've been working on a new section where we describe use cases for about a dozen different industry segments where we've seen "low hanging fruit" for the use of prediction markets. One write-up we finished recently was for the logistics and freight industry. We've done some work with a couple of these types of companies and while it may not sound like the most glamorous industry in the world, what they do is actually damn interesting. Here are some of the things companies have been doing and some ideas we thought up as well:

Supply Chain Management

• Understand risk probabilities of supply chain interruptions and inefficiencies (e.g. network congestion, equipment failure) and unexpected costs
  
• Forecast equipment supplier performance on service level agreements and quality control
  

New Product/Service Development & Business Process Change

• Forecast changes in performance metrics because of changes in business processes or new technologies
  
• Improve product/service development lifecycle: better forecast timelines, human resource and capital requirements, and budget requirements
  

Competitive and Regulatory Environment

• Understand impacts of changes in public policy in countries where business is being conducted related to operational costs, safety measures, and security protocols
  
• Leverage employees, supply chain partners, customers, and subject matter experts to gain comprehensive view of sector trends
  
• Compare idle time, distribution volume, and other available metrics with primary competitors
  

Customer Relationship Management

• Forecast demand of individual customers and other business performance metrics
  
• Contribute to profit margin and operating margin forecasts
  
• Predict customer satisfaction levels (ahead of time)
  

What's notable about these use cases is they all tie back to operational risk factors freight and logistics companies regularly experience, so figuring out something like the Annual Loss Expectancy (ALE) which can ultimately lead to the calculation of a Return on Investment (ROI) is pretty straightforward - a topic coming soon in another blog post. :)

Improved admin menus

We launched a new admin menu design this weekend.



We found the old menus weren't ideal in a few ways. For example, when the new market listings were released, the old menus covered up some useful pieces of data immediately when hovering over the row.

These new menus allow folks to have the menus stay a bit more out of the way until you really need them, just hover your mouse over the "Options" menu item on each market row.

New support/forums site

Today we are launching our new support and forums site: support.inklingmarkets.com.

A tad unfortunate, but if anyone had a username/password at our old forums.inklingmarkets.com site you'll have to create a new account at support.inklingmarkets.com in order to customize what issues you're notified of and how you receive updates.

The good news is that you don't even really need to create an account if you don't want to. You can create new topics with just your email address and without registering for anything.

There's also plenty of other good news.

There's now a knowledge base that's entirely searchable. In fact, when you search support.inklingmarkets.com, you'll be searching through discussions and knowledge base articles to help find the answers or insight you need.

The forum is now entirely synchronized with email too. So both you and the team at Inkling can reply and create new discussions all from within email without having to go back to the forums site at all. This will allow us to help answer any questions or issues even faster.

Stay tuned for more knowledge base articles and answers to frequently asked questions.

We think you'll like the improvement.

WYSIWYG, character counters, user reports

Last night we deployed the TinyMCE "what-you-see-is-what-you-get-editor" (wysiwyg) from Moxicode on market/stock descriptions as well as announcements.



That should make it even easier to add links and images and some formatting to your descriptions


A couple other things that were added recently
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To make it easier to create market questions and stock names in the bounds of how many characters are allowed, we added a character counter below a few things to give you an indication of how many characters you've already used up:



Also for admins using the user report, we've added users' answers to your profile questions in that report. For example on our public site (home.inklingmarkets.com), our admins see these added fields to the report:

Open Source Prediction Markets - $1,295 prize

The guys at Thoughbot; are running a new marketplace about how popular some open source projects are going to be. They are using for a metric the number of people watching each project on Github;.

https://opensource.inklingmarkets.com/;

This was a great idea! :)

And for those savvy Inkling traders who are also developers, Thoughtbot is offering a free training class (worth $1,295) to the top trader on Friday.

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An impetus for the marketplace was to get help in choosing open source projects to use for certain tasks. This is a problem that follows developers no matter where they work, whether large enterprises or small 1 person shops. We don't want to reinvent the wheel so we look for open source projects or off the shelf software that we can integrate and help with our jobs.

I won't go into too much developer speak, but many of us are faced with this decision of "Should I buy/use X or Y or Z?". If I choose X, does something better already exist out there, or will exist in the near future. And will X continue to be supported?

Too often we choose things that become obsolete.

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So here might be a good example that we can all relate to.

About 5 years ago, I was doing some moonlighting and building an auction site for construction equipment. I had carte blanche in choosing how to build the thing. This was in my Java days. So I picked what I thought was going to be a strong framework of the future: Keel.

I won't go into the nitty gritty details of the technology, but for background, Keel was a bit more like a meta framework that wrapped together other frameworks and projects. Things like: database persistence, scheduling, security, MVC.

Anyways, it sounded like it would save me oodles of time from having to wrap all this stuff together myself.

And Keel was getting tons of press. It was mentioned in so many technology magazines and blogs. This was going to be awesome.

And then it wasn't.

http://keelframework.org/

5 years later, and the site just says "Keelframework has been deprecated."

The auction site definitely had other business issues during it's execution, but it wasn't helped that even a year or so after it was built, the framework was dying out, and developers didn't want to work inside this obsolete project that wasn't getting maintained anymore.

That was a FAIL in choosing a technology. If I had a prediction market back then that said something like "The keel framework has 30% chance of still being maintained in 2 years" or some proxy for it's health (like github watchers), I would have stayed away and hopefully have found something with a bit more life to it.

For example, 2 years after this project I was faced with the same type of decision. Which technology should we use to build Inkling? I chose Ruby on Rails. And so far, this was a very good choice compared to the one I made with Keel.

In fact, it's the lessons I learned with Keel, that actually gave me confidence that Rails was a different thing altogether. I now knew some warning signs to look for.

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Now I'm not saying prediction markets are going to solve this 100%. None of these prediction markets are saying "you have 100% chance of succeeding with this". But we give you some level of confidence though of what your chances might be. Use them as another weapon to fight obsolescence.

It's definitely a good way to get the opinion of other folks that have been down this road before and have lessons to share when they place their trades or share their comments in the market discussion.

If the authentication project in Github only has a 30% chance of having a ton of watchers in a few months compared to other authentication projects, you might want to think pretty hard about that decision.

You don't want a "your framework is deprecated" message staring you in the face.


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And Coming Soon...

For all the folks that like using multiple Inkling sites, we are releasing a site switcher soon to make it much easier to trade in multiple different Inkling sites you have going on. For example "home.inklingmarkets.com" is always fun, but it should be easy to switch back to the one you have at work and other great ones out there.

Also you'll have the ability to clone markets from one marketplace to another. So if you see someone already asking some great question, a couple clicks and you can publish the same market into your marketplace.

How to save money, even on personal shopping, with prediction markets

I have a few stories about using Inkling's prediction markets for my own personal shopping habits. Maybe they'll spark some new ideas on using them to save money.

The biggest win was when I used a market to save $100 on buying a new TV.

The basic gist is that I feel I can save some money, if I could predict whether or not new products or sales are coming soon.

Especially the sales part.

I can take the probability of a sale happening, multiply it by the money I expect to save, and that gets me my "expected savings". Expected savings is like expected value, a fun lesson from probability.

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Let's look at saving money on a TV.

My wife and I were fortunate enough to be able to buy a new TV over the holidays. We had been saving for awhile, and finally got to replace a 200lb+ analog TV we've had for about 7 years. Needless to say we were excited to see what this HDTV stuff is all about!

I'm an extremely conscientious shopper, especially with these big ticket items. I debate and debate and debate. We finally settled on a Samsung LCD LN52A650, and decided that we'd get it in time for company and entertaining over the holidays.

Just as I was about to buy the thing, the worrier in me that hates seeing electronics fall in price just after I buy something, decided to see what the odds might be of the price coming down. Specifically, would the price of the TV come down at least $100 before Xmas. If the odds were pretty low, I'd probably stop spending all this time looking online and get the thing already:

http://home.inklingmarkets.com/stocks/53693/trades/new

And even though this only ran for a few days, the market had a little better than coinflip odds that I could save at least $100.

In other words, my "expected savings" then was at least $100 * (50 to 60%), so about $55 or more I could save if I wait. If the odds had been 20%, my expected savings would have been about $20, and I probably would have just gotten the task done with immediately. All the looking online costs me time, of which little I have.

But $55+ in expected savings seemed worth it.

So I came back to Amazon a few more times over the next few days, and sure enough, the price came down, and I pulled the trigger.


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Not time to buy a new Apple laptop.

Running a software company, I go through a lot of technology, including various computers. These days I have a 15 inch Macbook Pro that has 4GB of memory. And crazy enough, the memory just isn't enough to run all the things that I need to run day to day.

In January, Apple announced a new 17 inch laptop that can run 8GB of RAM. Now the 17 inch is far from ideal for me, and I don't want to carry it around. But that extra RAM and horsepower sure would be useful.

Again, I went to Inkling to get an idea of how probable would Apple release a 15 inch laptop supporting 8GB in the next 6 months. I figured if the odds were too low, it might not be worth waiting, and maybe I could bear the heavier/bigger laptop so that I could get the benefits of a more powerful machine today.



From a cost savings perspective, I'd probably have to spend at least $300 more too on the 17 inch.

With the chances of a 15 inch 8GB Macbook Pro coming between 70% and 50% (about 60%), my expected savings of waiting for the 15 inch this summer would be about 60% * $300, or about $180. Now $180 dollars isn't that much in terms of the time I waste in my CPU/memory problems right now. :)

But I just wanted to walk through the expected savings example.

So savings + not really wanting to get such a heavy machine, at 60% chance of seeing the laptop I do want by this summer, I'll wait it out.

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What video games are coming.

I've also started to use Inkling to help with shopping for video games. I was recently in the market for a new Wii game. Well, I really want to play a first person shooter game on the Wii. So I went looking, and found that a game called The Conduit is coming soon in 2009.

I thought I'd check to see what the odds might be for The Conduit coming in the first half of 2009, as well has how good the game might be.







The chances have been in between 50 and 70% that it would make it's release date. And also no one wanted to move the price off of a Gamespot score of 8.

I'm not an extremely frequent video game player so there's no real urgency in getting any particular kind of game. I just don't want to have a good probability of it going to waste when I could have waited for a much better one.

So with 50-70% chance of having a pretty good first person shooter by June 2009, I'll wait until this summer to get a new game.