Could prediction markets help you create an engaging long-term experience?

Google has been experimenting with an internal prediction market to forecast their product launches, office openings, and some of their other important events. A prediction market is a virtual stock exchange where people buy and sell stocks of specific events (e.g. A democrat will win the U.S. presidency in 2008) which will each payout $1 (usually virtual money) if the event actually occurs. With many people buying and selling, the resulting price of the stock then represents the probability that the event will occur. (E.g. $0.50 = 50%) More on prediction markets.

Google’s prediction market is an experiment on whether these markets accurately forecast the likelihood of events. (read article for more).

Google came up with a couple conclusions:

1. Prices in their prediction market accurately reflected the likelihood of events actually happening
2. As time went on, the accuracy of these predictions improved

So if you are not one of the world’s largest companies, with a thousand or so staff to participate in an internal prediction market –how could such a market help you?

Do you run any contests or execute events with thousands of consumers?

Would you like to tap into the knowledge these consumers?

Does your company or organization have a “gatekeeper” who decides what content will best engage your audience at large events? – (E.g. chooses the bands for a festival, chooses the set of speakers for a conference)

Think about combining a contest with a prediction market, giving your audience some of the “gatekeeper” role, to create an engaging and long-term experience while also generating consumer insight.

Example:

I was lucky enough to attend a presentation by Piers Handling recently, the CEO of the Toronto International Film Festival (TIFF). As I learned, TIFF prides itself on being a very audience centric organization. It relies heavily on a group of 15 “programmers” (gatekeepers) to pick the movies that draw approximately one million admissions* per year, and international acclaim. It was also interesting to hear, that one of the ways TIFF judge the quality of their programming choices is to see whether the chosen films or directors win international awards in the years after appearing at TIFF.

Would TIFF dare to open up a spot in its program to an audience member? – giving them the some of the gatekeeper role.

TIFF could combine a prediction market with a contest (or likely a series of contests). The prediction market would have the typical incentives to earn simulated money by buying and selling virtual shares in movies, directors, and actors. The contest could then provide additional incentive. The most successful participant would become be a temporary “programmer” picking a film for the festival as well as getting all the access that this position affords. This could be global too. Yeah, that’s another thing I learned, TIFF attracts a significant audience with events run all over the world.

If they did, not only would they have a highly engaging contest, but the existing 15 programmers may find that they also get another useful source of information to identify, assess, and ultimately choose the great films we see at TIFF every year.

Key things for you to think about, if you want to run a prediction market:

• Number of people – to have market accuracy, you need a lot of people
• A public event(s) (or information you can make public) to “bet on”
• Relevance of the event to your business

*895,879 admissions were reported for 2006 - TIFF