Predictive Markets & Experimental Results

Slide 1: The MindReading Agency Predictive Markets & the Wisdom of Crowds Experiments A Market Research Project by BrainJuicer® Produced December 2005 December 2005 Potency  Objectives  Glossary  PI  Ratings  Attributes

Slide 2: Extraordinary delusions and the Madness of Crowds, Charles MacKay (1841)

Slide 3: The Wisdom of Crowds – How the Many Can Be Smarter than the Few, James Surowiecki (2004)

Slide 4: • Diversity • Independence • Faithful aggregation Enables a crowd to be wise

Slide 5: Collective Guess Actual Weight = 1197 lbs = 1198 lbs Galton’s surprise findings.

Slide 6: Rockwell – Down 3% Lockheed – Down 3% Martin Marietta – Down 3% Morton Thiokol – Down 12% How did the market know?

Slide 7: Qu. Is there a more efficient alternative?

Slide 8: X 596 Polls ¾ (1988 - 2000) IEM - The original decision market

Slide 9: French – Referendum 29th May – Betting 28th May – Polls 30th May - Result BetFair (70% turn out) IPSOS Non 51.0% Non 53.6% Non 54.9% Oui 49.0% Oui 46.4% Oui 45.1%

Slide 11: 3 hypotheses to test on… Predictive Markets’ & Wisdom of Crowds 2. A random collection of 500 individuals will be as accurate as a targeted sample 4. Predictive Markets will be as accurate as monadics 6. The ‘crowd’ answering for the market will be as accurate as people answering for themselves

Slide 12: The Experiments Monadic Tests of 3, 10, 15 Predictive Markets of 3, & 20 ideas, with matched 10, 15 & 20 ideas, with targeted samples of 100 diverse ‘crowds’ of 500

Slide 13: Predictive Market 1 - UK Top Two Box Purchase Intention Results – Predictive Market 2* Monadic Test Predictive Market 2* New Product Significant with matched samples of With diverse group of 500 Concepts Differences 100 in the target market people - *no betting (Top 2 Box Purchase Intent) (Top 2 Box Purchase Intent) A 85 85 B 83 76 + C 81 80 D 78 86 E 74 70 67 67 UK Norms (top 2 box) F 64 28 *** G 64 28 *** H 54 35 *** I 49 45 J 43 16 *** Respondent Base Sizes: Monadic = 100 per cell / Predictive Market *No Betting = 507  A diverse crowd will be as accurate as a targeted sample  A ‘Predictive Market’ will be as accurate as a monadic test  Answering for the market as accurate as answering for oneself

Slide 14: Predictive Market Experiment 2 - USA Monadic Predictive Market Monadic vs. Rank Def + Prob Buy Rank Def + Prob Buy Research Mkt Mon. Concept 100 tgt per concept R.Mkt Crowd of 500 Sig. Difference 1 Fade Out 83 1 87 2 Odor Eliminator 76 2 78 3 Garden Lights 74 8 67 4 Exit Alert 74 3 76 5 Nightglow 72 5 71 6 Two in One 70 13 56 7 Solar Powered Holiday Lights 69 4 74 8 Voice Light 68 7 69 9 Cleaning Light 58 12 60 10 Light Stems 58 18 31 ** 11 Permanent Outdoor Lighting System 54 6 71 * 12 Energizing Light 54 15 48 13 Atmosphere Creator 52 9 64 14 Color Creator 52 17 32 * 15 Sky Scaper 50 16 45 16 Bath & Spa Candle 48 10 63 17 Sleep-ease 45 14 56 18 Rise & Gently Shine 45 11 62 + 19 Revitalight 45 19 27 * 20 Plug-in Lighting 40 20 18 ** 21 Snow Drapery 28 21 7 *** Juicy Bits    R.Market; 7/7 top, + 1 with sig. difference  The same no. of av. ideas but much clearer on which ideas are weaker

Slide 15: Predictive Market Experiment 3 - UK Significance Base Base Base Significance Screener vs. Marmite Screener Tgt Marmite Monadic Tgt Marmite R.Market Crowd Monadic vs. Monadic Def + Prob Buy 87-95 Def + Prob Buy 150 Def + Prob Buy 500 R.Market Marmite Walkers 72 95 x x x x ** Marmite Mini Toasts 62 92 80 150 80 70 ** Marmite Squeezy 63 89 79 150 84 129 Marmite Spreadable 71 87 73 150 81 57 *** Marmite Bites 65 88 73 150 95 40 Marmite Hula Hoops 61 90 x x x x + Marmite Crackers 60 97 72 150 84 31 *** McCain Marmite Wedges 40 96 69 150 62 45 *** + Marmite Cheese Bites 47 93 69 150 52 46 Marmite Marbled Cheddar 57 88 64 150 63 87 Marmite Quavers 55 93 x x x x *** ** Marmite Seasoning 49 91 64 150 41 49 + Marmite Soldiers x x 64 150 50 62 Marmite Mini Rice Snacks x x 64 150 50 48 *** Marmite Barrel Nuts 52 89 61 150 36 61 Marmite Squeezable Portion Pack 43 96 x x x x Marmite Buttery Spread 39 99 x x x x *** *** Marmite Cream Cheese 38 91 59 150 9 107 *** *** McCain Marmite Home Fries 31 89 55 150 26 82 Marmite Rusk Soldiers 28 92 x x x x *** *** Marmite Brunch Bar 22 95 51 150 11 152 Juicy Bits    R.Market; 5/5 top, only 1 with sig. difference & clearer on weaker ideas x = Only tested in the 1st screener, so no comparative data available  Screener; 2/5 top, 3 with sig. diff. / Av. ideas; Mon=7, Screener=5, R.M=3

Slide 16: Predictive Market Experiment 4 - Poland Significan R.Market Significanc R.Market Significanc R.Market ce (Sell / Buy e Monadic (Sell / Buy e Monadic (Sell / Buy Monadic Bases: Base vs. any vs. most vs. All Monadic Tgt shares) Base R.Market shares) Base R.Market Shares) Base R.Market Def + Prob 150- Def + Crowd (Any Def + Prob Crowd (All Def + Prob Crowd (All Buy 158 500 500 500 Prob Buy shares) Buy Shares) Buy Shares) New Cling-Gel 87 151 75.7 341 *** 73.3 225 *** 86.7 75 *** *** + New Plus 75 158 58.5 313 53.6 194 63.1 65 New Sink & Pipe ** *** Unblocker 73 150 61.5 366 55.3 235 69.2 91 Juicy Bits  In this experiment, only three concepts were tested. Therefore, to add a degree of sensitivity having asked which concept they’d buy / sell shares in, we asked how many shares they’d buy / sell (limited to 1000). The options were: - 250 shares - 500 shares - 750 shares - 1000 shares  Respondents who chose to buy / sell all 1,000 of their shares give the most accurate results when compared to the Bases Monadic Test.

Slide 17: Predictive Market Experiment 5 - Guatemala Predictive Markets Monadic Significant Purchase Purchase Difference Rank Base Rank Base Intention Intention 7UP Bite 1 83 166 Pepsi Cappuccino 2 69 219 Lipton Ice Tea 3 65 100 5 89 100 *** 7UP H2Oh! 4 56 97 2 92 101 *** Be Light 5 49 55 2 92 101 *** Tropicana Twister 6 38 90 2 92 100 *** Propel 7 29 92 1 99 100 *** Juicy Punch 7 29 76 Flavour Splash 9 22 109  Predictive Markets provides a wider spread in PI scores through aggregation of scores between buyers and sellers in a market place.  The PM scores rewards strong ideas and punishes weak concepts; making it easier, combined with other quant diagnostics and qualitative insights to identify progressive (highly potent and “on message” ideas). Nov 23, 2006 MENU

Slide 18: Possibilities for Market Research?

Slide 19: The Size of the Prize Monadic Test of 10 ideas Predictive Markets • Difficult to differentiate • Clarity on strong & weak ideas • Difficult to compare samples • All results are comparable • Costly targeted samples • Cheap convenience sample • Costly monadic approach • Cheaper ‘markets’ approach • Very time consuming process • Incredibly quick results