In memory of John Delaney, 1969-2011

May 29th, 2011

I’m very sorry to say that the world lost John Delaney on May 22, 2011.  John was the CEO of prediction market Intrade, one of the most well-known real-money prediction markets.  He was climbing Mount Everest and came within 50 meters of the summit when he encountered medical problems and died.

I’ve known John for some time; though we only met for the first time in October 2007.  I was struck by how down-to-earth he was, and truly interested in having everyone in the prediction market industry succeed.  At the time, Intrade was going through a legal separation of sorts from its other entity Tradesports, and many had questions and concerns about what that meant.  John was incredibly honest and up-front, and didn’t pull any punches in speaking about the issues.

To make this tragedy even worse, his wife gave birth to a baby daughter just before he made his way to the summit.  He died without knowing he had become a father once again.

I will personally remember John as a successful entrepreneur and as a man who embodied the friendly and big-hearted nature of the Irish.  He will be truly missed.

Rest in Peace, John.

Other Obituaries/News

New York Times

Daily Mail

Justin Wolfers (Freakonomics blog)

 


Prediction Markets – a review of 2010

December 21st, 2010

In the twelve months since I last wrote about prediction markets, the industry has matured. I wanted to take a look back at what’s happened in 2010, and think a little of what I expect in 2011.

Theme 1 – Software vendors moving up the value chain

The biggest theme to me is that the traditional software vendors (ConsensusPoint, NewsFutures, Crowdcast, Inkling Markets) have all been moving up the value chain. Where they used to provide software, they all provide a much more consultative service as well. For example:

  • Newsfutures, which always had a much more consulting-style approach, merged with another consulting group to become Lumenogic. Prediction market software is hardly mentioned; they pitch consulting and strategy.
  • Consensus Point has hired additional senior people, and David Perry has left. Their pitch features the consulting services much more prominently than it did in the past.
  • Crowdcast has been trying to go even bigger, taking venture capital investment. And like the others, features more “solutions” than just licensing software. (Leslie Fine was a terrific hire for Crowdcast, and board member Dr. Andrew McAfee is a top thinker in the “Enterprise 2.0″ movement.
  • Inkling Markets still has a great angle in the market. They appear to be a go-to company to run pilot prediction markets, and are then perfectly positioned to establish a long-term relationship if/when the trials go well. I get the sense that they tend to do less consulting work than the other companies, but will do so for larger clients. I also want to make a special mention of Inkling’s blog, which is the best one of all the prediction market companies.

Theme 2 – Free (broad) prediction markets can’t survive alone

If you think you can build a strong business on a free prediction market, you’re kidding yourself. HSX, which is great, it’s focused on a single industry and even then it’s an outlier. It exists because they’ve built a solid business selling analysis to movie studios. (Alex Costakis, the long-time CEO, left this year after Congress made it clear trading movie futures wasn’t going to happen. This meant that Cantor Fitzgerald had little reason to keep investing in trying to make a load of cash from extending HSX to do this.)

HubDub, a more generalist/news prediction market, was completely shut down because it wasn’t going to make enough (or really, any) money. Nigel, Lesley and team changed focus to fantasy sports and they seem to be doing quite a bit better.

So while I believe that very niche prediction markets associated with particular industries can thrive, it takes a lot of work to build a real business from it. And broad-based prediction markets aren’t going to make anyone any money, though they could be an investment to build traffic. (HubDub had a lot of user engagement, they just couldn’t build their prediction market into a business.)

Theme 3 – Real-money prediction markets (aka betting sites) are going strong

BetFair IPO’d in October of this year, (BET) and had targeted a £1billion market cap. They’re a very strong business, and are very well positioned if/when the US legalizes any form of betting or online gaming.

Smarkets is a startup in the betting/prediction markets market, and just recently passed £2million traded on the site. (They grew from £1million to £2million much more quickly than they grew to their first £1million.) I’ve known the CEO, Jason Trost, since he and his co-founder Hunter were doing the initial coding and fundraising in their London flat. They have a very bright future ahead of themselves.

Contrary to broad-based play-money markets, real-money betting has a solid business model that scales to become a big business. They are long-term businesses.

Summary – A market maturing

In short, the prediction market industry is maturing. I’m not naive; it’s a small market outside of the real-money betting markets. There is a solid core of strong businesses that have established themselves as the source for software and consulting and I see them continuing to grow as more companies experiment with new management tools and techniques. Niche play-money markets may also thrive, though this still remains difficult to execute.

I foresee that 2011 will be very similar to 2010: more mature and developed solutions from the established prediction market companies. It’s less interesting from an outside perspective, since there doesn’t appear to be much change. But internally I believe these companies will be an interesting place to be as they grow and work with increasingly more interesting and blue-chip clients. (And as I already said, Smarkets has a very bright future ahead of themselves in the real-money betting industry!)

I hope everyone in the industry has a happy new year and my absolute best wishes for 2011.


Prediction Market wrap-up for 2009

December 31st, 2009

How did 2009 turn out?

Early this year I posted my predictions for 2009. In the best spirit of Robin Hanson (getting better predictions by simply tracking how close predictions matched reality), I want to see how I did.

  • “Prediction markets in 2009 are going to become even more well-known and wide-spread, but there will be no single event that brings them to the attention of the public. It’s going to be a slow, but steady, growth.” – This was spot on. All of the vendors appear to be doing well, but there was no big “event” that brought everyone attention.
  • “All of the prediction market vendors will mature their business offering/proposition.” – Not having been on the receiving end of any of their sales pitches, I can’t say this one is true for sure. But from their blog posts and public statements I would assess this as likely.
  • “HubDub will continue to only be the only strongly popular play-money prediction market.” – Put me down as wrong on this one. Nigel and the creators of HubDub have focused their time and effort on FanDuel instead. (Rightly, for revenue reasons!) So while HubDub is still active, it’s not the hive of activity it was for a while.
  • That said, I’m still a fan of niche, public, popular sites like HSX. They managed to turn play-money prediction markets into a real-money revenue stream by analyzing trader behaviour (which can only be seen by administrators) and selling that business intelligence to the studios. This could be replicated in many industries, such as video games or television.

  • “While a couple additional software vendors may appear, I get the feeling that the market for prediction market software is largely saturated.” – This was also spot on.
  • “I’m looking forward to see how the CantorExchange develops.” – Not so much a prediction, but a hope that it proved interesting. It’s taken a long time to get up and running apparently, and won’t be widely launched for real-money contracts until 2010. (If I read the website correctly.)

A great development from InTrade

Just yesterday John Delaney of InTrade posted on his blog that InTrade will soon be offering some historical market data to the public for free. (As he notes, this means they’re losing a source of potential revenue, as historical data can be quite valuable.) This is a great development, and should be a solid source of data for people to dig in and get interested in how traders operate in a prediction market. Kudos to John for doing this.


Anatomy of a blog hack

November 15th, 2009

While WordPress is great software, its ubiquity means that a lot of script-kiddies and general hackers like to attack it. All of the different settings, options, plugins and the rest mean that it takes quite a bit of work to balance letting people participate (through comments, postings) while keeping spammers and hackers out.

About a year and a half ago, my blog was hacked. I was notified of it by Google’s webmaster tools, and it took quite a while to go through all the different files to find the offending code and strip it out. It ended up being located in a number of different places, so it took a few go-through’s re-submitting the site to Google before the hack-detection software declared it clean.

I was always a little worried that I hadn’t gotten it all. Recently, I came across a great couple of blog posts that I highly recommend:

———————-

Files that were uploaded:
fx_akismet.php
fx_blogger.php
fx_I10n.php
fx_menu.php
fx_wp-config.php
fx_wp-db-backup.php
… and a folder of 70 html files and a javascript file meant to steal Google PageRank

All the php files were nearly identical. Here’s the code:

I don’t code in php, so I don’t really know what this says, but hopefully it might be useful to anyone afflicted by the same script.

I highly recommend if any of you have WordPress blogs to take these same steps to see if you’ve been hacked.


Making prediction market trading and business intelligence easier

October 7th, 2009

It might not be the most ground-breaking innovation out there, but I really like what Inkling has done recently with their trading widgets. They recently demonstrated how your employees and partners can predict project management milestones within Basecamp, a very popular web application for project management.

Basecamp is used a lot in small and medium businesses, and I’ve heard that it’s becoming more common in niches of larger businesses. (It’s easy to put the relatively small monthly bills on corporate purchase cards.) It’s popularity means there’s a great population of potential customers that can start taking advantage of this new source of information.

(Inkling’s full post on how to implement prediction markets within Basecamp can be seen by clicking here.)

I’ve written before that I think there is a LOT of value in using prediction markets to forecast project milestones. (It’s generally done poorly, if it’s done at all.) One of my more popular posts according to Google Analytics is “RAG status – people lie, prediction markets don’t“. I dreamt of a day where prediction markets would be run on all project milestones, and the results of those markets would drive a project’s “RAG status”. That is now easily done with Inkling’s Basecamp widget.

There are probably still a few details to be ironed out with the actual implementation, but this is a great step forward for businesses that want better intelligence from their employees and partners. I look forward to hearing more from Inkling about how customers have taken advantage of this and if/how it’s worked for them.


From their blog post, here are two screenshots of what the screens look like before and after you trade:

The “trading” screen:

inkling-pt1.png

The results screen:

inkling-pt2.png