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Economic Predictions Using Web Usage Data
Makarand writes "The Chicago Tribune has an article on the claims of ComScore Networks Inc., that it can predict major economic
trends by tracking the online activity of 1.5 Million people.
The company gains access to people's Internet travelogues by giving
them free security software and programs that speed up their connections. Economists say that
the company's models need to be tested over several years
before they can be considered accurate."
Firm tracks Web activity to predict economy
By Rob Kaiser
Tribune staff reporter
Published November 30, 2002
Investors are always scavenging for data that could indicate the market's direction. Changes in everything from cardboard box orders to hemline lengths have led to stock market bets.
Now upstart ComScore Networks Inc. is claiming it can predict major economic trends by tracking the online activity of 1.5 million people.
While using Internet data to gauge the entire economy remains unproven--and economists are skeptical--the possibility highlights the Internet's unique ability to capture how people spend their time and money.
"It's a heck of a lot easier to watch somebody's online behavior than to follow everyone around in their daily lives," said Brian Wesbury, chief economist with Griffin, Kubik, Stephens & Thompson Inc. in Chicago. "So the more things we do online, the easier it is to track our behavior."
ComScore gains access to people's Internet travels by giving them free security software and programs that speed up their Internet connections. With its capacity to download 18 billion Web page views annually, ComScore expects this year to capture 800 million Internet searches and 5 million online transactions.
The question facing the 3-year-old company is how to use all this data.
So far, ComScore has gone in several directions, publishing rankings of the most-visited Web sites, tracking the success of online marketing campaigns and predicting the results of e-commerce companies such as Amazon.com prior to the companies' earnings reports.
Now the company is launching its boldest initiative, betting it can extrapolate what is happening online to the offline world. ComScore says it can determine spending, employment, automobile sales and other economic measures by comparing prior government data to levels of Internet spending and traffic on certain sites during the same period.
"I've been in the research business for a long time, but this is blowing my mind," said Gian Fulgoni, ComScore's chairman. Fulgoni, formerly the chief executive of market research firm Information Resources Inc., is based in ComScore's Chicago office. The company is officially based in Reston, Va., where its president is located.
To estimate employment levels, ComScore looks at visits among the people it tracks to more than 1,000 sites with job listings. It estimates how many of those visitors are unemployed by looking at whether the searches are being conducted at home during normal work hours and how often they visit the sites.
Research tool
"Consumers use the Internet today more than any other medium to research important decisions," Fulgoni said.
ComScore tries to predict the government's overall retail spending figure by looking at online buying activity.
"It mirrors it enough that you can predict if spending is going to be strong or weak in a month," Fulgoni said. "I'm not saying it's a perfect correlation."
As a second gauge of spending, ComScore also looks for trends in the credit card statements that about 30,000 of its panelists view online.
ComScore charges $50,000 for an annual subscription to the economic data. So far, Fulgoni says, a few customers have signed on to receive the information.
The company is also selling its data to an upstart hedge fund for a reduced price in return for a percentage of the fund's gains.
David Nuelle, a founder of the Arcanum Fund, said he will use ComScore's data to make investment decisions in e-commerce companies and offline firms, such as Southwest Airlines, where customers often place orders via the Internet.
"You can get a strong sense of the revenues" of companies that do business on the Internet, Nuelle said. "It'll be the strongest data point we will look at."
ComScore, which has 200 employees, has enjoyed some success at predicting the results of e-commerce companies.
Last month, the company estimated that Amazon.com would report third-quarter sales of between $839 million and $851 million, exceeding analysts' consensus estimates of $807 million. Two weeks later Amazon.com announced third-quarter revenue of $851.3 million.
Still, predicting the results of individual e-commerce companies is a far cry from being able to provide a new window to the direction of the entire economy.
"To make money off this thing you have to be better than the Blue Chip consensus," said Anil Kashyap, an economics professor at the University of Chicago Graduate School of Business. "There's a long way between saying we can predict and making money."
Testing needed
Kashyap and other economists said the company's models need to be tested over several years before they can be considered accurate. Also, the company will have to learn how to account for a general increase in Internet use and sales as well as seasonal factors, they said.
A more proven area of ComScore's business is showing companies whether their online advertising is sparking offline sales. ComScore gathers grocery store scanning data for 60,000 of the people it is tracking to watch their buying habits.
Nestle Purina Pet Care has used this service to determine if its Web site and online ads are prompting additional sales.
"We don't have that closeness of data with any other medium," said Michael Moore, director of Purina Interactive in St. Louis.
Copyright © 2002, Chicago Tribune
"The company gains access to people's Internet travelogues by giving them free security software and programs that speed up their connections."
I always thought that anyone who provides programs to "Speed up your internet connection" were crooked and could not be trusted. Spyware at its finest. As far as this company providing "security software"...I won't even go there.
-Krnl
http://krnlpanic.com
Tracking the behaviour of 1.5 million people. And all these people are aware they are being tracked? And they did agree?
I can't believe it...
PS. Watch out! You computer has an IP address...
giel.y contains 2 shift/reduce conflicts
P.
Paul "Say no to feeping creaturism"
This would make the world a better place, even if it could not be used to forcast the next great depresion.
Friends don't help friends install M$ junk.
Given that the equipment you need to access the web is still fairly pricy, and also that the majority of people accessing it are still relatively young, I'd question the ability of this model to extrapolate to the wider world.
Cheers,
Ian
I don't think the group theý're tracking will be very representative. Allthough there is a large group of people is using the Internet there's no way global trends can be predicted by their behaviour. There is a world out there that's hardly connected (some call it Africa) that has some influence on our world's economy but is left out completely.
Maybe the researchers should see the world is bigger than the US
/(bb|[^b]{2})/
ComScore announces their predictions for this year based on web activity. You should take all of your money out of large cap stocks and invest heavily into p0rn!
ComScore also looks for trends in the credit card statements that about 30,000 of its panelists view online
Is it just me - or does that sound slightly worrying?
They claim to look at a cross section of society, but I'm willing to bet only the criminally insane would sign up knowing that they are perusing your credit card statements...
Sig (appended to the end of comments you post, 120 chars)
As a second gauge of spending, ComScore also looks for trends in the credit card statements that about 30,000 of its panelists view online.
That's right: If you have their spyware installed on your computer, they are going to be looking through your credit card statements.
Why isn't this illegal yet?
Tarsnap: Online backups for the truly paranoid
My economy prediction is that comscore will soon file a chapter 11.
Notwithstanding the privacy issues involved, which have been discussed by other people -
:)
I'd have thought that if you could get a representative group of people of sufficient size, and allow for intrinsic skew in the data, then watching what they do online - what their ecommerce browse to conversion rates are, whether they're shopping at all, whether they're looking at holidays, cars, that kind of thing - could well provide a very good short-term predictor of where the economy is going next.
You could find out, for instance, that people were planning to buy new cars or go on a long-haul holiday weeks or months before that was converted to Real Money in the retailers' pockets, and upwards of three months before the quarterly reports from the companies themselves start to reflect the changes in the economic climate.
Sounds to me like this could be a really interesting toy to use as an adjunct to playing the markets
Danny.
I have written over 900 book reviews
Does anyone know what Amex, Discover, Visa, MasterCard, etc. are doing currently with the data they accumulate? I am not suggesting anything nefarious, rather I think these institutions, by having much larger (and probably more representative) sample sizes, would be able to accomplish much more than this smaller company would.
The key is to categorize the type of porn that is being viewed.
Teen porn would indicate a desire to return back to school for more education. This can be used to indicate a slowing in the job market or radical changes in job skills being required.
Lesbian porn indicates a desire for more social time, expanding ones horizons, and generally a good economy, since everyone is getting more then enough of the good stuff.
Hardcore porn would indicate a slowing economy, since you are just pounding away at the task at hand.
Gay porn would indicate a resession, since that is most likely when you are taking it in the ass at work, so why not see how the professionals do it.
Hope this helps with future economical models based off of the viewing habbits of porn.
Tournament Management Online &
I recently learned about Zipf's Law, which uses a very simple formula to predict quantities of all sorts of things.
It's truly amazing. For example, it accurately predicts the populations of the 10 most populous cities, the number of appearances of the 10 most oft-used words on the entire Web, etc.
From a quick Google query: "Zipf's law, named after the Harvard linguistic professor George Kingsley Zipf (1902-1950), is the observation that frequency of occurrence of some event ( P ), as a function of the rank ( i) when the rank is determined by the above frequency of occurrence, is a power-law function Pi ~ 1/ia with the exponent a close to unity."
Here is some more information: http://linkage.rockefeller.edu/wli/zipf/
If you celebrate Xmas, befriend me (538
Reading their privacy statement it should be noted that they are an incredible security risk and this company should be treated with the contempt that they deserve, the information they take is everything from emaills to SSL traffic and should put a chill through anyone.
What information is collected?
During the initial registration process, we request certain information, such as name, address, e-mail address, and education, about you and other persons who live with you or have the same mailing address as you (collectively, we call this your "Household"). After you register, our Network then collects additional information about your Household's Internet behavior and that of any other computers used by members of your Household that you have configured to use the e-Trends service. This information is then combined with other e-Trends member data and other information to create an aggregate view of Internet e-commerce. e-Trends monitors your surfing, essentially logging information about the web pages that you visit and the actions that you take, such as the purchases and transactions you make. e-Trends can only monitor the Internet behavior and activity of your Household's registered and configured computers. As a member, you therefore control which computers the e-Trends service is available on. e-Trends monitors both the normal web browsing you perform, and also the activity you may have through secure sessions, such as when filling a shopping basket or filling out an application form. e-Trend's proprietary and patent pending technology allows us to see the details of secure pages while protecting such content from parties other than the site to which you are connected. We monitor these connections so we can accurately and anonymously model not only the browsing habits of Internet users, but also their shopping, registration, and other interactions as well. Although we generally monitor your Internet behavior as part of this service, e-Trends does not examine, use nor keep any instant messages or examine or use the contents of any of your e-mail messages, except to perform specific functions necessary to provide you the e-Trends service (such as scanning your e-mails to effectively search for viruses), and as a quality assurance check against and method for verifying information on the surfing and buying behavior of e-Trends members.
Quite simply they read all your internet traffic
These companies should be illegal and the quicker someone sues them to oblivion the better,
but i see that handily Comscore have this e-trends as a subsidiary company just in case someone does that it wont affect the parent company.
buyer beware
What bothers me here is that the programs that are being used to bring spyware to the common user are programs that do things for which either there already exists an spyware-free solution, or is a program us /.ers could write in minutes.
Speeding up an Internet connection is more-or-less a myth in the first place, you can't make software to cause a modem to go any faster than it goes physically. The only thing that really can be done is to make sure there's nothing stupid in the Windows registry slowing down the connection... and guess what, in older versions of Windows there is! Microsoft initially set the Maximum Transfer Unit (MTU) to something that made sense on a LAN connection, but caused an annoying number of retransmitted frames on a modem connection. Lower that number to something sane, and web pages will appear to the user to be faster. However, that didn't really speed up the modem, it's now just not wasting as many cycles on bad data. Changing the MTU number is a registry hack, the program needs to only be run once... no need for it to be there on every boot.
Another such program syncs your computer's clock with to official U.S. Government time. That's a cool and useful function, but it's really just using the Network Time Protocol (NTP) standard to contact government servers. Anybody who bothers to read the docs can write their own program to do that. Microsoft has even built NTP into Windows XP, although once-a-week updates isn't exactly enough for most users who care about their clock accuracy.
Another program hitches its ride offering the local thermometer reading from your local TV station's WeatherNet system in an icon in your system tray. Cool feature... but wait a second here. What if you don't live near a WeatherNet site? Oh, that's simple, it taps into the National Weather Service data to get you a report. But NWS's data is public, paid for by your tax dollars. The info is available on both FTP and HTTP servers that are absolutely free to access.
Open source projects could knock these "Download me!" programs out of existance. Why don't we?