Archive for July, 2009

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Delay of Game

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Jul 2009

29

This holiday season was shaping up to be an epic lineup of intense AAA titles. Within the past few weeks, many of those titles have been pushed back to early next year, many still within the 2009 fiscal year for publishers, but in the 2010 calendar year. Though the general statement given is “we need a little more time to finalize the game”, this also may help many titles increase their sales by splitting the field in two. Here are some of the games that have already been delayed until 2010:

 

Splinter Cell: Conviction

 

Bioshock 2

 

MAG

 

Bayonetta

 

Red Steel 2

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The Value of Journalism and the Cost of Free

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Jul 2009

21

The first question my professor asked us in Introduction to Economics: “What’s the reason snow shovels in Ohio are sold out in January but fully stocked in August?” After much debate, he declared that the answer was not supply, not demand and not even the weather. The answer was price. In January, $20 for a snow shovel is completely reasonable because its value is great (“There’s snow in my driveway, I need to remove it”). In July, only a huge price reduction makes that snow shovel valuable to you. Of course, in January you could also hike the price up to $50 and some customers will still buy. Their other options are to drive 10 miles in the snow to find another store or to buy online and wait 5 days. The question is whether the extra $30 is worth the convenience. The same is true for a snow shovel on wheels for which you may pay $70 (is the added ease of wheels worth $50 to you?). There is no greater example of an item’s perceived value defining a market than when looking at journalism on the internet, and there is no greater illustration of internet competition than by Chris Anderson in his book “Free: The Future of a Radical Price”.

 

Anderson’s argument behind “Free” relies upon the fact that the marginal cost of distribution is rapidly and relentlessly approaching zero. The logic is this: if cost is zero, profit-conscious competitors will always undercut each other until margins are minimized to gain market share. As a result, markets will drive the price down to the lowest price that the market will bear. So when it comes to journalism on the internet, what is its true value? Is great journalism worth more than a blogger’s opinion and insights? What is the price that the market will bear – and is that price Free?

 

(more…)

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Managing Social Networks

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Jul 2009

14

I belong to a number of social networks. Honestly, I’d say I belong to too many. Even so, I’ve never had accounts on: Bebo, Classmates(.com), Friendster or a number of other sites that I’m sure are great. Why? Because they didn’t offer me something I needed. They didn’t add value. As they economist in me would say: their added utility wasn’t great enough. I only have a certain amount of time per week that I can spend on social networks, and I need to maximize that time.

 

I’ve explained before how I use social networks, but here’s a short list of the networks I belong to. A few years ago I made the decision to make my Facebook profile my one private resource that I now only share with close personal friends. I know that’s not how most people use it, but that was my decision.

So what networks are you on? Are they too many for you to count? Not enough? What value do they add to your web browsing experience?

 

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Attention All Analysts

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Jul 2009

10

To whom it may concern,

 

I have noticed that for a long time (but especially recently), you’ve been picking up dirty habits. Considering there is no good system for vetting you, I would like to address these two issues here. Additionally, I’ll give a couple prime examples of your large blunders as well as a current example.

 

extrapolating Attention All Analysts
(Source: xkcd)

 

Extrapolation is Dangerous
Ex. 1: The value of radio stations continued to rise in the 1990’s. Corporate behemoths like Clear Channel saw the growth and thought they could buy up all the stations and have control over the airwaves. Due to the rise of the internet and the changes in the market, radio is dying and Clear Channel’s creditors are trying to force the company into bankruptcy.
Ex. 2: In the late 1990’s, AOL was a media super giant. Its valuation was so high that it allowed it to purchase Time Warner in January of 2000, when the sky was the limit for AOL with subscriber growth through the roof (deal finally closed in January 2001). Since 2002, AOL’s subscriber base has not seen one quarter of growth. Time Warner has announced that AOL will now be split into a separate company by the end of 2009, fully breaking ties with AOL.
Ex. 3: Facebook and Twitter have each seen exponential growth. Facebook recently turned down a valuation of $8 billion, and Twitter was valued at $250 million in January (Facebook tried to purchase it for $500 million).

 

correlation and causation Attention All Analysts
(Source: Stephen R. Johnson)

 

Correlation does not imply Causation
Ex. 1: People who drink coffee have health problems. [No, people who drink coffee also often smoke and are workaholics. Those people do have health problems.]
Ex. 2: Eating breakfast is highly correlated with success for students. [No, people who miss breakfast are often absent or tardy students, or parents who make their child's breakfast are more involved in their lives (read: schoolwork, success)]
Ex. 3: As ad spending on a product increases, so do its sales.

 

Analysis doesn’t just take into account numbers and graphs with lines pointing in one direction or another. A good analyst will look at the other (sometimes hidden) variables and shed some light on whether the data shows mere correlation or actual causation. To that end, an analyst has to keep in mind that there are thousands of variables that will change over a one, two, five year period, which is what makes extrapolation so dangerous. Predicting Facebook’s pageviews in 2013 is no more certain than predicting AOL’s subscriber base or the radio industry’s growth. Just because a pattern exists doesn’t mean that it will last. Or that it isn’t just coincidence. Keep that in mind the next time you write a report.

 

Please. Friends don’t let friends extrapolate or imply causation. It’s just poor form.

 

Sincerely,
Jaremy

 

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