A Chump’s Game
A good friend of mine, whilst working at a New York hedge fund once said to me, “online advertising is a chump’s game”.
At the time he was exploring the idea of constructing financial instruments around the trade of user attention. His comment was coming from just how unpredictable, heterogeneous and generally intractable the quantitative side of advertising can be. Soon after, he quickly recoiled from the world of digital advertising and re-ascended back into the transparent market efficiency of haute finance; a world of looking for the next big “arb”.
What I Do
I am a data scientist and I work on this problem every day.
Over the last 15 or so years I have come to find that digital advertising is, in fact, completely the opposite of a chump's game – yes, media marketplaces are extraordinarily opaque and highly disconnected – but with that comes fantastically gross pricing inefficiencies exploitable in a form of advertising arbitrage.
The Wall Street guys saw this, but never quite cracked how to exploit it.
What you will find here
If you have spent more than a little time with me, then in between mountain biking and heli-boarding at my two favorite places in the world, you will have probably heard about or seen a probability model or two.
In the coming months I will be banging on about some of this, and in particular sharing a few easy tricks on how advertisers can use data to gain a bit of an advantage. With the right approach, it’s rather simple.
The concepts I will present here are already built into the black-box ad platforms we use daily, the foundations of which are two closely related assumptions:
- Any flow of advertising traffic has people behind it whom possess a fixed amount of buying power and a more elastic willingness to exercise it.
- As individuals we are independent thinkers, but as a swarm, we behave in remarkably predictable ways.
My aim is that one will find the material useful with little more than a bit of Excel and one or two free-ish downloads. The approach is carefully principled, elegantly simple and astonishingly effective.
Achtung! This site makes use of in-browser 3D. If your computer is struggling, then you probably need a little upgrade, a GPU or a browser change. Modern data science needs compute power, and alot of it.
The format is a mix of theory, worked examples and how-to, combined with a touch of spreadsheet engineering. A dear friend of mine – whom has written more than a few articles for the Economist - will be helping me edit things to keep the technical guff to a minimum.
I am hoping along the way that a few interesting people might also compare their own experiences and provide further feedback and refinement. If its well received then we might scale up the complexity.
So, if digital advertising is your game then stay tuned, this will be a bit of fun!
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