Prediction Markets at Google

Prediction markets are mainly used to gain new perspectives on problems from many different people to assist in predicting the future of a particular market. Within a company, they promote communication and collaboration as well as the ability to estimate, for example, sales of a new product. Thus, it is no surprise that Google decided to implement prediction markets into its product mix, as it seems to have the vital elements for success, a large diverse user base and the ability to provide financial incentives.

Although predictions proved accurate, providing decisive predictions about future events, attitudes varied widely among Googlers and the team wondered how it could encourage more traders and trading within the Google Company, bringing more liquidity to enhance markets. Google currently rewards its traders by converting each participant’s final balance into lottery tickets, drawing six tickets and giving $1000 to each select holder. The company felt that by providing this type of incentive, participants would trade based on true beliefs, helping them build a portfolio that did not rely on the occurrence of a single unlikely event.

It seems that overall, prediction market participants value reputation compared to monetary forms of incentives due to complexity, uncertainty, and low payoffs. Therefore, one way to bring more traders and trading within the company is to build in more social features and personalization, such as, creating individual profile pages or blogs to discuss markets. This would additionally allow others, not as familiar with a particular market, to learn and potentially make a prediction. Another way to increase participation is by rewarding several different categories of winners, allowing more individuals to win, producing a high level of involvement and retention. Google could also implement a type of crowdsourcing model in which company executives aim to change corporate strategies or product mixes based on learned opportunities from the prediction market. This allows the trader to desire accurate predictions to win this type of competition and also aids in building or maintaining a participant’s reputation, since a company will implement plans based on the accuracy of a prediction in the marketplace.

To further increase trading within Google, leader boards can be created and displayed predominantly in the office or company website, listing top contenders in each department, thereby fostering camaraderie among teams and increasing liquidity. Additionally, since it seems as though many of the participants came from engineering, sales, or operations groups, Google could throw launch events, aiming to make trading more fun and therefore more attractive to other departments, increasing interest levels. Lastly, more prizes, such as, T-shirts and hats to promote bragging rights can be used to promote involvement in the prediction market.