Quantitative Modeling for Arbitrage Positions in Ad KeyWords Internet Marketing

Assume you treat an ad keyword as an equity stock. There are slight differences in the cost for advertising for that keyword across various locations (Zurich vs Delhi) and various channels (Facebook vs Google) . You get revenue if your website ranks naturally in organic search for the keyword, and you have to pay costs for getting traffic to your website for that keyword.
An arbitrage position is defined as a riskless profit when cost of keyword is less than revenue from keyword. We take examples of Adsense  and Adwords primarily.
There are primarily two types of economic curves on the foundation of which commerce of the  internet  resides-
1) Cost Curve- Cost of Advertising to drive traffic into the website  (Google Adwords, Twitter Ads, Facebook , LinkedIn ads)
2) Revenue Curve – Revenue from ads clicked by the incoming traffic on website (like Adsense, LinkAds, Banner Ads, Ad Sharing Programs , In Game Ads)
The cost and revenue curves are primarily dependent on two things
1) Type of KeyWord-Also subdependent on
a) Location of Prospective Customer, and
b) Net Present Value of Good and Service to be eventually purchased
For example , keyword for targeting sales of enterprise “business intelligence software” should ideally be costing say X times as much as keywords for “flower shop for birthdays” where X is the multiple of the expected payoffs from sales of business intelligence software divided by expected payoff from sales of flowers (say in Location, Daytona Beach ,Florida or Austin, Texas)
2) Traffic Volume – Also sub-dependent on Time Series and
a) Seasonality -Annual Shoppping Cycle
b) Cyclicality– Macro economic shifts in time series
The cost and revenue curves are not linear and ideally should be continuous in a definitive exponential or polynomial manner, but in actual reality they may have sharp inflections , due to location, time, as well as web traffic volume thresholds
Type of Keyword – For example ,keywords for targeting sales for Eminem Albums may shoot up in a non linear manner after the musician dies.
The third and not so publicly known component of both the cost and revenue curves is factoring in internet industry dynamics , including relative market share of internet advertising platforms, as well as percentage splits between content creator and ad providing platforms.
For example, based on internet advertising spend, people belive that the internet advertising is currently heading for a duo-poly with Google and Facebook are the top two players, while Microsoft/Skype/Yahoo and LinkedIn/Twitter offer niche options, but primarily depend on price setting from Google/Bing/Facebook.
It is difficut to quantify  the elasticity and efficiency of market curves as most literature and research on this is by in-house corporate teams , or advisors or mentors or consultants to the primary leaders in a kind of incesteous fraternal hold on public academic research on this.
It is recommended that-
1) a balance be found in the need for corporate secrecy to protest shareholder value /stakeholder value maximization versus the need for data liberation for innovation and grow the internet ad pie faster-
2) Cost and Revenue Curves between different keywords, time,location, service providers, be studied by quants for hedging inetrent ad inventory or /and choose arbitrage positions This kind of analysis is done for groups of stocks and commodities in the financial world, but as commerce grows on the internet this may need more specific and independent quants.
3) attention be made to how cost and revenue curves mature as per level of sophistication of underlying economy like Brazil, Russia, China, Korea, US, Sweden may be in different stages of internet ad market evolution.
For example-
A study in cost and revenue curves for certain keywords across domains across various ad providers across various locations from 2003-2008 can help academia and research (much more than top ten lists of popular terms like non quantitative reports) as well as ensure that current algorithmic wightings are not inadvertently given away.
Part 2- of this series will explore the ways to create third party re-sellers of keywords and measuring impacts of search and ad engine optimization based on keywords.

Topic Models

Some stuff on Topic Models-

http://en.wikipedia.org/wiki/Topic_model

In machine learning and natural language processing, a topic model is a type of statistical model for discovering the abstract “topics” that occur in a collection of documents. An early topic model was probabilistic latent semantic indexing (PLSI), created by Thomas Hofmann in 1999.[1] Latent Dirichlet allocation (LDA), perhaps the most common topic model currently in use, is a generalization of PLSI developed by David Blei, Andrew Ng, and Michael Jordan in 2002, allowing documents to have a mixture of topics.[2] Other topic models are generally extensions on LDA, such as Pachinko allocation, which improves on LDA by modeling correlations between topics in addition to the word correlations which constitute topics. Although topic models were first described and implemented in the context of natural language processing, they have applications in other fields such as bioinformatics.

http://en.wikipedia.org/wiki/Latent_Dirichlet_allocation

In statistics, latent Dirichlet allocation (LDA) is a generative model that allows sets of observations to be explained by unobserved groups that explain why some parts of the data are similar. For example, if observations are words collected into documents, it posits that each document is a mixture of a small number of topics and that each word’s creation is attributable to one of the document’s topics. LDA is an example of a topic model

David M Blei’s page on Topic Models-

http://www.cs.princeton.edu/~blei/topicmodeling.html

The topic models mailing list is a good forum for discussing topic modeling.

In R,

Some resources I compiled on Slideshare based on the above- Continue reading “Topic Models”

Statistics on Social Media

Some official statistics on social media from the owners themselves

1) Facebook-

http://www.facebook.com/press/info.php?statistics

Date -17 Nov 2011

Statistics

People on Facebook

Creating Pages on Google Plus for some languages

So I decided to create Pages on Google Plus for my favorite programming languages.

a programming language that lets you work more quickly and integrate your systems more effectively

Add to circles

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Ajay Ohri

Ajay Ohri's profile photo

Ajay Ohri  –
Ajay Ohri shared a Google+ page with you.
Structured Query Language
Leading statistical language since 1960’s especially in sociology and market research
The leading statistical language in the world
The leading statistical language since 1970’s

Python

https://plus.google.com/107930407101060924456/posts

 

These are in accordance with Google’s Policies http://www.google.com/intl/en/+/policy/pagesterm.html  Continue reading “Creating Pages on Google Plus for some languages”

Interview Scott Gidley CTO and Founder, DataFlux

Here is an interview with Scott Gidley, CTO and co-founder of leading data quality ccompany DataFlux . DataFlux is a part of SAS Institute and in 2011 acquired Baseline Consulting besides launching the latest version of their Master Data Management  product. Continue reading “Interview Scott Gidley CTO and Founder, DataFlux”

Analytics 2011 Conference

From http://www.sas.com/events/analytics/us/

The Analytics 2011 Conference Series combines the power of SAS’s M2010 Data Mining Conference and F2010 Business Forecasting Conference into one conference covering the latest trends and techniques in the field of analytics. Analytics 2011 Conference Series brings the brightest minds in the field of analytics together with hundreds of analytics practitioners. Join us as these leading conferences change names and locations. At Analytics 2011, you’ll learn through a series of case studies, technical presentations and hands-on training. If you are in the field of analytics, this is one conference you can’t afford to miss.

Conference Details

October 24-25, 2011
Grande Lakes Resort
Orlando, FL

Analytics 2011 topic areas include: