Tweets are about to take their place alongside other economic indicators as a way influencing the Reserve Bank.
Not Australia’s Reserve Bank, at least not yet. The Federal Reserve Bank of New York is putting up money for firms to provide a “sentiment analysis and social media monitoring solution” that will allow it to read the mood of the economy through Twitter, Facebook, Youtube, and blogs.
Playing around with a basic free version of the software has convinced me they’re on to something. Before Tuesday’s financial statement tweets about Wayne Swan were twice as negative as they were positive. (I should acknowledge that the machine has a problem with sarcasm. When a Twitter comment thanked Wayne Swan for clearly explaining that ALP policy was no good, the machine scored it as a compliment). After the midday statement the comments become more negative still.
Whether or not the balance of Twitter comments accurately reflects the public mood, changes in the balance of comments probably do reflect changes in the public mood. And the number of comments available is massive.
Australia’s Reserve Bank already makes use of the Melbourne Institute consumer sentiment index, compiled each month by asking just 1200 people how they feel about the economy and their personal finances.
How much better would it be to aggregate in real time one hundred times as many responses, each given freely in moments of frustration or elation where the words used and the frequency with which they are used convey not just the numerical balance of optimists and pessimists but also the intensity of emotions.
Statisticians have a rule, the more observations the better... James Surowiecki takes it to its logical conclusion in his book The Wisdom of Crowds: When the number of observations gets very big and is aggregated it tends to be more accurate than any individual observation, even those of experts.
He says one of the early successes in harnessing the wisdom of crowds came in locating the missing US submarine Scorpion in May 1968. It could have been sunk anywhere in a region 32 kilometres wide.
Instead of asking one or two experts to describe where they thought it was, the chief naval officer assembled a very large group of specialists in all sorts of fields and asked each to guess the location. The prize was a bottle of Scotch.
Aggregating the guesses he came up with a spot just metres from where the submarine was found. It was a location none of the individual experts had come up with.
The outcomes of Twitter sentiment ratings are hard to rig. Right now the ratings for Qantas are running two to one against (about the same as for Wayne Swan before the yesterday’s statement made things worse).
A week ago Qantas attempted to re-engineer the balance by offering a gift pack “including the famous Qantas pajamas” as a prize for tweets that included the hashtag #QantasLuxury and described a good Qantas experience. (“Be creative!”, it added in parentheses.)
The responses were indeed creative, and a good deal more representative of the public mood than the airline had hoped.
“#QantasLuxury is a plane that actually flies,” said one. “#QantasLuxury is chartering a Greyhound bus and arriving at your destination days before your grounded flight,” said another. “#Virginluxury: Getting an exit row, #Tigerluxury: Getting a biscuit, #Qantasluxury: getting a pilot, a plane, engineers and baggage handlers, said one of my favourites.
Some 16,000 tweets followed. An analysis by the social media firm iGo2 found many of them were from the US and Europe where Qantas had stranded passengers.
The airline had created a buzz alright, but it had tapped into rather than altered the balance of feelings.
Southern Cross Austereo boasts on its website it can “connect brands with 95 per cent of Australians”. In the same week Qantas blew itself up on Twitter Southern Cross was humbled when the Australians it connects with used Twitter to connect with it and with its advertisers.
Its Sydney FM radio star Kyle Sandilands had had a less than impressive TV show debut on the Monday night. Angry at reaction the next morning he lashed out at a “fat slag” on a newspaper site who had labelled it a disaster.
“What a fat bitter thing you are. You’ve got a nothing job anyway. You are a piece of shit. Your hair is very nineties, and your blouse. You haven’t got that much titty to be having that low-cut blouse. Watch your mouth or I’ll hunt you down,” and so on.
ABC radio journalist Mark Colvin heard the outburst, tweeted about it, the Mumbrella website copied the audio and posted it on its own site before Southern Cross could remove it and thousands of tweets directly implored sponsors to remove their ads.
One by one Holden, Ford, Lexus, Telstra, American Express, Blackberry, Olympus, Beaurepaires, CUA financial services, Harvey Norman, Coles, Toys R Us and Fantastic Furniture withdrew their ads. Some removed their ads not just from the Kyle Sandilands show but from the entire network.
One advertising agency fired its client after it refused to remove its ads. “We have decided to disassociate ourselves from this client after a disagreement in regards to what we believe to be an appropriate response,” said the Girl PR agency in statement. The client, Goldmark Jewellers, then withdrew its ads anyway.
What is powerful invites manipulation. But the geeks are on that possibility. Fake comments, posted by so-called “sockpuppets” read differently to real ones.
Researchers at Cornell University say they have developed software they say can detect fake hotel reviews 90 per cent of the time. Humans can detect fake reviews only half the time. Apparently fake reviews use more verbs, real ones more punctuation. Amazon is trialing the technology.
Twitter may not be a prefect tool for assessing the mood of the times, but it is shaping up to be better than any we have ever had before. It’s not just the Reserve Bank. Everyone should be taking its pulse.
Published in today's Age
. How to get a pulse on the economy. NY Fed to monitor Twitter.
. Carbon Tax. When we Google, we are more interested than concerned.
. If this graph doesn't awe you... Meet Google's Hal Varian