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Using an Online Trading Market to Predict Success

Businesses are using an innovative tool to see what their futures may hold.

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This story appears in the February 2007 issue of Entrepreneur. Subscribe »

Stephen Marcus wanted to predict the success of a new business book his company was producing. So his company set up an online trading market where thousands of people purchased imaginary securities based on how well they thought the book would sell. When more than 85 percent of the market participants predicted that the book would rank among Amazon.com's top 1,000 sellers, Marcus breathed a sigh of relief.

Based on the accuracy of previous prediction market forecasts, the president and co-founder of 35-person Shared Insights likes the chances for the new book, to be titled We Are Smarter Than Me. Standard forecasting tools, such as focus groups, involve much smaller numbers of opinions, while the prediction market aggregates thousands of opinions, notes Marcus, 42, whose Woburn, Massachusetts, company generates annual sales of more than $10 million helping corporations build online communities.

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