Yahoo’s Incredible Political Prediction Engine

While just about anyone could tell you Mitt Romney is the favored candidate for the Republican presidential ticket, far fewer would have guessed that Rick Santorum would bow out of the race so early. But Yahoo could.

Data scientists at Yahoo (NASDAQ:YHOO) are using prediction markets, polls, trends in search queries, and even sentiment analysis on Twitter to create a political prediction engine like no other.

David Rothschild, an economist at Yahoo Research, and Dave Pennock, a computer scientist, call their effort the Signal. Their political prediction engine will produce data visualizations that best convey probability to a lay audience, and will get the public involved using fun and games.

Drawing on Yahoo’s success with fantasy sports leagues, Rothschild and Pennock have created “Fantasy Politics,” which allows users to bet on the outcomes of pretty much anything. “We’re going to let people [bet on simple predictions] like ‘the Democrats will win California,'” said Pennock. “But if they want to geek out, they could bet on the odds that ‘the Democrats will win both Ohio and Florida,’ or ‘the Republicans will win Florida but lose the election.'”

One of the most interesting features of the Signal is that it will utilize sentiment analysis, automatically determining how people feel based on how they communicate. The tool is only “at an infant stage,” said Rothschild, but can still provide insight that no poll can match. That’s because most polls are binary — they ask whether a vote will go one way or another. Sentiment data, on the other hand, can tell precisely why a candidate’s numbers are up or down.

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