Posts Tagged ‘Microsoft’

Arbitraging Microsoft

September 10, 2008

Great post in Think-Through on an arbitrage scheme using Microsoft’s recently introduced cashback approach.

 

I love the very idea of arbitrage — ‘risk-free money’. Anywhere else, this would be called a scam and the would be overtones of theft. But in the world of finance, where it is understood that markets are (mostly) efficient and that there can be no such thing as a free lunch (mostly), nobody seems to mind if you happen to find a lunch that’s free because they are safe in the knowledge that it won’t be free for long. Interestingly, some of the thought leaders in capital markets theory do describe a number of free lunches. But because they know that free lunches are not possible, they describe it as reward for extra risk taken.

 

I spent a year or two working with a treasury derivatives trader building treasury derivative arbitrage models. These were humungous Excel sheets loaded to the gills with add-in functions, some custom C code, and pulling in realtime data, detecting small differences in pricing between synthetic and real securities. An example: if you take a euro-swiss franc swap and a swiss franc-dollar swap you can create synthetic euro-dollar swap. This has (just about) all the characteristics of a real euro-dollar swap but it might have slightly different cost. Where the difference exists, it’ll be tiny but if you have a billion euros on your books overnight, it may be something you can take advantage of ‘for free’. Most of this simple type of arbitrage really does not exist in the markets any more, but when we used more complex treasury derivatives, and worked out all the permutations across a basket of ten currencies, there were more opportunities.

 

I still remain interested in financial arbitrage, and on the lookout for simpler ways of consistently making money — but that’s for another post.

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Google’s AdManager comes out of beta to form a real challenge to OpenX

August 26, 2008

If it’s good enough for Google Suggest — Google has recently announced that they their AdManager has moved from private beta to a public release. AdManager is aimed at publishers with small direct sales teams. It includes some nice features out of the box, mostly focussed on tracking directly sold and network-based inventory, then enabling the sale, measurement and provisioning of this. Naturally, there is tight integration with AdSense and multi-lingual support is excellent. There is also reasonable third party network integration. Some of the time in beta testing has led to new features such as time dependent rollout and previewing of ads. A sophisticated inventory management and provisoning system like this is no small investment and it’s a classic Google move to make it free to level the playing field — or to raise the competitive moat to monopoly level, depending on how you look at it. In this case, existing competition gives away its software to advertisers, and makes money, just like Google does, from the advertisers.

It seems unlikely for competition like UK-based OpenAds (now called OpenX) to be running scared. With chairing by former AOL head Jonathan Miller, more than $20 million in backing and an impressive roster of customer names, OpenX may be just looking to take their 30,000 customers into the arms of a competitor. However, Microsoft got hold of Atlas when it acquired aQuantive, so why it would want OpenX is anyone’s guess.

Note that AdManager is fully hosted and a closed proprietary system, unlike OpenX which allows its publishers to host it and to extend its PHP code base. OpenX’s CTO, Scott Switzer has also pointed out that a good number of publishers may not want to add another piece in the Google monopoly puzzle. On the flip side, many small publishers may love the ease of how  software-as-a-service enables them to get live quickly.