An example of information decay that
marketers would recognize is the half-life
associated with GRPs/TRPs or impressions to create a derived metric – ad-stock,
used to quantify the impact of marketing.
The delayed effects of marketing campaigns have been well understood and
have been successfully leveraged to measure short- and long-term effects on revenue and brand equity.
WHY DOES INFORMATION DECAY?
Every information entity should have an attribute
called “information decay” that describes how the
value of this information decreases over time.
but the rate of information accumulation
is accelerating as well. Combine that
with a highly dynamic business environment, and it starts becoming clear that
the value of each information entity is
decreasing at an ever-faster rate.
There is no better example of information decay than that of the Oakland A’s from
1996-2004, famously storied in the book
“Moneyball.” Starting in 1996, the team adopted a novel approach to scouting, driven
by using an analytical, evidence-based
(“sabermetric”) approach. The results were
dramatic, as the A’s made it to the playoffs
four straight years starting in 2000. Other
teams then caught on, and the A’s lost their
advantage rapidly – a case of rapid information decay.
A NA L Y T I C S
Information decays for several reasons,
and, as is usually the case, more than one
of the following reasons is typically at play:
Information becomes outdated: In
many situations, information has a temporal value that decays unless refreshed on
a regular basis. Consumer credit scores,
for instance, need to be continuously
refreshed in order to retain their value,
which is directly impacted by the refresh
frequency. In a world where a combination of data a