Political

How accurate should forecasts claim to be?

In a blog posting earlier today I touched on the issue of forecasts which are given to a spurious degree of accuracy, and by coincidence I’ve just come across another example, this time from the world of online advertising.

Nate Elliott of Forrester has produced a report on the outlook for online advertising, saying that:

We had previously forecasted that online ad spend would account for 12.6% of all European advertising in 2012; thanks to the recession, we’ve increased that forecast to 14.8%.

Do you think that you can forecast (a) how much advertising there will be in Europe in three years time, and (b) how much online advertising there will be in Europe in three years time both to a sufficient degree of accuracy to be able to work out a percentage to one decimal place?

It would take a lot to convince me of that, especially as Forrester’s own record suggests a rather wider margin of error may be sensible to apply to their forecasts:

Internet spend throughout Europe, which until 2007 has been increasing as much as 30% a year, is set to rise by just 10% in 2009 … Two years ago, Forrester predicted online ad spend would increase by 14% this year.

In fairness, this sort of spurious accuracy is by no means restricted to Forrester, but that doesn’t make it sensible and in fact an up front approach to the likely range of error around forecasts would make them much more helpful in my view.

Source: Media Week

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