Focus the Mining Beacon: Lessons and Challenges from the World of E-Commerce

1. SF Bay ACM Data Mining SIG, 6/13/2006 Focus the Mining Beacon: Lessons and Challenges from the World of E-Commerce

2. Overview • Background/experience • Business lessons and Controlled Experiments • Simpson’s paradox • Technical lessons • Challenges • Q&A Ronny Kohavi, Microsoft

3. Background (I) • A consultant is someone who • borrows your razor, • charges you by the hour, • learns to shave • on your face • 1993-1995: Led development of MLC++, the Machine Learning Library in C++ (Stanford University) • Implemented or interfaced many ML algorithms.Source code is public domain, used for algorithm comparisons • 1995-1998: Developed and managed MineSet • MineSet ™ was a “horizontal” data mining and visualization product at Silicon Graphics, Inc (SGI). Utilized MLC++. Now owned by Purple Insight • Key insight: customers want simple stuff: Naïve Bayes + Viz • ICML 1998 keynote: claimed that to be successful, data mining needs to be part of a complete solution in a vertical market • I followed this vision to Blue Martini Software Ronny Kohavi, Microsoft

4. Background (II) • 1998-2003: Director of Data Mining, then VP of Business Intelligence at Blue Martini Software • Developed end-to-end e-commerce platform with integrated business intelligence from collection, extract-transform-load (ETL) to data warehouse, reporting, mining, visualizations • Analyzed data from over 20 clients • Key insight: collection, ETL worked great. Found many insights.However, customers mostly just ran the reports/analyses we provided • 2003-2005: Director, Data Mining and Personalization, Amazon • Key insights: (i) simple things work, and (ii) human insight is key • 2005: Microsoft • Assistance Platform • Started Experimentation Platform group 3/2006 Ronny Kohavi, Microsoft

5. Business-level Lessons (I) • Auto-creation of the data warehouse worked very well • At Blue Martini we owned the operational side as well as the analysis, we had a ‘DSSGen’ process that auto-generated a star-schema data warehouse • This worked very well. For example, if a new customer attribute was added at the operational side, it automatically became available in the data warehouse • Clients are reluctant to list specific questions • Conduct an interim meeting with basic findings.Clients often came up with a long list of questionsfaced with basic statistics about their data Ronny Kohavi, Microsoft

6. Business-level Lessons (II) • Collect business-level data from operational side • Many things not observable in weblogs (search information, shopping cart events, registration forms, time to return results). Log more at app-server • External events: marketing promotions, advertisements, site changes • Choose to collect as much data as you realistically can because you do not know what might be relevant for a future question.(Subject to privacy issues, but aggregated/anonymous data is usually OK.) Ronny Kohavi, Microsoft

7. Collection example – Form Errors Here is a good example of data collection that we introduced without knowing apriori whether it will help: form errors If a web form was filled and a field did not pass validation, we logged the field and value filled This was the Bluefly home page when they went live Looking at form errors, we saw thousands of errors every day on this page Any guesses? Ronny Kohavi, Microsoft

8. Business-level Lessons (III) • Crawl, Walk, Run • Do basic reporting first, generate univariate statistics, then use OLAP for hypothesis testing, and only then start asking characterization questions and use data mining algorithms • Agree on terminology • What is the difference between a visit and a session? • How do you define a customer(e.g., did every customer purchase)? • How is “top seller” defined when showing best sellers?Why are lists from Amazon (left) and Barnes Noble (right) so different?The answer: no agreed-upon definition of sales rank. Ronny Kohavi, Microsoft

9. Human Intuition is Poor • Many explanations we give to “success” are backwards looking. Hindsight is 20/20 • Sales of sunglasses per-capita in Seattle vs. LA example • Our intuition at assessing new ideas is usually very poor • We are especially bad at assessing ideas that are not incremental, i.e., radical changes • We commonly confuse ourselves with the target audience • Discoveries that contradict our prior thinking are usually the most interesting • Next set of slides are a series of examples where you can test your intuition, or your “prior probabilities.” Do you believe in intuition?No, but I have a feeling I might someday Ronny Kohavi, Microsoft

10. How Priors Fail us Warning: graphic image may be disturbing to some people. However, it’s just your priors. We tend to interpret the picture to the left as a serious problem Ronny Kohavi, Microsoft

11. We are not Used to Seeing Pacifiers with Teeth Ronny Kohavi, Microsoft

12. Checkout Page The conversion rate is the percentage of visits to the website that include a purchase A B Which version has a higher conversion rate? Why? Example from Bryan Eisenberg’s article on clickz.com Ronny Kohavi, Microsoft

13. Graphics / Color Which one converts (to search) better? A B Source: Marketing Experimentshttp://www.marketingexperiments.com Ronny Kohavi, Microsoft

14. Amazon Shopping Cart Recs • Add an item to your shopping cart at a website • Most sites show the cart • At Amazon, Greg Linden had the idea of showing recommendations based on cart items • Evaluation • Pro: cross-sell more items • Con: distract people from checking out – VP asked to stop work on this idea • As with many new things, hard to decide • A/B test was run Idea was great. As many of you know from experience, this feature is live on the site From Greg Linden’s Blog: http://glinden.blogspot.com/2006/04/early-amazon-shopping-cart.html Ronny Kohavi, Microsoft

15. Office Online • Small UI changes can make a big difference • Example from Microsoft Help • When reading help (from product or web), you have an option to give feedback Ronny Kohavi, Microsoft

16. Office Online Feedback B A Feedback A puts everything together, whereas feedback B is two-stage: question follows rating. Feedback A just has 5 stars, whereas B annotates the stars with “Not helpful” to “Very helpful” and makes them lighter Which one has a higher response rate? By how much? Ronny Kohavi, Microsoft

17. Another Feedback Variant Call this variant C. Like B, also two stage. Which one has a higher response rate, B or C? C Ronny Kohavi, Microsoft

18. Twyman’s Law Any statistic that appears interestingis almost certainly a mistake • Validate “amazing” discoveries in different ways.They are usually the result of a business process • 5% of customers were born on the exact same day (including year) • 11/11/11 is the easiest way to satisfy the mandatory birth date field • For US and European Web sites, there will be a small sales increase on Oct 29th, 2006 Ronny Kohavi, Microsoft

19. Twyman’s Law (II) • KDD CUP 2000 • Customers who were willing to receive e-mail correlated with heavy spenders (target variable) • Default for registration question was changed from “yes” to “no” on 2/28 • When it was realized that few were opting-in, the default was changed • This coincided with a $10 discount off every purchase • Lots of participants found thisspurious correlation, but itwas terrible for predictionson the test set • Sites go through phases(launches) and multiplethings change together Ronny Kohavi, Microsoft

20. Interrupt: Key Takeaways Every talk (hopefully) has a few key points to take away. Here are two from this talk: • Encourage controlled experiments (A/B tests) • The previous examples should have convinced you that our intuition is poor and we need to experiment to get data • Simpson’s paradox • Lack of awareness of the phenomenon can lead to mistaken conclusions • Unlike esoteric brain teasers, it happens in real life • In the next few slides I’ll share examples that seem “impossible” • We’ll then explain why they are possible and do happen • Discuss implications/warning Ronny Kohavi, Microsoft

21. Examples 1: Drug Treatment • Real-life example for kidney stone treatments • Overall success rates: • Treatment A succeeded 78%, Treatment B succeeded 83% (better) • Further analysis splits the population by stone size • For small stones Treatment A succeeded 93% (better), Treatment B succeeded 83% • For large stones Treatment A succeeded 73% (better), Treatment B succeeded 69% • Hence treatment A is better in both cases, yet was worse in total • People going into treatment have either small stones or large stones • A similar real-life example happened when the two populations segments were cities (A was better in each city, but worse overall) Adopted from wikipedia/simpson’s paradox Ronny Kohavi, Microsoft

22. Example 2: Sex Bias? • Adopted from real data for UC Berkeley admissions • Women claimed sexual discrimination Only 34% of women were accepted, while 44% of men were accepted • Segmenting by departments to isolate the bias, they found that all departments accept a higher percentage of women applicants than men applicants.(If anything, there is a slight bias in favor of women!) • There is no conflict in the above statements. It’s possible and it happened Bickel, P. J., Hammel, E. A., and O'Connell, J. W. (1975). Sex bias in graduate admissions: Data from Berkeley. Science, 187, 1975, 398-404. Ronny Kohavi, Microsoft

23. Example 3: Purchase Channels Multichannel customers spend 72% more per year than single channel customers -- State of Retailing Online, shop.org • Real example from a Blue Martini Customer • We plotted the average customer spending for customers purchasing on the web or “on the web and offline (POS)” (multi-channel), but segmented bynumber of purchases per customer • In all segments, multi-channelcustomers spent less • However, like shop.org predicted,ignoring the segments, multi-channelcustomers spent more on average Ronny Kohavi, Microsoft

24. Last Example: Batting Average • Baseball example • (For those not familiar with baseball, batting average is percent of hits.) • One player can hit for a higher batting average than another player during the first half of the year • Do so again during the second half • But to have a lower batting average for the entire year • Example • Key to the “paradox” is that the segmenting variable (e.g., half year) interacts with “success” and with the counts.E.g., “A” was sick and rarely played in the 1st half, then “B” was sick in the 2nd half, but the 1st half was “easier” overall. Ronny Kohavi, Microsoft

25. Not Really a Paradox, Yet Non-Intuitive • If a/b < A/B and c/d < C/D, it’s possible that (a+c)/(b+d) > (A+C)/(B+D) • We are essentially dealing with weighted averages when we combine segments • Here is a simple example with two treatments • Each cell has Success / Total = Percent Success % • T1 is superior in both segment C1 and segment C2, yet loses overall • C1 is “harder” (lower success for both treatments) • T1 gets tested more in C1 Ronny Kohavi, Microsoft

26. Important, not Just Cool • Why is this so important? • In knowledge discovery, we state probabilities (correlations) and associate them with causality • Treatment T1 works better • Berkeley discriminates against women • We must be careful to check for confounding variables • Confounding variables may not be ones we are collecting (e.g., latent/hidden) Ronny Kohavi, Microsoft

27. Controlled Experiments • Multiple names to the same concept • A/B tests • Control/Treatment • Controlled experiments • Randomized Experimental Design • Concept is trivial • Randomly split traffic between two versions • Control: usually current live version • Treatment: new idea (or multiple) • Collect metrics of interest, analyze (statistical tests, data mining) • First known controlled experiment in the 1700s • British captain noticed lack of scurvy in Mediterranean ships • Had half the sailors eat limes (treatment), half did not (control) • Experiment was so successful, British sailors are still called limeys • Note: success despite no understanding of vitamin C deficiency Ronny Kohavi, Microsoft

28. Advantages of Controlled Experiments • Controlled experiments test for causal relationships, not simply correlations • They insulate external factors • Problems that plague interrupted time series, such as history/seasonality/regression impact both versions • They are the standard in FDA drug tests • But like most great things, there are problems and it’s important to recognize them… Ronny Kohavi, Microsoft

29. Issues with Controlled Experiments (1 of 4) If you don't know where you are going, any road will take you there —Lewis Carroll • Org has to agree on key metric(s) to improve • While it may seem obvious that we need to know if we’re improving, it’s not easy to get clear agreement • If nothing else, bringing this question to the surface is a great benefit to the org! Ronny Kohavi, Microsoft

30. Issues with Controlled Experiments (2 of 4) • Quantitative metrics, not always explanations of “why” • For example, we may know that lemons work against scurvy, but not why;it may take a while to understand vitamin C deficiency • Data Mining may help identify segments where difference is large, leading to better understanding • Usability studies also useful at explaining • Short-term vs. Long-term • Hard to assess long term effects, such as customer abandonment • Example: if you optimize for ads for clickthrough revenues, you might plaster the site with ads. Long-term concerns should be part of metric (e.g., revenue per pixels of real estate on the window) Ronny Kohavi, Microsoft

31. Issues with Controlled Experiments (3 of 4) • Primacy effect • Changing navigation in a website may degrade the customer experience (temporarily), even if the new navigation is better • Evaluation may need to focus on new users, or run for a long period • Multiple experiments • Even though the methodology shields an experiment from other changes, statistical variance increases making it harder to get significant results • It is useful to avoid multiple changes to the same “area.” QA also becomes harder when tests interact • Consistency/contamination • On the web, assignment is usually cookie-based, but people may use multiple computers, erase cookies, etc. Typically a small issue • Launch events / media announcements sometimes preclude controlled experiments • The journalists need to be shown the “new” version Ronny Kohavi, Microsoft

32. Issues with Controlled Experiments (4 of 4) • Statistical tests: distributions are far from normal • 97% of sessions do not purchase, so there’s a large mass on the zero spending • Proper randomization required • You cannot run option A on day 1 and option B on day 2, you have to run them in parallel • When running in parallel, you cannot randomize based on IP (e.g., load-balancer randomization) because all of AOL traffic comes from a few proxy servers • Every customer must have an equal chance of falling into control or treatment and must stick to that group Ronny Kohavi, Microsoft

33. Technical Lessons – Cleansing (I) • Auditing data • Make sure time-series data exists for the whole period.It is very easy to conclude that this week was bad relative to last week because some data is missing (e.g., collection bug) • Synchronize clocks from all data collection points.In one example, some servers were set to GMT and others to EST, leading to strange anomalies.Even being a few minutes off can cause add-to-carts to appear “prior” to the search Ronny Kohavi, Microsoft

34. Technical Lessons – Cleansing (II) • Auditing data (continued) • Remove test data.QA organizations constantly test the system. Make sure the data can be identified and removed from analysis • Remove robots/bots/spiders5-40% of site e-commerce site traffic is generated by crawlers from search engines andstudents learning Perl.These significantly skew results unless removed Ronny Kohavi, Microsoft

35. Data Processing • Utilize hierarchies • Generalizations are hard to find when there are many attribute values (e.g., every product has a Stock Keeping Unit number) • Collapse such attribute values based on hierarchies • Remember date/time attributes • Date/time attributes are often ignored, but contain information • Convert them into cyclical attributes, such as hour of day or morning/afternoon/evening, day of week, etc. • Compute deltas between such attributes (e.g., ship date minus order date) Ronny Kohavi, Microsoft

36. Analysis / Model Building • Mining at the right granularity level • To answer questions about customers, we must aggregate clickstreams, purchases, and other information to the customer level • Defining the right transformation and creating summary attributes is the key to success • Phrase the problem to avoid leaks • A leak is an attribute that “gives away” the label.E.g., heavy spenders pay more sales tax (VAT) • Phrasing the problem to avoid leaks is a key insight.Instead of asking who is a heavy spender, ask which customers migrate from spending a small amount in period 1 to a large amount in period 2 Ronny Kohavi, Microsoft

37. weekends Data Visualizations • Picking the right visualization is key to seeing patterns • On the left is traffic by day – note the weekends (but hard to see patterns) • On the right is a heatmap, showing traffic colored from green to yellow to redutilizing the cyclical nature of the week (going up in columns)It’s easy to see the weekend, Labor day on Sept 3, and the effect of Sept 11 Ronny Kohavi, Microsoft

38. Model Visualizations • When we build models for prediction, it is sometimes important to understand them • For MineSet™, we built visualizations for all models • Here is one: Naïve-Bayes / Evidence model(movie) Ronny Kohavi, Microsoft

39. A Real Technical Lesson:Computing Confidence Intervals • In many situations we need to compute confidence intervals, which are simply estimated as: acc_h +- z*stdDev • where acc_h is the estimated mean accuracy, • stdDev is the estimated standard deviation, and • z is usually 1.96 for a 95% confidence interval) • This fails miserably for small amounts of data • For Example: If you see three coin tosses that are head, the confidence interval for the probability of head would be [1,1] • Use a more accurate formula that does not require using stdDev (but still assumes Normality): • It’s not used often because it’s more complex, but that’s what computers are for • See Kohavi, “A Study of Cross-Validation and Bootstrap for Accuracy Estimation and Model Selection” in IJCAI-95 Ronny Kohavi, Microsoft

40. Challenges (I) • Finding a way to map business questions to data transformations • Don Chamberlin wrote on the design of SQL “What we thought we were doing was making it possible for non-programmers to interact with databases." The SQL99 standard is now about 1,000 pages • Many operations that are needed for mining are not easy to write in SQL • Explaining models to users • What are ways to make models more comprehensible • How can association rules be visualized/summarized? Ronny Kohavi, Microsoft

41. Challenges (II) • Dealing with “slowly changing dimensions” • Customer attributes change (people get married, their children grow and we need to change recommendations) • Product attributes change, or are packaged differently.New editions of books come out • Supporting hierarchical attributes • Deploying models • Models are built based on constructed attributes in the data warehouse. Translating them back to attributes available at the operational side is an open problem • For web sites, detecting bots/robots/spiders • Detection is based on heuristics (useragent, IP, javascript) Ronny Kohavi, Microsoft

42. Challenges (III) • Analyzing and measuring long-term impact of changes • Control/Treatment experiments give us short-term value. How do we address long-term impact of changes? • For non-commerce sites, how do we measure user satisfaction? Example: users hit F1 for help in Microsoft Office and execute a series of queries, browsing through documents.How do we measure satisfaction other than through surveys? Ronny Kohavi, Microsoft

43. Summary • The lessons and challenges are from e-commerce, but likely to be applicable in other domains • Think about the problem end-to-end fromcollection, transformations, reporting, visualizations, modeling, taking action • Beware of hidden variables when concluding causality. Think about Simpson’s paradox. • Conduct many controlled experiments (A/B tests) because our intuition is poor • Build infrastructure for controlled experiments (this is what my team is now doing at Microsoft) Copy of talk at http://exp-platform.com Ronny Kohavi, Microsoft