In the third episode of the nationally televised publicity stunt put on by IBM (and as publicity stunts go, I’ll grant this one has been mightily entertaining) the computer, named Watson, ultimately prevailed over two of the game’s greatest human champions. The final score for tonight’s game was $44,131 for Watson, $19,200 for Ken Jennings and $11,200 for Brad Rutter. Total scores over two days of play was $77,147 for Watson, $21,600 for Rutter and $24,000 for Jennings.

The humans, however, didn’t go down without a fight. After Watson scored early on what looked like six question in a row. Jennings, who had lagged in the first game, rallied spectacularly, racking up a decent score on questions that Watson seemed to struggle with in the category of “Actors Who Direct” and on one about what you call a section of a newspaper that’s added within the folds. (Answer: What is an insert?) The score at the first break: Watson $4,200, Jennings $3,400, Rutter, $600.

During the second segment it got really interesting. Jennings managed to pull ahead, and in so doing probably made some IBM executives sweat in the process. That “Actors Who Direct” category continued to trouble Watson, which didn’t hit the buzzer as often. Jennings pulled ahead on another question concerning newspapers and then hit a Daily Double, which he answered correctly with a wager of $3,600 that doubled his score to $7,200, giving him the first human lead of the entire match.

Watson then went on to miss a few. Jennings and Rutter both beat it on questions it didn’t try to answer, and Jennings went on to build a considerable lead. By the time the board was cleared, Jennings’s score was $8,600 to Watson’s $4,800, while Rutter had $2,400.

In the third segment, Jennings went for a run, building up a commanding lead. Watson missed a crucial Daily Double in the nonfiction category, choosing “Dorothy Parker” where the answer was “The Elements of Style.” Jennings started what appeared to be a methodical hunt for a Daily Double, selecting high-value questions. Late in the game, Jennings had a $17,000 score to Watson’s $15,073, when Watson found the next Daily Double. This time it answered correctly, bringing it to $15,440.

Watson then had another run, finally pulling ahead of Jennings going into Final Jeopardy. The score was Watson $23,440, Jennings $18,200 and Rutter $5,600.

Here the game came to an interesting point. The question in the category of “20th century novelists” concerned the author Bram Stoker, who wrote “Dracula.” All three got it right. Before seeing the clue, however, Jennings made a conservative wager: Only $1,000, bringing his final score to $19,200. Had he bet more aggressively, he would have doubled his score to $36,400.

Watson bet $17,973, unusually aggressive, as it has generally wagered carefully in earlier rounds of Final Jeopardy, bringing its total to $41,413. My question for Jennings: Why didn’t be bet all the marbles and go for the win, on the chance that Watson might get it wrong?

Episode two had ended strangely. Having correctly answered 29 of 32 “Jeopardy” clues correctly, including two daily doubles, Watson completely blew Final Jeopardy. Asked to name a U.S. city whose two largest airports were named for a World War II hero and a World War II battle, Watson answered “Toronto?????”–the question marks indicating a low level of confidence in the answer. The correct answer was Chicago, where the airports in question were named O’Hare, after Edward “Butch” O’Hare (a U.S. Navy flying Ace), and Midway, an important battle of the Pacific War.

How could Watson have gotten it so wrong? There was at least some logic to its attempt. Readers have since told me that Toronto’s two biggest airports are named for Lester B. Pearson, Canada’s 14th prime minister, and Billy Bishop, a Canadian flying ace, both Canadian figures from World War I. But how could it choose a Canadian city when the category was “U.S. Cities”? Steve Hamm, a former colleague of mine at BusinessWeek and now an IBM employee explains further here.

To its credit, Watson had wagered only a small amount, not enough to blow the game. As we heard from my other former BusinessWeek colleague Stephen Baker last night, there were human TV producers in the room secretly hoping that Watson would bet all its marbles on Toronto, and that it would lose, after having essentially wiped the floor with Rutter and Jennings. It would have made for the kind of dramatic turnabout that’s great on television but would have embarrassed IBM.

For more on all this, I once again turned to Baker, author of “Final Jeopardy,” a book covering the behind-the-scenes story leading up to this matchup. (The book is out in e-book format now, and in hardcover tomorrow.) We talked via Skype and I recorded our chat, which you can hear below. In it he talks about where Jennings made a crucial tactical error, the controversies that will likely remain now that the game is finished, what Watson will likely do next and the possibility of a rematch.

AllThingsD: Day 3 Of the IBM Jeopardy! Challenge by ahess247

PREVIOUSLY:

• IBM “Jeopardy” Challenge Day 2: Very Different From Day One
• IBM “Jeopardy” Challenge Day One Ends in a Tie
• That Human Vs. Machine Practice Round of “Jeopardy” Didn’t End the Way You Heard It Did
• “Final Jeopardy” Question: Would You Buy an E-Book Without an Ending?
• This Supercomputer Defeated Human Champions of a TV Game Show in 2011
• I’ll Take Computer Company PR Stunts for $1,000,000

Day two was very different. Watson dominated, winning nearly every buzzer and answering nearly every “Jeopardy” clue put to it, correctly. The first segment was all Watson, and it would be like that all night. The computer jumped out to an enormous lead, quickly breaking last night’s tie, soon running up a score of $21,035 to $5,000 for Brad Rutter and $2,000 for Ken Jennings, the scores they had at the close of play last night.

One question about French art stumped all three players, including the computer, and so all three lost the same amount of money on the board.

And at one point, Watson drew an early Daily Double about the designer of Emanuel and Pembroke Colleges. The answer was “Sir Christopher Wren.” Watson wagered $6,435, an oddly precise amount that drew some laughter from the crowd. Watson answered correctly, and the room erupted in applause, and a shot of the crowd showed IBM researcher David Ferrucci, widely seen as the public face of the research team that built and worked on Watson, looking something like a proud father. IBM CEO Sam Palmisano was also visible in audience shots.

At another point, when asked a question about items stolen from a museum in a certain city in 2003, Watson had only 32 percent confidence in what it thought was the best answer, which was Baghdad. It said, “I’m going to guess,” before giving the right answer.

By the end of the second segment, Watson’s lead was bordering on the ridiculous–$36,881, to $5,400 for Rutter and $2,400 for Jennings. One interesting moment occurred when all three players passed on a question about a painting stolen in Argentina in 1987. It all came down to Final Jeopardy. The clue was in the category of U.S. Cities: This city’s largest airport is named for a World War II hero, and its second largest airport is named for a World War II battle.

Here the story takes a surprising turn. And once again we’re fortunate to the have the color commentary of Stephen Baker, my old Businessweek colleague and author of “Final Jeopardy,” a book on the inside story of the IBM Jeopardy Challenge. He witnessed the match in person and spent months reporting on the run up to this event. I recorded our Skype call.

In the audio clip below, Baker starts out describing the strange turn the game took at the end during Final Jeopardy, where Watson displays at once how it can be both stupid and smart at the same time.

Steve Baker Talks About The Day 2 Of the IBM Jeopardy Challenge by ahess247

PREVIOUSLY:

• IBM “Jeopardy” Challenge Day One Ends in a Tie
• That Human Vs. Machine Practice Round of “Jeopardy” Didn’t End the Way You Heard It Did
• “Final Jeopardy” Question: Would You Buy an E-Book Without an Ending?
• This Supercomputer Defeated Human Champions of a TV Game Show in 2011
• I’ll Take Computer Company PR Stunts for $1,000,000

The IBM supercomputer and human player, Brad Rutter, each had $5,000 on the scoreboard, while Ken Jennings, who had bested Watson in the much-publicized practice match, ended with $2,000.

Watson missed some questions and in interesting ways. At one point Watson repeated a wrong answer, the “1920s,” which Jennings had just said. Host Alex Trebeck referred to these as “weird little moments.”

Watson sprang to a huge lead early. By the first commercial break, Watson had $5,200 to Rutter’s $1,000, and $200 for Jennings. It began a serious run interestingly enough after hitting the Daily Double and making a bet. This is interesting in that Watson, in the practice match which it ultimately lost, showed a weakness in situations where betting was called for. This was a weakness that Jennings exploited to his benefit. This made it a surprise when Watson threw down and bet $1,000, more than it had on the board at the time.

I asked Stephen Baker (pictured), author of the forthcoming book on the match, “Final Jeopardy,” to call me after the episode aired for a little color commentary from the point of view of someone who was in the studio to witness it. Our conversation, which I recorded on Google Voice, is below.

Steve Baker Talks about The IBM Jeopardy Challenge, Day 1 by ahess247

Humanity’s best champions at the game show “Jeopardy”–Ken Jennings and Brad Rutter–are going up against the IBM supercomputer, named Watson, in the first of a three-night televised match.

But new details are starting to emerge about the highly anticipated game. Much was made in the press coverage of a warm-up match witnessed by several reporters last month when it seemed that Watson had won. According to a portion of the final chapter of a book on the match, by technology journalist Stephen Baker, that was not the case.

The assembled reporters saw only 15 clues, not a full game. When the reporters left, Watson was ahead, with a score of $4,400 to $3,400 for Jennings and $1,200 for Rutter. After the reporters left, the match continued. Jennings went on to win the full match, with $50,000 to $39,000 for Watson; Rutter finished third with $10,000. In fact, when it was over, Jennings pointed at the computer and exclaimed, “Game over!” as if he were actually trying to taunt the machine. Baker posted the opening section of the book’s final chapter on his blog today.

Baker’s book also reveals that Watson has a weakness: The Final Jeopardy portion of the game, where players can make bets based on the confidence in their answers, and where speed to the buzzer–where Watson has an advantage during normal clues–doesn’t matter. Jennings figured out this weakness in Watson’s game play and used it to his advantage.

Baker’s book, “Final Jeopardy,” has been coming out in pieces. The first several chapters were released in e-book format last month, and once the match has aired, the final chapter describing the televised match will be released, and then the hardcover version of the book will hit bookstores this Thursday.

How will it all end? You’ll have to watch “Jeopardy” starting tonight–and read Baker’s book–to find out. I’ll be posting more on this after the match airs in the Eastern Time zone tonight.

It’s about IBM’s years-long effort to build a computer smart enough to beat the world’s best “Jeopardy” players. And we’ll know how it turns out next month, when the quiz show airs a series of pretaped matches between Watson–IBM’s machine–Ken Jennings and Brad Rutter, “Jeopardy”’s most successful champions.

But Baker and publisher Houghton Mifflin aren’t waiting for the end of the show to start selling the tale.

You can buy an e-book version of “Final Jeopardy: Man vs. Machine and the Quest to Know Everything” via Amazon or Barnes & Noble today, and start reading immediately–you just won’t get the last chapter, about the climactic battle.

Then in mid-February, immediately after the face-off has aired, the booksellers will send readers the end of the book, either beamed directly into their e-readers or shipped to their PCs.

(And if you’re into delayed gratification, or paper and ink, you could also just wait till mid-February to buy the complete edition in hardcover.)

Novel, right? Sort of. For e-books, the serial approach is a new one, and both booksellers had to be coaxed into doing it.

But selling books on an installment basis is a really old idea, dating back at least to the 1800s, when greats like Balzac and Dickens used to serialize their stories. New Yorkers supposedly gathered at the docks to ask incoming passengers for updates on Dickens’s characters.

And perhaps we’re headed back that way, since digital media allows creators to put out work in as long, or short, a format as they’d like, at whatever pace they want.

Amazon is already playing around with this with its clever “Kindle Singles” format, which sells mini e-books (i.e., novellas or long magazine articles) at mini prices.

And in Baker’s case, the strategy theoretically allows him to piggyback on a wave of publicity that IBM and “Jeopardy” are generating in advance of the shows. If you watched the NFL playoffs this weekend, there’s a good chance you saw, or at least fast-forwarded past, this spot:

Now the trick is to figure out how to turn that kind of media into book sales, which isn’t a given.

But Baker’s a clever guy–prior to writing this book, he was a longtime BusinessWeek writer and editor, and spent the last several years of his tenure covering technology–so I give him decent odds. He was able to get me to write this piece, for starters….

According to a new survey from NPD, only 13 percent of iPad owners bought the device in lieu of a PC. For the other 87 percent, it was an incremental purchase, a luxury purchase.

Which to NPD analyst Stephen Baker means recent claims that the iPad is cannibalizing the PC market are overblown.

“Early adopters, like iPad owners, follow a traditional pattern of consumer behavior; they purchase products because they want them, not because they need them,” Baker explains. “However, as Apple increases iPad distribution and consumer interest peaks, the profile of an iPad owner is much more likely to mirror the overall tech population. When that does happen other tech products with similar usage profiles as the iPad, such as notebooks, netbooks, and e-readers will come under increased pressure from the iPad.”

Evidently that’s happening already. According to Baker, folks who purchased the iPad within a few months of its release were 44 percent more likely to watch YouTube videos, 50 percent more likely to watch movies, 60 percent more likely to watch TV shows, and 38 percent more likely to be reading e-books. And that type of usage behavior is, as Baker observes, “a dagger at the heart of the usage model for netbooks and secondary notebook computers.”

A personal observation: For me, the iPad started out as an incremental purchase, driven by early adopter mania. But now, having used the device for some time, I see it as a needful one. In other words, I wanted the iPad, but I didn’t realize I needed one until I had a chance to use it.

PREVIOUSLY:

• IPad: Tonight We Feast on Laptop Flesh!
• Forget Netbooks, iPad Cannibalizing Entire PC Industry
• Apple: The iPad Isn’t Cannibalizing the Mac, But We Sure Hope It’s Cannibalizing the PC

We’ve had an incredible reception to the new version of Office, Office 2010, SharePoint, Exchange.”

– Microsoft CEO Steve Ballmer, July 12, 2010

Microsoft (MSFT) CEO Steve Ballmer describes the reception given to Office 2010 as “incredible,” but according to NPD, it’s been anything but. In the research house’s view, the first two weeks of Office 2010 sales have been “a bit disappointing.”

The latest data from NPD’s Weekly Tracking Service reveals Office 2010 units sold and dollars earned to be down from Office 2007’s initial two weeks of sales, though slightly ahead of sales trends for the aging software suite so far this year. That doesn’t mean it’s not a strong product–the reviews have been largely positive–just that it is having difficulty gaining momentum in a saturated market. A vast improvement over Office 2003, Office 2007 sold 10 million new copies retail during its lifetime. But folks who shelled out $399 to buy it three years ago aren’t feeling so compelled to do it again for its successor.

“Office 2007 was a radical new design that certainly helped deliver a lot of curious buyers and it was launched nearly parallel with Vista, adding a good deal of promotional activity in the software aisle, both of which likely helped drive initial sales of Office 2007,” NPD analyst Stephen Baker explains. “This time Office was launched during a seasonally slow period for PC purchases which have, over time, proven to be a have a strong impact on Office sales. The combination of these factors, plus the increasingly saturated installed base likely explains most of the initial weakness in sales of Office 2010.”

What about new challenges from online office suites like Google (GOOG) Docs? Surely they must play a role here as well? Not really, says Baker. “These products have little awareness among the mainstream consumer who is the retail boxed version’s primary customer. Over time it is certainly likely that we will see some slowdown in retail sales as consumers alter their productivity software habits, but that time is not now.”

So Office 2010 sales will be a bit slower to ramp up than those of its predecessor. At least until the PC refresh cycle really kicks in–and there are signs that that’s beginning to happen.

That’s the conclusion of an NPD survey that suggests that Mac households favor multiplatform environments, buy more gadgets and have the higher income needed to afford them.

“While Apple owners tend to own more computers and more electronics devices, there is also a high correlation among Apple owners and more affluent consumer households,” said NPD’s Stephen Baker. “The average Apple household owns 48 CE devices whereas the average computer household owns about 24.” (See chart below; click to enlarge.)

Not a surprise, really. Presumably, if you can afford to purchase a $1,199 laptop or desktop, you can afford to buy an assortment of other gadgetry to go along with it. A couple of other data points worth noting:

• 66 percent of Mac households own three computers or more, compared to 29 percent of Windows households.
• 63 percent of Mac households own an iPod. The same can be said of only 36 percent of all computer-using households.

Sadly, NPD’s survey didn’t explore how PCs are used in Mac households or how they ended up there in the first place. Are they leftovers from a PC-to-Mac switch? Are they corporate laptops? Entry-level machines for the kids? High-end gaming machines?

And it continues to sell well. While Leopard and Tiger sales declined more than 60 percent after their first week at market, sales of Snow Leopard have only declined 25 percent in the two weeks it’s been available.

“Even though some considered Snow Leopard to be less feature-focused than the releases of Leopard or Tiger, the ease of upgrading to Snow Leopard and the affordable pricing made it a win-win for Apple computer owners–thus helping to push sales to record numbers,” NPD’s Stephen Baker said in an announcement.

“With pricing reduced by more than $100 for both the single-user and five-user pack versus Leopard pricing,” Baker added, “Apple has clearly demonstrated that aggressive pricing policies in this economic environment generate an outstanding consumer response.”

In a research note issued earlier this summer, Piper Jaffray analyst Gene Munster estimated that Apple (AAPL) would sell about five million copies of Snow Leopard in the quarter in which it was launched. And while that number might have seemed optimistic at the time, it’s looking increasingly more reasonable. Leopard, as you might recall, sold more than two million copies its first weekend at market. If Snow Leopard is selling twice as quickly, Apple should have no trouble hitting Munster’s target and perhaps even passing it.

According to new stats from NPD Group, Apple now claims 91 percent of the U.S. retail market for personal computers costing more than $1,000. Nine out of 10 dollars spent on such machines in June went to Cupertino.

Now, granted, Cupertino only sells three Macs priced below $1,000 (the 13-inch MacBook and both versions of the Mac Mini), and Apple’s (AAPL) rivals’ offerings typically price out in the $690 -to-$703 range. Still, that 91 percent metric is impressive.

As Joe Wilcox over at Betanews puts it, “A (higher pricing) doesn’t necessarily lead to B (greater sales). All major Windows OEMs sell PCs in the premium category, too. Apple’s charging more isn’t necessarily recipe for people paying more for Macs, or their capturing big revenue share.”

That said, as NPD analyst Stephen Baker points out, Windows product average selling prices have been falling pretty rapidly over time, especially at retail, so it was inevitable that Apple’s share of the high-end market would rise, since the company hasn’t really altered its pricing philosophy.

It would seem then that the so-called “fastest-growing segment of the PC market” is also the most misunderstood. For what is a netbook but an underpowered laptop or a giant Gallagher-sized smartphone? Consumers are intrigued by the netbook’s low prices, but they don’t understand its value proposition.

“We need to make sure consumers are buying a PC intended for what they plan to do with it,” said NPD’s Stephen Baker. “There is a serious risk of cannibalization in the notebook market that could cause a real threat to netbooks’ success. Retailers and manufacturers can’t put too much emphasis on PC-like capabilities and general features that could convince consumers that a netbook is a replacement for a notebook. Instead, they should be marketing mobility, portability, and the need for a companion PC to ensure consumers know what they are buying and are more satisfied with their purchases.”

Seems the econalypse and the absence of a “must-have product” really played havoc with spending during our annual consumer binge. Said Baker, “Not only was there not a really hot product, not only did the economy tell people that they shouldn’t buy stuff, but the stuff I have [is] more than good enough in most cases.”