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Sunday, September 23, 2007

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Rikki Tahta

Hi Michael,

I am the CEO and co-founder of Covestor

As Fred pointed out Covestor.com has already been allowing investors to tap into their real trading accounts to create a verified profile of their investment activity (comparable to professional hedge fund managers if they choose)

Re being a social "Bloomberg": before launching Covestor earlier this year I had a conversation with Lex Fenwick (CEO of Bloomberg who I know from a past life), about what we were intending to do and to see if there was anyway we could tie into their network as we were discussing with Reuters and Thomson. He listened and decided to pass as ultimately he saw the value of our proposition to investors, but viewed the upside for Bloomberg as not worth the potentially competitive role we might play years down the line.

What is great about Bloomberg is the unabashed gloves off focus. They are well aware that their email network is a core competitive advantage. It may not have been the result I wanted but I can't fault his clarity and decisiveness. If we are successful in breaking down the barriers between individual investors and professionals and allowing the p-p investment advice to emerge. I don't doubt that eventually Bloomberg will add more social networking tools to their platform.

Cheers Rikki

Shawn Ward

Hey Michael,

Great post! Social investing sites like Covester are in a great position to rock the investing landscape. Instead of thinking of these sites as the chance to be a “social Bloomberg" we should think of them as the chance to be a “retail Bloomberg”.

Given the nature of Bloomberg’s audience– it will never be social. Traders and Portfolio Managers make the big bucks for outperforming their peers, even fractionally. They live in a world where they conceal their trades, research and actual holdings for as long as they can. Bloomberg is the ideal “closed network” for professional traders – and they willingly through the nose for it. Bottom line the users want it closed.

The retail space, however, is the wild west – and these social investment sites are going to turn it upside down. One of the big reasons – everyone benefits from the open, social aspects!

1. Investors crave innovative research and expert stock picks … Join a site like covester and be able to follow the trades of thousands of Jim Cramers... AWESOME! Better yet, you can follow their actual trades for as long as you want before you make a trade on your own. No BRAINER!

2. If you are an active trader you want thousands of people following your trades. Here is investor-nirvana – you have a hundred thousand people following your buys and short sales. In the days following your trades you have a huge following trading the same stocks. Nothing like creating your own pop in the market- after every trade you make!!

3. Finally the brokers, especially the discount brokers, want these services (although, they may not know it yet). Brokers have two primary goals:

a. Attract more users - seamless integration with social sites will drive users

b. Make each user more profitable – remember commissions are still the brokerage firms primary revenue source. Imagine if a firm could get 5% of their investors trading 3-4 more times a year because of these social investing sites. BOING! that's easy math...

It’ll be interesting to see who the ultimate long-term winners are: Brokers that offer all the social benefits within their own community (ala Zecco), sites that build their business around the transparency and integrity of actual trading data (like Covestor or Cake Financial), or sites that build their business around virtual trades and individualized research and rankings from the community (like UpDown or Motley Fool’s CAPS).

It'll be a fun couple of years watching it all unfold...

Shawn
Geezeo


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