NEW VEINS OF GOLD
Fred Wilson has a post on a recent trend bringing social networking features to online financial investing:
"A big theme at TechCrunch 40 was social/web financial services. Mint and Cake launched there and Mint came away with the top prize.
To many, it seemed that these two companies were the first movers in their respective market spaces. But that is far from the case. In the case of Mint, there are at least three services already in the market, Wesabe (which Union Square Ventures is an investor in), Geezeo, and Buxfer.
The social investing market is even more crowded with dozens of companies trying to become "a social Bloomberg".
The twist that Cake brings to the social investing field is that they use real transactions to build your profile by accessing your online trading accounts."
The "social Bloomberg" quest is something I've long been on the lookout for, for over a decade now, starting in the "Web 1.0" age. It's been a particular focus, since I've had a chance to closely watch how Bloomberg became Bloomberg on the global financial scene.
Most of the current companies though seem to be focused more on the trading prowess of it's members, which to my eye is a long way from what made Bloomberg really successful.
The real Bloomberg service has always started with the content and tools around almost every type of investment vehicle imaginable. And then the communities that built ad-hoc around these content and tool hubs became the major icing on the cake.
And then of course, the thing that really makes Bloomberg Bloomberg is it's impressive subscription-driven business model, where each terminal can bring in over $1000/month.
Nothing like that is likely to happen on a consumer-driven social Bloomberg. But it could still be financially interesting.
If anything, it's almost something Yahoo! Finance, the leading online financial destination, could do if they selectively added social networking features to it's venerable service. Yahoo! Finance already has one of the densest collection of financial content and tools, with one of the highest following by mainstream users.
As many of us might imagine, social networking features can be useful in a whole host of prosaic, online applications.
A good example of this is Xobni, another startup that made it's debut at the TechCrunch40 conference last week. Here's how TechCrunch's Duncan Riley described the company:
"Xobni creates a profile of all the interactions you have with your contacts. It appears to be a plugin for your email client - sits on the right-hand side of the client as you browse your email. Gives context to each message that you view; you can browse your messaging history with people, see their portrait, look at connected people (social networking), import calendar openings into email text, search your email by people and keywords. Xobni automatically extracts phone and email contacts from email messages.
You can also view upcoming appointments, to-do items, and a “stay in touch” area (a list of people who used to email you but haven’t in awhile - the “ex-girlfriend” feature).
Currently available for Microsoft Outlook, others soon.
Main points: view threaded conversations, find attachments, use email’s social network, and search email and people."
Yahoo! President Sue Decker recently commented that Yahoo! Mail had the potential to be a social network, a la Facebook and others.
Presumably Microsoft will soon wake up to the opportunities it has to do the same with it's global Outlook franchise. They even have Ray Ozzie has their chief technologist, who brought us the original social networks with Notes (later Lotus Notes), and then with Groove. It's pretty extraordinary to me for some time now that they've not yet tried to leverage the latent social networks opportunity within their Outlook franchise.
Companies like Xobni point the way to these opportunities across other email platforms. Today's news that Google is updating it's popular Gmail application, is yet another opportunity to do the same. Indeed, TechCrunch's Michael Arrington recently reported that Google is preparing a broader offensive against social networks like Facebook on November 5th.
So the opportunity to leverage existing online applications, be they in email, or verticals like Finance, is one of the next near-term Holy Grails of the Web 2.0 trend. We'll see if they bear fruit.
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
Posted by: Rikki Tahta | Monday, September 24, 2007 at 07:18 AM
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
Posted by: Shawn Ward | Tuesday, September 25, 2007 at 12:46 AM