Tag Archives: stock

SkyGrid: Case study on ad-supported investment media

Is the elusive “Bloomberg for the masses” attainable?  Of course, most do-it-yourself investors cannot afford the cost of thousands of dollars per month for these expensive terminals.  But, what about making a platform free for subscribers and monetizing the platform via advertising?

That’s exactly what SkyGrid is attempting.  Until recently, SkyGrid charged $6000 per seat/year for a flash interface that allows users to track financial news on stocks and sectors they’re interested in.  In April, the company, which raised $11M in April from top venture firms, transitioned away from a premium model to a completely free model.  SkyGrid has made free accounts available to New Rules of Investing readers.  If you’re interested, go here to sign up for a free account: http://www.skygrid.com/reg/?id=8x89a9e3

The Service

skygrid_home

SkyGrid users log in to their accounts over the web via their browsers.  Once in, users are greeted with the only human-arranged editorial component on the platform: the day’s top or breaking financial stories.

SkyGrid produces a user-defined customizable news-stream.  Users of the system can customize SkyGrid to continuously stream stories about stocks in their portfolios.  SkyGrid compiles this content based on what the company described as a complex, multi-step process that includes:

  • crawling/scraping data/headlines from feeds in real time
  • validating reputation (link structure, click volumes) to weed out only content appropriate for a high-end user, like a hedge fund manager
  • testing if the content is important/impactful  for investors (Steve Jobs = important for Apple),
  • applying sentiment indicators (green if the content is positive, red if it’s not) via semantic analysis developed by computational linguists (something the firm says is very different from keyword analysis)
  • real time clustering (grouping various articles around similar themes)

The upshot is that users get a vertical stream of  headlines which they can click through to read the entire article.

Pros:

  • The system works really quickly and it appears to be eerily on target with its content.
  • I found very few articles streaming by that weren’t interesting or important for shareholders.
  • I believe this comes from good science, programming, user interface and tying it all together, a focus on investors.  SkyGrid has developed this for investor use and investor use only and it shows.
  • It even follows Twitter streams where more and more investment content is being shared

Cons:

  • This may be another case of coming to a knife fight with a gun or a solution looking for a problem.  I found the amount of information hard to digest.  As an hedge fund analyst, I was paid to discover profitable investments.  Does actually having this amount of information make me better at that?  I’m not convinced.

Building News Streamsskygrid_portfolio

Because SkyGrid is a smart, content aggregator built with investors in mind (as opposed to some of their competitors that are merely trying to sell to investors), SkyGrid has some interesting functionality when it comes to customization of news streams.

  • Uploading tickers of portfolio: for institutional investors monitoring lots of stocks, the ability to upload a list of tickers makes it really easy to set up
  • Sector analysis: I like what SkyGrid has done here.  Instead of using old-hack sectoror industry number/jargon, SkyGrid allows investors to monitor sectors the way they think about investing in them.  So, no “information retrieval” for “web portals” or “hardware components” for “consumer electronics”.  This isn’t trivial and is quite useful.

Pros:

  • customizing a news stream is really easy on SkyGrid.
  • upload function is really helpful for professionals or retail investors monitoring a lot of positions
  • sector tools approach industry analysis the way investors do, not like the Dewey Decimal system does
  • Good filter system gives users ability to tune out blogs, mainstream media, news wires, etc.

Cons:

  • I’d like more help here with idea generation.  For many investors, they know exactly what they want to monitor.  Others need help.  Maybe pre-seeded news streams with commonly held stocks could help.  Or maybe seeing celebrity investors’ news streams could help prod users for ideas.  I think more work here will help many retail investors as well as professionals who are less web-savvy.
  • While the filtering provided allows investors to tune out certain types of sources, it would be more interesting to filter out specific sources.  Maybe I’m interested in TechCrunch.  Or maybe I’m not.  I’d like to be able to decide as I go to amplify or drown out certain sources.

Social components

There are a few important components built-in on SkyGrid that connects the platform to the greater whitespace of social networks:

  1. Each of the streaming headlines can be easily posted to social networks like Twitter, adding to the virality of the platform, though it’s unclear to me if there are any beneficial network effects for users by having additional users on the platform (it’s clearly good for SkyGrid’s marketing and distrubition).
  2. The customizable news-stream can be shared out with others, much in the way content aggregator, Alltop allows users to create my.alltop.com (see my.alltop.com/zackmiller, as an example)
  3. Users can rate that they like certain articles.  These articles are then tagged so users can revisit them.  At the aggregate level, there is even some rudimentary ranking of top favorited items.

Pros:

  • Basic sharing functionality outside of the SkyGrid platform onto social networks.

Cons:

  • There don’t seem to be any (easy to find, at least) internal social components.  I’d like more insight into others’ news streams.  That voyeurism works well for me and on the web in general.  We’re seeing portfolio peeking in expert investing communities, like Covestor.
  • analytics: I can’t put my finger on it exactly but there is probably some interesting stuff to be done here with meta information that would be useful for investors.  I’d like to see some data (ie., 76% of articles on Apple are normally positive, today shows only 25% — maybe the beginning of a turn in sentiment)

New Rules of Investing Overall Ratingraiders-sword_l

UsabilityPass +

SkyGrid does everything it purports to do.  It’s a great user experience to have an ongoing conversation stream of all the stocks and sectors in one’s portfolio. The filters are great — read only that content that’s pertinent to a shareholder.  The rest is just noise and SkyGrid tunes it out.

New Rules Meter:    Pass-

This is a level of how Web 2.0 the site actually is.  The site scrapes and analyzes content really well but doesn’t do a great job of sharing/producing content withing its own 4 walls.  Unlike Twitter, which combines both external content and commentary on top of it, SkyGrid seems a pretty static environment at this point.  Because we’re dealing with financial information, this could certainly be by design but it would be interesting to create some type of network effect, where users can also create content and share.

Needs Fulfillment: Questionable

It’s here that I struggle.  SkyGrid does what it does quite well.  I’m just not convinced anyone really NEEDS it.  Combine a chintzy Yahoo Finance with StockTwits and a good blog aggregator like Google Reader and how much do you really miss?  SkyGrid is another program that demands attention.  I like to keep a separate window open on a separate screen from where I’m looking just to let it scroll — much in the same way I use the Twitter client, TweetDeck.  I like it but just not sure how ultimately valuable this is.  It’s like half-listening into a conference call or letting CNBC play in the background.

That’s just me — what do you think?  What are your perspectives on SkyGrid?

I’m going to use a future post to delve into the business model — turning an institutional-grade investment platform into an ad-supported thin client.  Stay tuned.

SkyGrid has made free accounts available to New Rules of Investing readers.  If you’re interested, go here to sign up for a free account: http://www.skygrid.com/reg/?id=8x89a9e3

Like what you’ve read?  Don’t forget to subscribe to receive free daily updates from New Rules o fInvesting.  You can also follow us on Twitter.

Great idea for a fresh investment letter: mimic Senators’ portfolios

In previous posts, we’ve explored the process of picking a theme for your newsletter.  This is an important process because it really defines everything that you’ll be doing as part of your newsletter business.

  • It will define what goes into your portfolio
  • By deciding to go broad or narrow, your theme can differentiate you from your competition
  • Different themes fall in and 0ut of favor during different market cycles
  • The theme can mean the difference between making a little money and making lots o’ cash along the way

us-senate-logoSo, are you looking for a fresh idea to start a newsletter?  How about a new market-beating portfolio for inclusion in your existing portfolio?

Reading a great article on Compliance Building today, I stumbled upon a great idea that’s fresh, creative, requires some research, should sell well in subscription format and historically, makes investors money.

It turns out that a 2004 research piece by Professor Alan Ziobrowski of Georgia State University showed that US Senators’ personal stock portfolios outperformed the market by an average of 12 per cent a year in the five years to 1998, beating even the average return on portfolios of corporate insiders.  According to the author of the study:

The results clearly support the notion that members of the Senate trade with a substantial informational advantage over ordinary investors.

Turns out, that Federal law does require Senators to disclose their common stock transfers annually in their Financial Disclosure Reports.  While this only happens on a yearly basis, the information should make for interesting portfolio composition.  Stocks in blind trusts, by the way, were not included in the study, but that shouldn’t matter anyway.

So, what about putting together a portfolio comprised of the best and most ardent of picks from the U.S. Senate? You could segment out Democrats vs. Republicans.  You can see how Senators are positioning themselves in front of some of President Obama’s energy plans.  The study found freshman senators performed well.  You could pit 1st years against their more senior peers.  I dunno, could be quite interesting.

You better hurry, though.  There is legislation being pushed by U.S. Representative Brian Baird to close this loophole and “prohibit securities and commodities trading based on nonpublic information relating to Congress.”

Don’t forget to check out our ebook available for free download, How to Start a Profitable Investment Newsletter.  I’ve also posted important resources to build and run a newsletter.

And if you like what you see, please sign up to receive free updates from New Rules of Investing.

How the Internet is influencing equity research

Interesting presentation from an O’Reilly Webcast by Robert Passarella. According to his O’Reilly bio: “Robert Passarella has spent over 18-years on Wall Street in the gray zone between business and technology…focused on leveraging technology and innovative information sources to empower Equity Research and serve clients. A veteran of Morgan Stanley, JP Morgan, Merrill Lynch, and Bear Stearns…

…Rob is passionate about leveraging alternative data and news provided by the Internet for investment analysis. Robert holds a BBA in Finance from Baruch College and an MBA from the Columbia Business School.”

It’s a good watch but a tad long (it’s over 1hr).

Couple of interesting points:

  • gives a lot of credence to the rise of financial bloggers, aggregators and independent research sources for use on by investment firms
  • thinks the whole “buy, sell, hold” model of sell-side research is commodity now
  • abundance of info (from horrible to really good) is just amassing outside of traditional research channels, some of it “just waiting for analysts to connect the dots”
  • exodus of professional analysts out of ibanks leading the trend towards independent research combined with commission sharing agreements: barrier to entry low, good little business
  • 75% of journalists consult blogs to get ideas for stories
  • key is to take publicly available information (like from Amazon) and transform it into investable information/within human context of financial models/compare data sources
  • different business models competing against traditional research models (mentions SeekingAlpha’s ad revenue and blogger revenue streams)
  • out of ashes of crisis, lot of creativity and entrepreneurship plus low costs and easy-to-use distribution tech will prove fertile ground for new products, services, models in investment research

[Hat tip: IR Web Report, a great read, turned me onto this presentation.]

How to start an investment newsletter: give away content to get more sales

givingGone are the days where reputation alone drives sales for an investment newsletter.  Successful newsletter publishers understand that it’s become much harder to get investors willing to pony up a couple hundred dollars per year for stock research.  One technique that well-marketed investment newsletters are using to drive more sales is by giving away a lot of good content.

Why does giving away content get sales?

Buyers like to kick the tires: I do much of my investment research work online — for free.  Yahoo Finance has a tremendous amount of content.  To get me to pay up for something, you’ve got to convince me that you are a) making my life easier by helping me find stuff and/or b) providing me with a type or quality of research I can’t find elsewhere.  The only way a customer can feel confident that they would find value in your work is by sampling it.

So, you’ve to to give it away.  Give away a recent issue.  Give away a 3 month trial subscription.  Provide value for free.  Give away a yearly overview piece highlighting some trends you expect to see.  Give it away in the form of ebooks like Brian does.

Buyers want more in perceived value: Consumers have been spoiled by all the free content on the Internet.  Those are the rules of the game.  Your prospective subscribers want to feel like they are receiving tons of value in return for their hard earned research dollars.  That means, a monthly newsletter, trading updates, portfolio moves, interviews, and anything else you can load ’em up with.

Good free content must mean great premium content, right?: By segmenting content, you provide your readers with a choice.  They can stick with what they know — the great, free content they’re receiving — or pay up for something unknown to them that must be of better quality.  The fact that there is an option to pay up immediately positions your premium content into the mysterious world of the better.  I mean, you’re charging for it.   It must be better.  As users consume your free stuff, they will always be thinking about the greater value you’ve placed behind the pay wall.

Free content doesn’t cannibalize premium

Some of us might be thinking: hey, giving away too much good, free stuff doesn’t incentivize users enough to pay up.  There is some truth in this statement.  I mean, why would I pay up for your investment newsletter if I’m getting such great free content.  This requires careful planning.  The free content you give away should stand on its own.  But there must always be a reason to upgrade subscriptions to premium and that means doing better.  Going deeper and providing a richer experience.

3 tips for giving away free content

  1. Segment free content like you do premium: Just like we segment free content from premium content, I believe there are different types of free content.  Some of it is worth more than others.  Some of it should be made freely available, published out onto your investment blog.  For higher-quality, more in-depth pieces like ebooks, ask for something back from your subscribers.  Like an email address.  Like answering a survey.  Then load up that precious email address (and it is precious, don’t squander it) into your autoresponder program like my recommendation, StreamSend or another email services program.
  2. Showcase your expertise: Whether it’s an investing style or industry, you probably are a whiz at something.  Take this experience and knowledge and put it together in an expansive overview piece for your readers.  Show that you completely understand the innerworkings of a vertical industry.  By showcasing how smart you are at an industry level and giving that away for free, you’re telling prospects that you probably know how to run a portfolio made up of stocks in that industry.  As we said above, prospects will pay for value — vertical knowledge of an industry is invaluable.
  3. Be creative: This opportunity to create valuable free content has tremendous power to bring in far-reaching readers.  Do something creative.  Something that’s not run-of-the-mill.  Give it away as a guest post to other blogs in the industry you’re writing about.  Submit it to top investing magazines.  Use it as your calling card and a way to rise up above the noise.  Others will link to it while others will talk about it.  Whatever they do, you’ll expand your reach big time.

Don’t forget to check out our page of all the newsletter resources you’ll need to get your newsletter off the ground and making some dough and subscribe to receive free, value-added updates from us.

Being patient with your investment newsletter as it grows revenues

patience

Time is money

Patience is a virtue.  In tough times like this, though, we all want a quick fix.  Some of us find it but I bet for the majority, achieving true success takes more time.

It’s tough and I know you’re getting squeezed from all sides.  Advertising revenues are shrinking.  Speaking gigs are few and far between.  It’s hard to keep driving sales on your investment newsletter business when investors don’t want to buy anything.

Be patient.

Unless you’re a well-regarded, very popular VC, it’s not easy to make $30k just from your blog every year.  It take a lot of effort and time to cast your sales net large enough to be bringing in respectable income sums from your investment blog or newsletter.  I’d like to say a couple of things about this.

Couple of points about building your newsletter for the long term

  • Gotta be in the game: Suppliers, distributors and customers all need to see staying power before they commit to a relationship and plunk down money fro your product.  Customers can sense if you’re in the game for the long term or are just a Johnny-come-lately looking to make a quick buck.  There will be push back.  In the early days of your newsletter, you’ve got to convince prospective buyers of your newsletter that you’ve been doing this for awhile (don’t lie!) and that you’ll be sticking around for long term profits.  It’s like a marriage — both sides need to feel commitment for everything to work as it’s supposed to.
  • Valuable things take time to build: While the media likes to focus on the 23 year old who writes a business plan on the back of a napkin and becomes an overnight millionaire, that doesn’t happen to the vast majority of people.  Most people take years to find their calling and then years finding a way to strike it big.  The investment newsletter business is no different.  You’ll try different strategies, different marketing/distribution techniques.  All the while, you’re building your reputation online and offline.  It’ll come.  Just give it a chance.
  • You never know where the success is going to come from: Being in the game and allowing your business to grow leaves the door open for so many opportunities.  Maybe you end up writing a best selling investment book.  Maybe you’ll be made full professor at a great business school.  Maybe you finally get on CNBC and the PR that comes from that appearance launches your investment newsletter.  You just got to be in the game to make it happen.

You must read this post on Get Rich Slowly.  While it focuses mainly on personal finance, there are some valuable lessons to be learned for entrepreneurship.  J.D. discusses Gary Vaynerchuk, a personality in his own right, who is just killing it online for his wine business.  Check out all of Gary’s stuff that you can get your hands on.  He’s a great entertainer and has found a great channel to really start moving his sales.

Anyway, Gary related the following recently and I think it’s got great meaning for investment newsletter publishers out there:

This bad economy is the greatest thing that ever happened to Hustlers and people in the trenches,” Gary tells the crowd. “It’s the best thing.” When you work hard, when you build Brand Equity — even if it’s only your personal brand — you can always make more money. But those afraid of hustle, or afraid of trying something new, get left behind.

“There’s a scary four letter word that a lot of people are just completely petrified of, and that’s called Work. That’s what you have to do,” Gary says. But he also says you need something else. “There’s nobody that has enough Patience. Everybody’s like, when’s it gonna happen? But you’ve been doing this for three months — are you kidding me?”

Gary describes how he spent 8-10 hours every day for 18 months pumping out a 20 minute wine video that nobody watched. He participated in the online wine forums. He commented at wine blogs. And gradually — very gradually — he achieved success. “That’s hard,” Gary says. “That’s Patience.”

Do you have the staying power to see some real results?

Don’t forget to check out our page of all the newsletter resources you’ll need to get your newsletter off the ground and making some dough and subscribe to receive free, value-added updates from us.

Investment Screening 2.0: An interview with Validea’s John Reese

Institutional investors have powerful tools at their disposal to screen through reams of data.  Part of the institutional investment process entails screening through thousands of securities looking for a needle in a haystack — stocks that fit certain investment criteria.  From thousands of stocks, analysts can filter through a couple of hundred that fit these so called screens.  With a couple of hundred stocks in hand, analysts set out to do the hard work analyzing these companies, comparing them to one another, speaking to management and whatever else hedge fund and mutual fund logonew1analysts do when looking at prospective investments.

If I’m a value investor, I’m probably going to use some metrics that focus on Return on Capital (RoC) or Return on Equity (RoE) and Earnings Yield (E/P).  Growth investors might like to compare the price/earnings ratio (P/E) to the actual growth prospects of the stock in question.  There are literally thousands of things to look at.  So, where to start?

As we discussed in the “Piggybacking the Pros“, the Internet is a wonderful place to get information on stocks.  From monitoring actual moves that uberinvestors make to seeing what your peers think of certain firms, the information is out there.  You just need to be able to find it.  Investment Screening 2.0 is all about using screening criteria from super investors like Warren Buffett to find the next big stock.  Think of it as tapping the world’s greatest minds to see what they think of a given investment.

John Reese, a well-regarded entrepreneur with degrees from the two best schools in Cambridge, MA, has created a premium service that is the product of many years of research into the strategies of super successful investment managers.  Having devoured numerous investment books and interviews with the world’s best investors, Reese embarked on an ambitious project to computerize this information.  His firm, Validea, has created an algorithm capable of analyzing thousands of stocks according to differing investment strategies ranging from Fidelity’s Peter Lynch to Berkshire Hathaway’s Warren Buffett and applies screens to the overall market to find stocks that would fit these uberinvestors’ criteria.

John Reese joins New Rules of Investing for an exclusive interview.

John, can you tell us a bit about yourself? Continue reading

FT.com pimping it out

Most of my writings/reviews focus on sites targeted to North American investors.  It’s not that I’m ethnocentric or xenophobic (good SAT prep), it’s just what I’m more familiar with.  The FT, or more formally, England’s Financial Times, has the same brand cache that the Wall Street Journal has for US readers.  PaidContent.org has a good review of some recent and planned future changes in FT.com.

More than just cosmetic changes, the FT.com is addressing monetization of financial content, combining an interesting mix of free and premium content.  Other interesting nuggets are the cool things ad sales guys can do when you have both offline and online properties, including some special sponsorship opportunities.  Check out the review here.