The wisdom of the crowds has been used to better predict world events, elections, and the outcomes of sporting events. It’s now being used for more accurate forecasting of stock prices. Instead of following experts, crowdsourcing investment ideas seeks to assess what the masses think about a specific stock. The crowd is frequently more accurate in its predictions than top analysts?.
Enter Social Media
But with the onslaught of investors publishing their thoughts on stocks and the market on Facebook and Twitter, it’s hard for investors to monitor all the noise. Determining what the crowd thinks about a specific investment is tricky. Therefore, we’ll also explore different ways that investors can effectively plumb the wisdom of the crowds to build a portfolio populated with stocks the crowd thinks are going up.
What if there was a way to leverage the collective knowledge of all investors out there and use it to make a profit? What if you could build a portfolio that took investment ideas from the throngs of day traders and couch-potato investors, firemen and police officers, lawyers and doctors—a population of millions of investors? Figure out where the herd mentality thinks profits are and damn the experts.
It’s been a *long haul* and I received a lot of great help/support from many of the investment industry’s top thinkers. Thanks to everyone who’s listened to my ideas, helped me vet them, contributed their own perspectives and helped propel this work forward (you know who you are )
I think this is just the beginning of an exploration of the new modes of investment research empowered by the Internet in general and social media sites like Facebook and Twitter in particular. There is a ton of great stuff going on at startups in Silicon Valley, New York, Europe and Israel.
I plan to continue to analyze tradestreaming strategies and the new technology platforms enabling this all to happen.
To accompany the launch of the book, I’ve compiled an ebook entitled “Tradestreaming and the Future of Investing”. It’s a compendium of opinions from many of the online investing industry’s thought leaders from a variety of different disciplines. It’s a really interesting view about where we are and where we’re headed in financial communications, research, and investing.
Hedge fund analysts, financial advisors and brokers, investment advisors, investment relations professionals, Internet entrepreneurs, and all investors will find something useful and thought-provoking.
Here is a short compilation of top business books taken from the New York Times best seller list (if you purchase off these links, my Amazon account gets credited a minute sum). Hopefully, this is useful. Some, if not all, of these titles should be on your nightstand.
************* The Blind Side (Movie Tie-in Edition) (Movie Tie-in Editions): As always, Lewis is a great story teller in the world of business and sports (think previous hit, Moneyball — a great read) and this tale of rags to fame was supported by a recent movie with the same title. My kids even enjoyed it.
Combining an interview with founder and CEO, Maz Jadallah, the paper includes his comments that should provide a resounding recommendation for using blogging as a lead generation tool for premium financial products:
Jadallah: Hiring a PR firm turned out to be a disaster for us. They simply did not perform well. The important point here is what does a startup do when they have zero/limited budget for marketing. Answer: blog, blog, blog, use word of mouth, run affiliate programs, cold call reporters, try to get content syndicated on third party sites!!
We’re looking for an experienced, versatile, high-motor blog editor specializing in business news targeted at both sophisticated and mass-market audiences. The successful candidate will write and report his or her own stories, as well as hire and manage a small team of professional bloggers to curate and create original content for the largest audience on the Web. This person will set the strategy for and oversee the publication of financial blog content for programming on Yahoo! Finance, the Yahoo! network and consumption on the Web at-large.
Forbes and Forbes.com have always been about content. Forbes has always employed professional editors in a mixed outside-inside model for content, blending its own staff reporters with content contributed from asset managers and thought-leaders in their field. Never known for its ability to break stories, Forbes really was about highlighting interesting opinions from experts in their verticals.
But Yahoo is different than Forbes
Yahoo Finance is a different animal. While Yahoo Finance hasn’t changed much in the past 10 years (much to my chagrin), this move changes its tack. Remember, Yahoo Finance, as a giant financial portal, has always been about aggregation of both data and information, taking feeds from tens of information and content providers. By the way, check out ValueCruncher’s CEO’s, Mark Clare, great breakdown of Yahoo Finance, its past, its business and potential to disrupt providers like Bloomberg in the future.
Yahoo Finance is still the 800-lb gorilla in online finance as evidenced by its majority of traffic in the online finance category (see graph to the right). What’s made Yahoo Finance so strong was an early-mover advantage and a site that just worked quickly and had enough information on it to act as a proxy for a research terminal (Why Google Finance still sucks at its news offering is beyond me). With a deal it consummated with Seeking Alpha in 2007, Y! Finance dipped its big toe into the wild and woolly financial blogosphere. Now, with the job posting mentioned above, it appears that Yahoo Finance is changing its strategy.
How this may play out
This is a risky strategy. In essence, the financial portal is pitting itself opposite all its content partners — many of whom pay the portal for the firehose of traffic it throws off. I’d be less willing to partner with a company that is introducing a product to compete directly with mine. And this is a common problem with channel marketing for any platform — and Yahoo Finance is certainly a finance platform — in that the platform, given where it sits in the whole matrix of supply-demand, can always just mimic other offerings that are working. This is the fear of developing any tools that work on Twitter of Facebook – that the social media platform can quickly just put you out of business.
Such is the life now for Yahoo Finance content partners. If (and this is a big IF) the Yahoo Finance offering is a combination of serious, professional editorial oversight with smart curation with a good understanding of what’s important to Y! Finance readers (a-la Abnormal Returns) with thought-evoking and decision-supporting articles, Yahoo Finance can evolve itself from a financial resource to a must-see, must-read site for both individual and institutional investors.
What if it doesn’t work
If, however, Yahoo Finance doesn’t do this right and takes a half-assed, half-baked approach, the results could be pretty serious: both for the company/site and for content, in general. As Steve Lubetkin argued with me yesterday in the comments on PRNewser’s article Is Steve Rubel the Future of Forbes, aggregation using free, contributed — outside content — risks turning everything into an “echo chamber” where the biggest voices (those voices appearing everywhere) drown out newer, more creative content by people who take content creation really seriously. If Yahoo Finance’s own content offering isn’t managed well, it could cause other partners to leave the site, taking their money and their contribution to the estimated few hundred million dollars in annual revenue Yahoo Finance generated.
What this all means for aggregation sites? We’ll have to see how it plays out. There’s most likely room for multiple aggregators if they end up focusing on slightly different readerships (a retirement investors reads different content than a day trader).
Tradestreaming is a community of investors learning directly from experts. I’m Zack Miller, investor, entrepreneur, and founder of Tradestreaming.com and I literally wrote the book on how to invest in the age of Facebook and Twitter. Tradestreaming is the resource I’ve created to help me become a better investor. I believe it will help you … Continue Reading
Tradestreaming is all about using technology tools, social media, and strategies to become better -- more accurate -- investors. Zack Miller is the author of Tradestream your Way to Profits: Building a Killer Portfolio in the Age of Social Media (Wiley, 2010).