In ‘A Future of On-Line Finance: From Brokers to Blogs to
Yahoo,’ Mark Clare, founder of Valuecruncher.com, an interactive website for
stock valuation, presents a scenario matrix of trends in online equity research
and investment advice along the free-to-paid and individual-to-collaborative
axes. Mr Clare explains how the Internet has broken stockbroking firms’
exclusivity over the triple-link investor supply chain of information, stock
analysis and trade execution.
Sites like Google Finance and Yahoo Finance have upended the
first link, while others like SeekingAlpha, StockTwits and Wikinvest have
invalidated the second. In the third hook, sites such as AlphaClone, Covestor
and KaChing are challenging the bread-and-butter income of brokers.
I have given more than casual thought to similar disruptive
sites in Nigeria. In reality, excluding the third link, trading execution, a
few sites like InvestorDelight.com, ProShareNg.com and StockMarketNigeria.com
are challenging the status quo. But how far these sites will go in connecting
the value proposition dots to users is open to conjecture.
Upstarts and the
resources
Anyway, the victors in the battle between these upstarts and the
Resources sections on established dealing firms’ websites will not be
determined based on content alone, for instance, interactive financial
statements, rich stock charts, downloadable analyst research, etc.
In my opinion, the winners will be those that leverage the
metadata generated by communities that coalesce around their sites. In other
words, the real differentiator will be discursives layered over numbers and
mechanical analysis. Call it the ascent of Investment Information 2.0 if you
like, but I doubt that sites which focus on content to the exclusion of
metadata will triumph over those that merge the two.
Like a lot of readers, I receive market information from
different stockbroking firms in my inbox most days of the week. For example,
Meristem Research, under its very able head, Saidi Bashir, sends me daily
prices and the market wrap-up each day. Last week, the firm sent an email to
the effect that ‘in line with its business strategy and emerging realities,’
beginning March 31, it would restrict access to its research portal to clients
and paid subscribers. As a consolation, some material would still be available
free of charge.
Frankly, while I doff my hat to the industrious team at
Meristem, the fact is that access to quality information on equities has moved
beyond the barbed wire perimeter of stockbroking firms’ research departments.
In a related development, BroadStreetLagos.com, a pay-to-access
stock market portal, has announced a radical shift in its business model which
allowed two weeks of free access to new users of the site. At expiration, they
either pay for continued access or have their accounts terminated. On Monday,
Obi Ugochukwu, the managing director, sent emails to blocked account owners
that their expired accounts would be reactivated in line with the portal’s
latest two-tier structure: regular, which is free (with unlimited access to
some site features) and premium (with paid access to all site features). Again,
content is only half the battle. The absence of context around the numbers on
the site remains a heavy yoke.
Research focused
Since most trading-signal focused research quickly passes its
sell-by date, research departments have nothing to lose by making them
available on their sites after their own clients have seized the opportunities.
By fostering communities around their sites to discuss trading ideas, company
performance and prospects as well as the wider market, these firms can attract
a substantial client base that will be encouraged to pass their trading
instructions through them.
I have bypassed the conflict of interest debate over research
subsidisation since the purpose described is not to seek investment banking
business from companies.
What of the challenger sites which do not enjoy the preliminary
popularity of established firms with a broad client base? There are two issues
they need to deal with. The first challenge will be to foster a community
around their domains, and the second will be to attract a circle of what Mark
Clare calls ‘rock stars,’ members who have built an enviable track record of
accurate market calls, to their sites’ budding communities as contributors,
moderators or ‘unofficial’ investment advisers.
In this regard, StockMarketNigeria.com is far ahead its peers,
although its forum structure, instead of a multi-user blogging platform, may be
limiting its full potential. ProShareNg.com has built a solid reputation for
engaging analysis but may be hampered by the tight control it maintains over
posts on its site.
Adopting a SeekingAlpha model by open invitations to credible
investment professionals and analysts to write articles will give it further
boost and encourage community growth. A good number of these knowledgeable
folks already moonlight under aliases on StockMarketNigeria.
InvestorDelight.com needs to add community features to its site. It is
counter-productive to provide tools and information to visitors only for them
to go to other sites to discuss them for want of same on the original site.
Whoever the winners are, the losers are already marked. They are
the companies which disdain their suffrage and abdicate their mandate to these
third-party sites by failing to build information rich websites. They are not
worthy of inclusion in the title. I call their category ‘abandoned properties’
or if you prefer, ‘ghost towns’.
The writer is the managing
director of a full service investor relations firm based in Lagos, Nigeria.
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