How to make a fortune from Monitor110

Monitor 110 has managed to make a huge news splash this week with its public launch, which has in turn sparked considerable capital markets interest and comments, mostly favourable – without detracting from the tool itself, I suspect some of the “awe” is more a reflection of the ignorance in capital markets circles (some tech research analysts aside) of what’s going on and available in the internet. Try conducting a poll of terms such as RSS or Wiki and don’t hold your breath whilst you wait for a look of recognition, let alone comprehension, in most dealing rooms!

That aside, as I understand it Monitor 110 will be providing a tool for helping institutional investors access, analyze and monetize information from the internet primarily blogs. The key benefit of their services will be to offer real-time; relevant; trustworthy (based on source reputation) summaries on textual inputs from around the blogosphere.

As someone that has been involved in capital markets for over 15 years I am fascinated by developments in this area. For many years there has been a keen focus on technical analysis of time series, tick data – seeking to uncover relationships and trends in real-time in order to gain an edge. Such systems rarely focus on causality, merely scanning against pre-defined criterion that may allow some form of relationships to be inferred. Early versions involved what were then considered to be massively powerful databases from specialist vendors such as Informix, tuned especially to cope with real-time tick data analyses.

Recently we’ve also had the launch of Seeking Alpha, who’ve secured a deal with Yahoo to also monitor/scan and filter news from the blogosphere.

Anyway, back to Monitor 110, which I felt had surprisingly little critical challenge in the press. This tool will be of great interest to many institutional investors seeking to filter out the noise from a source, that presently is too overwhelming to pay considerable attention to – the search effort in finding timely and reliable news is almost incomprehensibly large. Whilst you can put keyword searches into a variety of search tools htat will monitor postings, these won’t distill the content into a manageable propotions, nor will they be filtered based on quality or reputation of the writer.

Many will be sceptical about the reliability of information and will continue to remain loyal to independent research boutiques. Yet there will always be a nagging doubt that someone may have a new take or nugget of information that will be material to the share price, if only it can be found. Problem is you have to know begin by knowing what to search for! Some users may be hoping to find a preconfigured answer in this tool and will be sadly mistaken. Others will be drawn to it in the hope that it gives them an edge over non-users and certainly one can expect Monitor 110 not to try too hard to dissuade them from such a notion, after all there is a sale at stake :- ).

Nonetheless, a few questions occurred to me about the system itself, which I’ve posted to its President and Chief Operating Officer, Roger Ehrenberg, (whose intro says something I can almost relate to “After 17 years in M&A, Derivatives and Trading, I’m spending my time working with kids half my age and thinking about the impact of the internet on Wall Street”): My comments on the thinking behind the question is presently in italics.

– Am I right that time series tick-data is not included as an input in the current product capabilities?

Looking at news independently of tick-data strikes me as a gap

– How often you will be “polling” relevant blogs for new posts, given that there presumably is a time value associated with the output as well as an information value?

Some RSS aggregators only retrieve updates every hour or so. Depending on update timings, you may get ahead of the market so any latency between posting and dissemination may cause concern amongst professional investors seeking time advantage – bear in mind traders seek to hit the market in sub-seconds; any longer may mean they miss the opportunity.

– Will the addition of new sources of data selected by users (which I’m speculating users will be able to do) be available to only the person that adds them or passively for all users of the system to include in their scans?

If I identify great new sources, I don’t necessarily want everyone else to know or have access to them without doing their own discovery work.

– Will I be able to perform a reverse scan of how many people (not necessarily who) are monitoring which sources and what is being monitored (perhaps with top 10 list etc)?

I think there is huge value in this element, in the same way that Digg highlights what people proactively flag, investors will be keen to know who is watching what and from whom. This is similar to the “Watchers” indicator on an Instinet screen or even eBay, which highlights market interest by the electronic crowd.

– Who will have access to observe who is monitoring what at an individual level i.e. how do you prevent people externally/internally utilises the value of this “interests disclosure”?

Knowing what particular users were watching has information value which could be exploited e.g. if I knew certain investors monitored certain blogs, it might be hypothetically possible to collude with the writers to create false markets

– How will you mitigate against “gaming” of news (as a secondary measure to reputation) whereby people collude to create noise in the blogosphere?

Monitor 110 has created a huge story for itself in the blogosphere. “A list” bloggers and “sneezers” are usually able to spread news fastest due to their high readerships.

If he is kind enough to reply, I’ll be happy to post his answers here. Meantime, dare I suggest that I know of at least one person who is almost certainly going to make a fortune from Monitor 110, if not two. Congratulations to Roger and his Sales Director ;- )

Comment posted by informationarbitrage
at 9/26/2006 11:28:00 AM
Thanks for the thoughtful commentary, John. I’ve written a response on my blog to both yours and Yaser Anwar’s questions. Regards, Roger

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