Blogging Filters Bringing Order to Chaotic Content
Alternative research providers give shape to unstructured data
July 14, 2008
As blog postings and other content about stocks, market sectors, products and company actions permeate the Internet, time-pressed portfolio managers, traders and research analysts are finding it harder and harder to keep pace. But a new generation of research providers is working to change that with algorithms and pattern-matching technology that aggregates and analyzes a seemingly impenetrable body of information.
"In a market where prices are changing all the time, the person who has the best information about any event that might impact a trading price has an advantage--and that includes unstructured data that has been filtered for quality, reliability and relevance," says Patricia McGinnis, research director with IDC affiliate Financial Insights and co-author of a June report on the subject.
Framingham, Mass.-based IDC estimates that the market for unstructured data research, which includes blog postings, has reached $100 million annually and by 2013 will exceed $250 million. "It's clearly a growing universe," says McGinnis.
Collective Intellect, Connotate Technologies, FirstRain, Monitor110 and SkyGrid are among a growing group of vendors packaging aggregated alternative research--blogs, RSS (Really Simple Syndication) feeds, forums and message-board conversations, for example--on a real-time or daily basis, giving professional investors access to information that might move markets or have relevance to their strategies.
The services are based on a basic principle--news or shifts in public opinion that can affect a stock price often show up in blogs before they reach the mainstream media. Content can be monitored for indications of stock volatility or as another form of data for review and is served up in various formats: e-mails, Web portals, widgets, dashboards or printed reports. Some of the vendors combine their data with more traditional sources--mainstream media publications and government Web sites, for instance.
An Alternative Lens
A blog filter "provides a different lens from which to view publicly available information," explains Greg Parsons, co-founder of CP Capital, a long-short fund in New York. A client of Sunnyvale, Calif.-based SkyGrid for the past year, Parsons says he regularly reviews company data culled from the Web alongside more traditional research. "I view it as ancillary information that will either support or refute my analytics, and with [SkyGrid] I can get the info a lot faster and cleaner than if I went searching for it on my own."
"Blogs are where many of the most intriguing questions, trends and ideas first come to light," notes FirstRain CEO Penny Herscher, who calls them a "blind spot" for institutional investors. "Manually finding the meaningful information from the volume of meaningless chatter is just not practical, even for the largest firms."
Foster City, Calif.-based FirstRain last month introduced Blog Monitor, which uses an algorithm that looks at "prominence, reach and authority" to identify the most influential sites. A standard search engine relies on popularity as a measure, says Herscher.
"There is a big difference between working with a standard search engine, where you have to put in a query to get a response, and a continuous search service--which is what we do--that is reading all the blogs for you, prioritizing the information, normalizing it and proactively reporting information to you, for example, when there has been a volume change of activity," adds Herscher.