Revolutions are inevitably confusing. Basic rules of doing business change beyond recognition. Formerly effective strategies can turn horribly destructive. What was once precious becomes worthless, while dross is magically transformed into gold.
For truly potent evidence of this, take a look at the world of investment information. Knowledge is the lifeblood of the financial world. Those with the opportunity and ability to clearly see trends and possibilities can outflank, outmaneuver and devastate their competitors. Yet today’s investment world is in such a state of frenzied flux that making intelligent choices about information sources seems almost impossible.
Data from the same sources appears to be showing up in many places at once. Information that once took money and effort to get is now available at the click of a mouse. Not too many years ago, getting a Reuters news feed would have taken a special terminal and a dramatic amount of money; today, the basic Reuters newswire is offered by more than 100 sites on the internet, says Wendy Zajack, manager of media relations at Reuters America.
At times, knowledge about knowledge seems more important than the facts themselves. Chaos, however, creates opportunities as well as losses. And those who take a step back, look at the realities of their needs, budgets, talents and companies will be able to find new ways to make and save money. A crucial first step is to recognize that although the internet, with its impact on the information industry, looks utterly unfamiliar, it bears resemblance to a number of industries that have come before.
In its interactivity, unbelievably vast content, ability to update on a moment’s notice, ability to give visibility to those with almost no resources, and the power to tailor itself to user needs, the internet is unique. Yet in many other ways, the world wide web is coming to resemble a business that was also once touted for its revolutionary potential: cable TV.
Cable model
‘It’s almost like the cable television model,’ says Tim Kelly, senior VP of corporate communications at Bridge Telerate (Bridge Information Systems recently purchased Telerate from Dow Jones for $510 mn, expanding the system to some 270,000 desktops. That compares to Reuters at 300,000 and Bloomberg at around 90,000). ‘Cable has done a great job getting people to pay for programming,’ Kelly continues. Indeed, cable TV users pay for what they could have once had for free. They also purchase tiers of services, recognizing that some bits of information and entertainment are more valuable than others. It’s often possible to find one piece of ‘information’ on different channels on cable TV; the same film may run on both HBO and Showtime simultaneously, for example.
Viewers pay a premium to get that film quickly and without interruption; if they’re willing to wait and endure commercials, they could see it on network TV. If they’re impatient or have an extraordinarily strong need for a program, they can pay a premium on top of a premium and see the film on pay-per-view. ‘People will always pay for quality,’ Kelly says.
They’ll also pay for environment, context and brand names – which is very much what’s happening in the investment information world. Services such as First Call or Standard & Poor’s Money Market Services are available on a stand-alone basis. They’re also available as add-ons to other services, such as Bloomberg. Users need to decide whether they want to purchase these services by themselves or get part of a package.
‘In the vernacular, we’re called an optional service or a value-added service,’ says Thomas Jessop, vice president of global marketing at Standard and Poor’s MMS. Standard & Poor’s recently introduced a stand-alone service. But its primary pipeline is through other carriers. ‘We’re currently distributing our information on Bloomberg, Reuters, and the Bridge-Tell system,’ he says. ‘We don’t view them as competitors. We view them as partners.’
Pay for use
‘First Call is a third party service on Bloomberg, so you’re paying for it whether you get it from First Call or from Bloomberg,’ says Lou Eccleston, director of sales at Bloomberg. Users need to take a close look at their needs before they decide to lay out cash; fees for services range from a few tens of dollars to up to $1,200 a month for a full-service Bloomberg unit.
Premium services don’t come cheap – but basic ones are relatively affordable. ‘If users are buying the Bridge Channel product, they can pay anywhere from $62.50 for a desktop station all the way to the $800 range for a fully-loaded work station,’ Kelly says. Reuters’ fees range from $95 to $800 a month.
‘Since you’re paying for First Call at either place, you need to determine where it’s more valuable,’ Eccleston says. His decision is unsurprising. ‘First Call is more valuable on a Bloomberg terminal because it’s integrated into a whole package of other things you’re doing,’ he says.
For others, especially the budget conscious, the choice might prove more difficult. Providing fresh information is a great way to get people to visit a web site or promote an organization’s members, so ever-greater amounts of information are available for free on some excellent no-charge services online. One of the best examples is www.nasdaq.com (see right), which provides everything from up-to-the-moment prices to basic analysis for those stopping by. Users don’t even need to register. One result: officials say fully 20 percent of Nasdaq’s business now comes from individuals trading over the net.
Investor relations executives, however, aren’t trading. They’re collecting, analyzing and distributing information for their bosses, stockholders and companies. That makes their information needs fundamentally different from those of the average investor. Determining what information is actually needed is one of the biggest challenges any IR department faces.
Any evaluation process should start with acknowledgement of the realities of the new media. The most important: the fact that the internet is not just a magazine or book that moves over a phone or data line. It’s a fully-fledged, interactive communications medium. That translates into a number of options. One is a company’s ability to shape various sources of information into a service for employees.
New media reality
In effect, each company using the internet is its own cable television station, and can choose which online services it carries. ‘In today’s professional environment, either companies take Reuters and integrate it in their own networks, or they take us as a feed and we’re integrated into another provider’s trading systems,’ Zajack says. ‘People are always going to require to look at a number of different sources for different things.’
Choice isn’t the only thing the internet offers. Communications capability is another important tool. ‘We give investor relations executives the ability to communicate directly to their investor base,’ Bloomberg’s Eccleston says. Bloomberg’s system includes a database of Technimetrics holding information, he says. ‘They can find out, Who are the biggest owners of my debt or my equity?’ he says, and then transmit a text or audio message to them over the Bloomberg system.
Timeliness is another crucial factor for many users. Sometimes a wait of minutes can dramatically change the fees charged for a data stream. ‘If people are looking for real-time information, they’re willing to pay for it,’ Zajack says. Traders need analyses the moment they come out; investor relations executives may prefer to wait a week or so, which can dramatically reduce the price.
Info hits
In part because so much information is now so widely available, more and more investor information services are working on creating exclusive relationships in the same way that premium cable services try to ensure they’re the sole venue for hit movies. ‘The NYSE has turned to Bridge to provide the data solution on its listed firms,’ Kelly says. ‘It actually gives two versions of our PC-based system to the investor relations department at each NYSE-listed firm.’
Customer demand will ensure that information products are available through the widest possible variety of channels, S&P’s Jessop adds. Even though S&P now has its own online service, it will continue to offer its data through other channels as well.
‘We’re trying to provide our information in the formats our clients want,’ says Jessop. ‘It’s going to be up to the customer. If they want a Reuters terminal, we’ll be on Reuters. If they want to be on the internet, we’ll be on the internet. It comes down to someone owning a shop window and knowing how to package information to meet a customer’s needs.’
