Social Stock Picking
Social networks are exploding, sparking startups trying to cash in on social chatter. Now a number of those companies are focusing on online talk about stocks, commodities and personal finance. Getting investment advice from people posting 140-character bursts on Twitter doesn't sound like the wisest way to make financial decisions, but it's increasingly popular.
Launched in October, StockTwits.comhas 30,000 registered users, following stock commentary from 1,000 people who "tweet" every day for the site. They tag their Twitter posts, about any public company, so the posts appear on StockTwits.com. The site is open to anyone and is populated by professionals and novices alike. So to help users cull through and find the best information, the company has a recommended list of about 50 tweeters with proven records and consistent contributions to the site. Just like with Twitter, you can follow as many contributors as you'd like with their 140-character blasts show up in your Twitter feed.
StockTwits.comis still small, but it's backed by an impressive range of media and business names. In December IA Capital Partners led a nearly $1 million round of investment in the newcomer. The list of backers includes former Major League Baseball pitcher Todd Stottlemyre, now a day trader and contributor to the site, James Altucher, hedge fund manager and TheStreet.com columnist, as well as a former head of Global Internet Research and Managing Director for Goldman Sachs, and former VPs from Yahoo and AOL .
The site's community can provide near-instant feedback on pretty much any company, but is it reliable? StockTwits.comsays that the fact that every message you send is saved on Twitterprovides accountability, but it also encourages users to do their own research. Critics, like Morningstar Equity Strategist Paul Larson, warn that people who have a good strategy that works, have no incentive to share their ideas with the rest of the world, and they might be driven by promotional reasons. And this is clearly a site designed for day traders rather than long term investors. We'll see if the user-generated content is worth paying for: StockTwits.com plans to start charging about $20 a month.
Other sites like Tipd.comare also trying to tap into the demand for online stock tips. There's certainly a market for financial news on the web: Comscore reportsthat 60 million people in the U.S. visited financial news sites in February, about a third of the total American web audience. And the time spent on financial news sites is up 11 percent from last year. (A self-promotional aside: Comscore reports that CNBC.com is one of the fastest sites in the category, up 161 percent from a year ago). Unlike StockTwits.comwhich criticizes the traditional media, Tipd.com embraces it, including news headlines in the content it aggregates about stocks. Tipd.com's"Social Tickers" track everything that's being said in the social media world about professional stocks.
Social stock commentary is the latest variation on the stock message boards of the late 1990s. And I'm sure there will be yet another technology that will go beyond social networks. No matter what the community for discussing stocks, I'd bet that social chatter will only complement professional advice, never replace it.
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