The word “smart” is tossed around a little too much these days when describing products. To me, smart doesn’t mean added features or greater technology, but more intelligent – more evolved. I have always thought of the internet as a smarter place – a network of millions of people interconnected creating and consuming knowledge. As the social web expands we will witness this intelligence as smart communities form and work together to solve problems.
Recently, I have had the pleasure of witnessing a smart community at work while interning at StockTwits. StockTwits is a twitter based network of traders, investors, as well as journalists who get together and share ideas with one main problem to solve: make money in the financial markets. Based on my observations, they do a superior job than any other such community.
But what makes StockTwits smart?
The Network
Being on Stocktwits is like having a team of thousands of part-time analysts working for you by your side. While you won’t always get the help you need, for the most part if you’re looking at a stock or have an idea, there are people willing to help or people who have already shared some ideas on the subject. In a game where you are competing against other traders, this is a huge advantage. Abnormal Returns refers to it as a “social Bloomberg” and he’s spot on. Its a interconnected “human-computer” comprising of many brains and their respective knowledge and information. In a time where some in the financial industry are relying on artificial intelligence, Stocktwits brings actual intelligence. The real-time aspect of Twitter allows it to be quick enough to compete.
A Socially Evolved Community
JP Rangaswami always has a very keen eye to the web and in a piece on good and bad news on the web he writes,
The web has places of light and places of extreme darkness as well. I like spending time in places where people build each other up, say encouraging things to each other. I like spending time in places where people pass along tips and recommendations about people they like, books they like, music they like, food they like, restaurants they like. Positive things.
StockTwits is a “light” place, and I believe that makes it smarter. Every day while watching the stream, I am amazed by how helfpul, friendly, transparent, humble, and accountable people are. In a financial world where many of these qualities don’t exist, a community founded on such principles has a distinct advantages as it helps strengthen the bonds and the appropriately identify and position the hubs within the network. This all helps create order. A “dark” community which lacks these characteristics decends towards chaos (e.g. Yahoo Message Boards, CNBC, Wall Street).
A Market for Ideas
I have said in the past that if you have read the Cluetrain Manifesto, and believe “markets are conversations, then Twitter is the exchange. In the financial world, StockTwits is the exchange for a market in ideas. It is a well-designed market that quite efficiently allocates the best traders to the most amount of people. Twitter gives each member a transparent track record of their ability and StockTwits and the community itself go to great lengths to ensure that the best ideas and the best idea-generators flow to the top. This is important to a smart community, as it truly beneficial in solving the problem at hand. Each day I am amazed at the talent oozing through the stream, as the community is quick to ensure that talent is noticed through tweets and retweets, thus increasing its collective chance for survival.
As Twitter evolves, I am excited to see what other smart communities pop up. There are a lot of problems out there that need to be solved and those who form smart communities would be smart to model StockTwits.
Sean Park, says that CEO’s are “evolutionarily ill-adapted”. I agree and will go a bit further and say that many sales and marketing departments are as well. Nowhere can you better see this than in financial sales. I remember being at Citi at the same time that the “social” web was really getting started, and wondering why the hell I was cold calling these people with no particular rhyme or reason, who most of the time didn’t want to talk to me. My “website” was filled with BS sales articles and looked like every other Citi advisor;s site. To publish something that I wrote, it would have to go through a days long compliance process, where if your article was intelligent, it would have immediately been shot down. And while some regulatory burdens “prevent” them from talking to the public, their sales strategy was preventing salesmen to sell.
Regardless of what industry you’re in, these days the conversations are had on the web, increasingly more in real time. In this new landscape, the good salesman will not be on the phone all day, but the web and those who can reach out and touch the most prospects will win. Who’s on the web more often and has successfully sold on it already? Bloggers.
Bloggers should be the ideal prospect for a position in your company’s sales department, if you want to win on the web. They are experienced at sales and they have enormous real time networks.
Bloggers are Experienced Salesmen
Anyone who has written and maintained a blog with any level of readers has, at some point, “sold” his/her blog. There’s nothing wrong with that. Nobody likes talking to themselves so the first logical step is to go out and get readers. This is not easy. You have to be real, you have to be social, and most importantly you have to go out and find a market for your message. Most bloggers understand the concept of the link economy, and if you have a decent readership its likely that you have succesfully navigated it. They understand the social fabric of the web, how you have to converse on it, and successfully have targetted, built, and expanded a market for thier message. They’ve already run a successful campaign.
So if you plan to do any business in this new environment, I would recommend matching up a good blogger with great products.
Bloggers have Enormous Real-Time Networks
In my short period of time on this planet, I have noticed that the best salespeople really understand the concept of networks. They understand that markets are conversations and they have spent their life building relationships and talking to people. They have established themselves as a hub in the network of relationship that took years of being helpful and social to create.
These days, the web is changing the social network framework. Thinking about spacetime physically and not informationally is wrong. I am not a wildly successful blogger, but through my blog and twitter I can reach out to hundreds of people in almost real time who then can reach out to thousands. As a blogger if there is a market for your message, and you have a good network, the network will help your message find its market faster. Imagine talking on the phone with a hundred people then them talking on the phone w/ a hundred people. How long would that take? While bloggers’ digital networks may not be as rich as the analog networks of past, they are quicker, larger, and are better equipped for 21st century sales.
Some may question the “ethics” of a blogger selling for his company, but those arguments are made by people who don’t get how you sell on the web. Look at Fred Wilson or Howard Lindzon.They always are selling the companies they invest in, but you can tell they are genuine and they have spent a long time building rapport talking about interesting stuff with interesting people (they also have great products). They have mastered how you sell on the web, which is not some lame “pitch” loaded up with corporatespeak, but just being real, awesome, and helpful, and in turn they ask for a little help back. There is nothing wrong with people helping people, everyone needs help and bloggers understand that sales is a two way street, a conversation.
DISCLAIMER: I am an unemployed blogger, and yes, of course I’m selling myself (Shock! Horror!).
The past week there has been a great deal of talk about Twitter’s growth slowdown in May. There are many explanations given for this, the best being that many users have moved to platforms such as Tweetdeck, thus analytics from Compete and its ilk are at best incomplete. Howard Lindzon, doesn’t buy that Twitter is at a top, and sees this as an opportunity for entrepreneurs to engage users. I would tend to agree.
While many argue why Twitter stopped growing, or if Twitter stopped growing, I will posit the following questions: Does Twitter need to grow at such a rate to continue to be disruptive? And, hasn’t Twitter already arrived?
Look at Twitter’s big brother, blogging. Back in 2004, it was reported that about 7% of the population while 58% read blogs. I would expect those numbers to be a little bit higher today (but not all that much). Nobody will argue that blogging hasn’t radically changed the landscape, even at such a low participation rate. This is because, while a minority of people create the content, a majority of people consume it. There are only a certain cross section of people who are “bloggers” by nature, but a much greater crossection who are readers. This is human nature and will not change. Thus, it doesn’t come as any surprise that there are more lurkers than active users. The fact that Twitter is following the same distribution as blogging should come at no surprise, and if blogging was disruptive, Twitter will be too. In fact, it already is.
Is growth for growth’s sake a good thing anyways? The more noise on Twitter, the less useful it is to those that want to use it. Not to mention that it is already having a tough time scaling, as image of the “Fail Whale” is all too familiar to the Tweeple. As I pointed out yesterday, without any real plan to monetize, the marginal user can get costly, and growing for growth’s sake could devalue the entire platform. That’s I agree with Eric Jackson when he says that Twitter must innnovate, not just grow.
From here on out, the “growth” for Twitter will be in its application and use, and its appeal to the general populace from the point of view of consumption, not simply participation.
Lately, I’ve been thinking about monetization of web applications. The web 2.0 movement has been characterized by the proliferation of web applications that are designed to make life easier, the web more manageable, and information and people more easily accessible.
One reason this phenomenon has caught on is the fact that many of these applications are free. The “freeconomics” model has enabled many people to focus on building great products and accumulating loyal users which is in itself a good thing. However, as time gets tough and companies start to burn through cash, at what point does a user become a liability rather than an asset? With no plans to monetize, probably sooner than people think.
The first lesson I ever learned in sales is not to be afraid to ask for the order. Sure tons of users are great, who doesn’t like free stuff, but your work is worth something. I fear that until many companies and developers of web-applications are confident enough to stand behind their product and ask for the order, we will forever live in web 2.0 infancy, a utopian fantasy of a digital economy where everything is free. When the web 2.0 user is no longer a liability, the real web 3.0 movement can begin.
Lately, I’ve been watching the markets and pondering the economy’s next step. There are many debates going on right now about reflation, stagflation, hyper-inflation, deflation, as well as those debating the shape of the recovery, if there is one. While I contend that we are navigating uncharted waters here and any economic prognostications should be taken with a grain of salt, I am going to go out on a limb and say that we are going to experience a return to normalcy.
But what constitutes normalcy?
I hesitate to use a term such as “normalcy” when describing markets, because what is a normal market? Most people would equate that term with some idyllic bull market where everything goes up with very little volatility. But, as we have found over time, those are not normal markets by any means. Thus, by a return to normalcy I mean a return to the prevailing themes that were guiding the markets before they were interrupted by the credit crunch. Actions since may have exacerbated some of them, and slowed down others, but I contend that they will prevail:
1. Globalization: While many see a protectionism in our future, I haven’t seen anything that would signal that the globalization trade is off. What does this mean? A continuation of capital flows to emerging markets countries, new markets for US Global companies, and greater competition for US Labor. It seems that the market is betting on this. Over the past three months, the emerging markets index has outperformed the S&P 500 by 20% and it seems to me that we are picking up right where we left off, frontier markets. I’m not saying that is the trade to make, but rather that it was the trade before the crisis hit, and appears to be picking up again.
2. Commodities Bull Market – Before the crisis hit we were in the middle of enormous commodity bull market. Take a look at major commodities over the past month as well as oil and material stocks to see what the market thinks about this. Once again this theme may not HOLD UP, but it seems to be picking up again.
3. Infrastructure – Back in 2006 and 2007, the global infrastructure play was all the rage. This ties into both commodities and globalization and appears to be hot as ever. Look at the performance of MDR compared with the S&P to see what the market thinks about this. Throw in Obama’s stimulus and the theme even strengthens.
4. The Dollar – Before the crisis hit the dollar was getting trashed, well guess what, its starting to get trashed again. This had to do with competing currencies such as the Euro as well as rising deficit spending. This crisis hasn’t helped much, and while the rest of the world is flooding the markets with their currency as well, we’re going to be forced to devalue to the dollar if we want to destroy the debt and compete on the global stage. In addition, there were many companies that were booking large foreign exchange gains on their profits simply by doing business overseas. Since many companies are now global, this was bullish for the market as a whole and should be again as long as this theme holds. It ties in directly with the commodities bull market and globalization themes.
5. Inflation in things we need, Deflation in things we want – As technology continues to be the biggest deflationary force in history, industrialization in developing countries is increasing the demand, and price for things that we need, such as energy and food. If you are unsure about this theme see this and this.
There are many other themes that were going on before this all hit, and if you think of any please add them to the list. I do believe that the market seems to be leaning towards this return to normalcy. While these themes may not hold up in the longer term, in the short term, it may be helpful to think 2006-2007 when approaching the current market.
Yesterday it was announced that Digg, in an effort to begin generating positive cash flows, was launching an a user controlled ad system.
From Mashable:
Today, the company may have just revealed their big ace-in-the-hole for bringing in the revenue: a new ad platform called Digg Ads that will let users control which ads appear on the website by voting up or burying ads.
According to Digg, the more a user votes up an ad, the less costly the ad is for the advertiser. So, maybe if you get 100 diggs, your ad costs only half as much. On the other hand, an avalanche of buries will make advertising cost so much that you’ll be kicked out of the system. The ads must appeal to Digg users, which hopefully will make these ads more acceptable to Digg’s core user base.
Digg is basically a well-designed market for news. It quite effectively solves a problem, which is “What are the best stories on the internet?”. Upon an initial Digg (similar to an IPO), a user launches a story in the Digg market and the market comes together and “values” a story in Diggs. This works because there is a demand for the story.
Ads are a bit trickier. There is very little, if any, demand for ads out there on the internet. On top of that you have three different parties trying to solve three seperate problems in the same market. Digg users are trying to solve the problem, “What are the best stories out there?” and I would think they are not too concerned with resolving Digg’s problem, “How can we maximize Ad Revenue?”, nor are they too concerned with the advertiser’s problem, “How can I maximize product visibility?”. As Ben Parr puts it in the Mashable story, “will diggers mass-bury every ad that appears?”. That is surely a concern. Buried ads cost advertisers more and will eventually get wiped off the system. By combining the two markets it will be quite difficult to solve all three problems at once.
In order to be succesful the market for ads needs to be designed differently. While I don’t know the intracacies of the market design, here are a few suggestions I have:
- Digg levels should be auctioned off. Since original placement is key, Digg should value add placement amongst a certain level of “dugg” stories. An add placed amongst stories with 500 Diggs should be a much different price than an add placed amongst stories with 50 Diggs. I assume they are doing something like this already, but if they aren’t they should.
- There should only be Digg Ups. Since users are inherently indifferent towards ads, giving them an option to “Digg Down”, or bury is redundant. I would assume most users wouldn’t Digg at all so a “No Digg” is essentially a Digg Down. This puts more value on the initial auction and allows Digg to offer value added ad revenue reduction through its market place. It allows Digg and its advertisers to set a maximum price away from the market, which simplifies the process a great deal.
- A seperate Ad Market Should be launched. Digg should investigate a seperate market where users have the sole responsibility of solving the problem, “What is the best ad?”. The market would designed similar to the Digg Marketplace, where each ad only starts off with at effectively zero. Users are then are asked to Digg the best ads, and earn points if they Digg ads that are Dugg by more users. These points can then be used towards discounts at the very advertisers that use the Digg marketplace. By turning it into a game, they are giving the advertisers visibility, and also generating warm leads towards sales. In addition, they are giving users an incentive to watch ads and to spread ads virally. This would work well if done correctly.
It will be interesting to see how this pans out, but I believe in order to be successful, market design will be key.
This afternoon it was announced that the Fed says Banks must raise equity capital before it could repay TARP.
From Bloomberg,
The 19 largest U.S. banks will have to demonstrate they can sell new shares before they are allowed to repay their government stakes, the Federal Reserve Board said today.
The companies “must successfully demonstrate access to public equity markets,” the Fed said in a statement released today in Washington. Bank holding companies that want to repay Treasury funds also “must demonstrate an ability to access the long-term debt markets without reliance on the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program.”
Almost immediately afterwards, JPM announced that it would be raising $5 billion in capital to repay TARP.
Now call me cynical, but it seems to me that the Fed is changing the TARP repayment rules to make it look like bank capital raises are being done to appease the Fed, not because the banks actually need the capital. Perhaps this is an unintended consequence of the stress tests. If JP Morgan had announced the need for capital out of the blue, I don’t think market would have taken it well, as it would have undermined the conclusion of the stress test and JP Morgan themselves – that they have adequate capital and are ready to repay. Something tells me this is not the case and that the Fed is putting in additional hurdles to effectively give banks “cover” in raising more capital, without alarming the market.
Don’t get me wrong, I think its a good thing that JP Morgan is able to tap the capital markets and definitely a sign that things are getting better. However, if the Fed “requirements” are being used to mask real capital needs, then the Fed is being used as marketing material, which is not its role in the markets.
One theme I have been noticing during the downturn has been an uptick of people being “better people”. Many people I know are training for marathons, triathlons, and not engaging in the vices of society as much as say…2005. Perhaps its because I’m getting older, or maybe society is changing. Regardless, I figured I would go to the charts on this one.
Below is a chart of the Vice Fund (VICEX) during the last bull market (which basically started at its inception), compared with the S&P 500:
As has been pointed out in the past, the VICE fund completely killed the S&P during the good times. During this last upswing, however, things have changed.
The S&P 500 has outperformed the VICE fund by nearly 15%, which is a pretty healthy margin.
Does this mean we are having a Vice-less recovery? Only time will tell. We still don’t know if this is, for one, a recovery. Also, it appears that early on during the last recovery, the Vice Fund lagged the S&P for a bit before completely blowing it away. Perhaps as people get more disposable income they tend to allocate it more towards vices and Vice itself outperforms later in the cycle. Only time will tell.
I’m glad Gmail didn’t pick up on this one.
Dear Friend ,
I am Mrs.Ruth Madoff, wife of bernard madoff.
I am actually going through some kind of difficult time with my family right now, as my
husband is at the Metropolitan Correctional Center, New York City.My husband’s Sentencing is scheduled soon and he is likely to face a maximum sentence
of 150 years in prison and $170 billion in restitution, so there is need for me to move
out alot of my personal funds and personal belongings around the world , particularly
from outside america, but i need somebody to trust now, because i cannot receive funds
here in america right now.I would need your assistance in acquiring some of my money and keeping some large cash
amount for me. but first i would prefer to hear from you relating to the above
proposal.This is very urgent, i would have to entrust a large amount of money into your hands.
But this would have to be very confidential, just between me and you, because the press
are after me and my husband name all over the headlines, because of his Wall street
business.Anyway,don’t be scared about the risk, it is a very safe deal and we should work to
protect our interest.Yours Sincerely
Mrs. Ruth Alpern Madoff
Email:ruthmadoff@msn.com
This was probably eerily similar to his quarterly letter to investors.
This weekend it was announced that Twitter plans to develop a TV show.
From TechCrunch:
Twitter is crossing mediums to develop a TV show, according to a Variety report.
Joining forces with LA-based production companies Reveille Productions and Brillstein Entertainment Partners, Twitter plans to launch an unscripted show that will put “ordinary people on the trail of celebrities in a revolutionary competitive format.
While Twitter is a lot of things, one thing I see it as is the audience and laugh track to the soundtrack of Life. It is essentially the peanut gallery, for better or worse. A few years back there was a hilarious show, Mystery Science Theater 3000, which featured a man and a bunch of robots sitting in the peanut gallery of the movie theater watching terrible movies and commenting on it. While I don’t know Twitter’s plans for TV, it would be interesting if somehow they could mash up traditional programming with Twitter in such a way as to make traditional forms of media more interactive. It could bring a lot of value added to traditional media and its advertisers by bringing the conversation straight to the media, and while much of the conversation will be making fun of it all, media outlets would be best served by recognizing that conversation exists and taking a few jabs (but making more money) then ignoring it completely.
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