A FEW months ago, there was a lot of hubbub in the technology blogging community about a new service called Twitter. The service asked people to write short messages about what they were doing, and then it delivered the one-liners to their friends in near real time via instant messaging, SMS and the Web.
Initially, my interest was in the platform and the infrastructure. I really wasn’t interested so much in following what my friends had for lunch or where they were. And I didn’t feel the need to use Twitter myself to tell anyone what I was doing. It would be boring. “I am on the Web reviewing IR websites. I am asleep. I am on the Web reviewing IR websites. I am asleep…” You get the picture.
But I was deeply interested in what Twitter could do for investor relations departments of public companies to get their information out to the market without having to use expensive proprietary newswire services. Twitter seemed like a good platform for that purpose. A company could use Twitter to notify investors about important information in real time, on their mobile phones, Blackberries or on their computers. It fit in perfectly with my idea from last October for a 25-word news release.
However, I didn’t think about this much more because of some issues with Twitter’s reliability (it was overwhelmed by early demand) and because the noise of people writing 140-character “tweets” (a Twitter message) kind of distracted me from thinking more about serious applications of the technology.
Then I read a post by David Berlind, Executive Editor at ZDNet, entitled Get ready for the ‘Twitterization’ of mainstream media. Buried in the middle of his long post was something I think you’ll find very interesting. I’m quoting liberally from the post, but it is a long one, so I think you will appreciate me pulling out the meaty stuff for you here:
A couple of days ago, I noted how Twitter is the sort of technology that could completely up-end subscription-driven outfits like Bloomberg or Reuters. Investors subscribe to these services and sit in front of giant consoles as editors from these organizations spit out one-liners at them — one-liners with material information to investors — in near real-time. In other words, if there’s a reporter at a financial briefing for some public company and an executive of that company makes an important forward looking statement, that statement will appear on the consoles of thousands of investors within seconds of it being uttered.
On the investor side, there’s a stream of these one-liners about everything that’s important to them flowing by their consoles like a river. The secret sauce is not just in the business process (a chain of talented writers and editors who feed the system), but also in the infrastructure that facilitates that process: a proprietary infrastructure that, as far as I can tell, has been completely cloned by the likes of Twitter and Twitter-competitor Pownce.
Publishing one-liners takes only as long as it takes to type the one-liner. Subscribing to a source of one-liners the way an investor might subscribe to Bloomberg’s information services takes only seconds as well. Whereas Bloomberg puts a sophisticated system in the hands of an exclusive group of people on a private network, Twitter and Pownce make such a system available to everyone on the Web. Bloomberg gives subscribers a means of instantly offering feedback to publishers. For example, as it was once described to me by a Bloomberg editor, “If we don’t get the information into the system in time for investors to make key decisions, it could cost them millions of dollars. When they lose millions of dollars, you hear about it right way. They’re very quick to tell you you’re late.” I haven’t played with Pownce yet (I’ve reached out to the folks at Pownce but have yet to hear back), but Twitter offers precisely the same private feedback capability.
Berlind goes on to say that he can imagine a world where experts who don’t work for Bloomberg or Reuters start to publish useful, timely, and material information using a tool like Twitter, and he can see investors and traders subscribing to those feeds to ensure they have an edge in the market.
When I read “experts” I think of companies themselves. Investor relations departments and company executives are the ultimate experts on their own companies. Companies using Twitter alongside their websites to notify investors of new material information could bypass intermediaries like wire services.
In essence, Twitter can be a notification system and an editorial system. It can tell someone news is available and provide a link to it. For example: “Sun reports Results for Fourth Quarter and Full Fiscal Year 2007 http://tinyurl.com/2h5osq ”
It can also be an information system by delivering the news in a concise format: “Sun Beats Profit Target Q4 Revenues $3.835 billion, EPS $0.09 vs consensus $0.05 http://tinyurl.com/2h5osq “
Berlind is right. If traders can get information faster from companies than from Bloomberg, they will use companies’ Twitter feeds. So who does that hurt? I think the real losers are PR wire services, which right now charge companies to deliver their information to the same trading desks that Twitter can reach for free. Unless they can go to free, private PR wire services are in deep trouble as a market disclosure service.
Where the threat to Bloomberg may come from are experts who can add value by giving a very quick and accurate interpretation of the news. Something like, “Sun’s beat based on lower component costs. I question sustainability.” Now if that “tweet” is by a highly respected analyst, you will probably find that traders will be following his Twitter posts, too.
That could create big problems for Bloomberg and Reuters. They mostly employ journalists. Journalists interview experts, but are not normally considered experts themselves. So their first takes and their follow stories quoting experts will probably be slower in getting to trading desks than the Twitter announcements.
Twitter has already caught the attention of traders. Last month, Brett Steenbarger, author of The Psychology of Trading and Enhancing Trader Performance started posting real time market commentary and insights to Twitter. You can view his twitter page or see the twitter messages on his blog. Here are a few of his recent “tweets” to give you a flavor for what he’s writing.
- 9:14 PM CT – Nikkei down over 1%, Yen has bounced higher. Market update before the Friday open.
- 8:03 PM CT – The 3430 new 65 day lows is the highest level we’ve seen in this bear stretch, and it’s the highest since 2003.
- 8:02 PM CT – Candidate for momentum low: Thursday had 201 new 20 day highs; 4035 new lows. 105 new 65 day highs; 3430 new lows.
- 7:59 PM CT – Advance decline line for NYSE common stocks only slightly above the March lows; same for SPX AD line. Quite a retracement.
Others in the trading game have also seen how Twitter can be used in a trading environment, where IM is already well established. Andy Swan, founder MyTrade.com and a professional day trader, recently explained why Twitter is not a fad.
In a July 19 blog post announcing his Twitter experiment, Steenbarger invited other market traders to join him in using twitter to post news and insights. By “friending” one another, they could “create a valuable Web 2.0 resource for traders–a real time stream of market observations from multiple perspectives. It could easily evolve into a high-level conversation about markets as they trade. Cool.”
Cool indeed. It is just a matter of time before someone does indeed start aggregating real-time commentary of interest to investors and traders. And when that happens, the whole information distribution system for material news is likely to look completely different than it does today. Sun’s recent decision to bypass PR wire services for its earnings releases is but a baby step in what is coming.
I’d like to see someone integrate Twitter with an IR website. If anyone has done this, or is planning to, please let me know.