SAYING that institutional investors are increasingly looking to the open web for information, a Boston-based independent research firm plans to use its blog as its primary publishing and client management platform.
Research 2.0, founded in 2005 by former Wall Street director of research Kris Tuttle, will provide much of its research through its blog while revenues will come from premium subscriptions, providing research to online partners like the GigaOM Pro research subscription service and private company share exchange SharesPost, and through issuer-paid research.
In a post yesterday, Tuttle, whose career includes stints at S.G. Warburg, SoundView Technology Group and Adams Harkness , said the research business has “started shifting online in earnest,” which he believes may be due to the “iPhone/iPad/Facebook phenomenon.”
He said these were now “wildly popular, especially with the crowd we generally write for. But they are also technologically at odds with older proprietary systems like FactSet, Bloomberg, FirstCall, CapitalIQ, etc.”
Research 2.0 focuses mostly on emerging information technologies like mobile and cloud computing, advanced nano and biological materials and systems, the connected car, the intersection of real and virtual worlds, and 3D computing.
‘Open Professional’ model of research
Tuttle says it’s “clear that many ‘institutional’ readers are actively moving to open online sources for their information and research content. The old platforms will no doubt be around for a long time to come but will be eclipsed by these new channels.”
Hamstrung by the red tape of rules and regulations, the traditional equity research providers will not be able to participate in what he calls the “open professional” model of research.
He also believes and that more analysts will eventually move over to the open professional model as compensation levels at investment banks and broker dealers “may soon reach some kind of grid parity where talent can go where it belongs.”
While Research 2.0 will continue to distribute its research through traditional third party platforms like FactSet, CapitalIQ and TheMarkets.com, the firm will be placing much more emphasis on its blog and investment-focused communities like Seeking Alpha and StockTwits, as well as its own direct distribution through email, Twitter, Quora, LinkedIn and Facebook pages.
“In the past the blog was a secondary platform for us and considered part of our ‘downstream’ information flow,” explains Tuttle. “We will still be supporting the old distribution platforms but they will now be ‘downstream’.’”
Impact on IR community
My personal view on this is that the disruption experienced by the music industry and newspapers due to technology is now beginning to hit the equity research business.
Of course, there are powerful groups with a strong vested interest in preserving the old model, not least among them investor relations professionals who benefit from having strong sell-side research and corporate access teams doing much of their work for them.
This is one reason there has been strong resistance among many IROs to using new web technologies. It’s not in their interests to support alternative research channels if they undermine the established players on which IROs rely so much.
However, at some point, Tuttle’s “open professional” model and Wall Street’s closed, proprietary model are going to clash.
And in the middle will be the IR community.