Seeking Alpha aims to “transform” investment research industry

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FINANCIAL blog aggregator Seeking Alpha, which reaches a global audience of 3.4 million, has launched a new program that will pay contributors for exclusive rights to their posts under a plan that it hopes will transform the investment research industry.

In an email to contributors and an open letter posted on Seeking Alpha’s website, CEO David Jackson, a former research analyst for Morgan Stanley, said the site’s Premium Partnership Program was about a vision to provide an alternative to the sell-side research industry.

Jackson has previously criticized sell-side research for having “no skin in the game” and for being “formulaic, less enjoyable to read, and less creative.”

However, in his letter to contributors Jackson made it clear that his vision is to disrupt the sell-side research business, which largely exists as a tool to generate trading commissions from large customers by parlaying privileged access into research reports, investment conferences and sponsored road shows.

Said Jackson: “Investment research has been dominated by the sell side, but there’s a world out there of other people who have considerable knowledge and insight about stocks, options, bonds, ETFs and investment strategy.  Whether you’re a fund manager, financial advisor, industry expert or a smart individual investor, we want to be the partner that brings that insight to light and unlocks value for contributors by offering exposure, reputation, customer leads and direct income. If this is successful, it should transform the investment research industry.”

Reuters columnist condemns program

Under the new program, contributors will be paid $10 for every 1,000 page views their contributions receive. Jackson told PaidContent an average Seeking Alpha post gets between 3,000 and 4,000 page views.

The compensation model was immediately condemned as inadequate by Reuters columnist Felix Salmon, who said someone such as himself with a high profile among Seeking Alpha contributors could hope to earn just $500 per month.

“In any case, my advice to anybody thinking of taking part in this new Seeking Alpha program is to just say no. So long as you stay outside the program and retain the copyright to your material, you can sell it or repurpose it or do anything you like with it. The minute you contribute a piece under Seeking Alpha’s “premium” terms and conditions, however, you lose all rights to it whatsoever — note the word “exclusive” in the agreement. I’ve sold magazine pieces for thousands of dollars where I haven’t given up exclusive rights. You should never give up exclusive rights for a pathetic payment of $10 or so,” wrote Salmon.

Powerful enemies with much to lose

Of course, Reuters is part of Thomson Reuters, whose financial customers overlap significantly with Seeking Alpha’s growing audience. Along with sell-side research departments, companies such as Thomson Reuters and Bloomberg could potentially see their own businesses disrupted by new financial information services like Seeking Alpha and others that have sprung up on the internet.

As we reported last week in our story about Research 2.0 adopting a new “Open Professional” business model, there is a growing class of financial research and information providers who see web syndication as a viable alternative to the traditional sell-side research model, including the potential for web channels to compete with the rich pay offered by Wall Street.

Seeking Alpha’s move provides more evidence that the disruption experienced by the music industry and newspapers due to technology is now beginning to hit the equity research business.

Of course, that means Jackson and his company have just made themselves a lot of powerful enemies with much to lose if he succeeds. We’ll keep you updated on this developing story.

Dominic Jones

Dominic (bio & disclosures) is IR Web Report‘s founder and an online investor relations consultant. He advises leading public companies and investor relations service providers worldwide on using the web for disclosure, engagement and profile building. You can contact him via the contacts page.