For much of his career, Tadas Viskanta has taken the traditional path in finance. He was even the founder of a hedge fund. Then in 2005, he made a big change -- starting an investment blog. It was certainly gutsy. At the time, blogs were considered part of the fringes of journalism. Over time, Viskanta's blog, Abnormal Returns, gained more traction."Last year, I started to take advertising on the site," said Viskanta. "I also formed a joint venture with Stocktwits." As the name implies, Stocktwits integrates with Twitter to allow people to pass along investment ideas and comments.
Well, the relationship turned out to be a success. This week, Stocktwits agreed to purchase Abnormal Returns. There were no financial details disclosed on the deal. Yet, it may signal the early stages of a trend in online finance and even the whole online world: It's called the real-time Web.
An Online Coversation
Think of the real-time Web as the online conversion, such as on blogs, social networks and micro-blogging services like Twitter. In fact, Twitter appears to be the main driver of the real-time Web since it allows anyone to broadcast on the Web. As a sign of the potential, Twitter was recently able to snag $250 million in financing at a $1 billion valuation.
Perhaps one of the first areas where we'll see lots of action on the real-time Web will be in stock trading. After all, this was the case with the Net in the 1990s, when there was the emergence of E*TRADE (ETFC), Ameritrade and Schwab (SCHW). The Web allowed for easy access to stock quotes, breaking stories and trade executions. From there, online discussion boards exploded in popularity.
Essentially, the real-time Web is a natural extension of these forces. That is, investors can get an instant snapshot of the sentiment of investors. Is a company going to have a solid quarter? Or is there some skepticism? Is a company going to be taken over? Yes, the possibilities are endless and the real-time Web will serve investor information junkies.
This should bode well for companies like Stocktwits. But to win, there will need to be more then cool technologies. Rather, it will be important to quickly grow the user base and get investors hooked. This was the key reason Stocktwits purchased Abnormal Returns.
So far, it seems that the real-time Web is mostly for information junkies and as a result, has a limited revenue opportunity. But there are definitely signs that it could eventually go mainstream.
Let's face it, social media has exploded. People seem to be addicted to sites like Facebook, MySpace, Digg, YouTube and Twitter. More and more, people are finding that it is normal and fun to share personal information.
But there's a big problem: Information overload. How can anyone really keep up with this stuff?
So, just as Google (GOOG) organized the web, there will likely be something that will make sense of social media. Of course, there are a variety of companies trying to be the leader in this nascent category.
One interesting player is Factery Labs, which launched in November. The company's site helps you find the most relevant and interesting links on a topic. "Other players are trying to use traditional link approaches for real-time search," said Paul Pedersen, the founder and president of Factery Labs, "but we think it is the wrong way. We've had to use new sophisticated algorithms to build our service."
A Billion-Dollar Market
Ron Conway, who is an angel investor, is always keeping his pulse on the next-big-thing. For example, he was the original investor in Google. He also has a stake in Twitter.
For Conway, he thinks that the real-time web will rapidly grow into a billion-dollar market within the next few years. And, he is wasting little time placing bets on start-ups.
But, the fact remains that things are still in the early stages and there will likely be much roadkill. That's the nature of technology -- and what makes it so interesting. Hey, Google was not one of the first search engines, right?
Tom Taulli advises on business tax preparation and resolving tax problems. He is also the author of a variety of books, including the including The Complete M&A Handbook. His website is at Taulli.com.
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