Some forms of ROI are inherently easier to track. While so many focus on the marketing & communications uses of social media, two companies are putting social media analysis techniques to work for institutional investors. What they do is simple: they look for reliable information online, before it shows up in mainstream media and moves the market. By going to the source, they can identify potential trading opportunities for their clients.
Buy on the rumor; sell on the news.Collective Intellect and Monitor110 offer market intelligence services to the Wall Street crowd (CI also offers a version tailored to marketing and communications). The basics are familiar to anyone who's looked at social media monitoring services—they watch blogs and other online sources for interesting bits of information. The difference is their purpose: to find information that has the potential to move stock prices, before everyone else finds it.
Collective Intellect describes three different use cases:
- Traders need to know everything going on with a stock in real time. They don't want a tap on the shoulder, a few minutes after a trade, to hear “didn’t you see that thing on the Internet about their product problem?”
Traders deal with a lot of information, so there's an emphasis on filtering to find the best information and the best sources.
- Portfolio managers and research analysts usually have more time to think, but they need a comprehensive view of activity associated with a stock, an event, a technology, an individual executive, or an industry.
- Quants dig through the rich data available in social media for tradeable correlations. If there's predictive power in a social media metric, they'll find it—but don't expect them to share. They know how to make money with math secrets.
If online market intelligence leads to a profitable trade, the ROI is easy to determine, without any arguments about how to translate outcomes to money.