An increasing number of Web 2.0 companies are turning to user-generated financial and investing content to give them a strategic advantage in the cutthroat equity trading business.
The commoditization of equity trades means the technology driving online trading platforms no longer provides a strategic advantage to financial firms.
This is good news for the providers of open-source financial technologies, such as Zecco, a Web 2.0 stock trading and investment community. Zecco said its open-source platform allows it to offer its 75,000 customers 10 free equity trades a month, and to build up a community which generates financial content for the company.
“Free is nice, like open source, but there has to be more than that,” Jeroen Veth, the CEO of Zecco Holdings, told eWEEK at the O’Reilly Money:Tech conference on Feb. 7. “It’s about information and investors wanting to find and debate their investment options. The killer application for us is user-generated content, where our customers share their portfolio data and investment knowledge and expertise.”
Customer blogs and forums are at the heart of the financial and investment content on the site, all of which is moderated by Zecco staff.
These tools also allow the Zecco community of investors to communicate with one another, share their portfolio data and trading strategies, as well as get activity feeds of the trading data for other members, if they agree to this.
This online investment community and user-generated content model has also opened the door for a new and innovative business model for Web 2.0 financial companies, which no longer just rely on revenue from equity trading commissions and paid research.
Revenue now comes from a number of sources, including interest, cross-selling and advertising, which Veth said is “the icing on the cake for us.”
Zecco is also building a separate database so that it will be able to roll out a new, internally built, community platform when the need arises.
While an open-source trading platform is not in the cards for Zecco as yet, Veth says there are enormous benefits to this, as proprietary trading platforms get outdated quickly and the vendors often do not do what they promise.
Power of the Wiki
Wikinvest, a research portal where users can contribute information on company profiles, investment concepts or chart analysis, is built on the open-source MediaWiki package that was originally written for Wikipedia and is now customized for its use.
But Wikinvest co-founder Michael Sha agrees that the platform itself is not the value-add any more. It’s the user-generated investment and research content on its site that brings value for the Web 2.0 firm.
The Wiki is a new and transparent tool that facilitates the creation of good content as numerous people work on a single document. So far the startup has had more than 2,000 people contributing content, and there has been more than 100,000 edits.
“It opens up a huge opportunity for us to provide people with free investment research, something they had to previously pay a financial services firm for and, on the business side, advertising is now a potential good source of revenue for us,” he told eWEEK.
Wikinvest will also soon launch a new data service that compares the productivity and performance of specific companies in various sectors. Much of this content will also be user-driven, the company announced in January at the Money:Tech conference.
Another Web 2.0 company in the financial space that is taking advantage of user collaboration, is Covestor, a no cost sharing service that lets self-investors share their investment decisions and earn fees by helping others.
All the data is private and anonymous, and membership is free. Members of the service plug in their online brokerage account information, their portfolio shows up on the site and then the system creates its relative performance to the broader indices, sector indices and a risk profile, CEO Richard Tahta told eWEEK.
“Other members can see a person’s holdings as percentage of their portfolio, along with charts and other relevant data, and can track their investments in a social networking-like environment,” he said.