Will financial information become the next “commodity” data?

Bernard Lunn of SemanticWeb, wrote a great post on XBRL and the impact it can have on the different layers of the stack using financial information. His article is greatly detailed  so if you haven’t done it yet: read it!

As quoted in this other article on XBRL Financial Information :

“Anyone can get the information [from the online SEC XBRL filings] and read it, but how to make good use of it is another thing,” Rong says. Today a lot of money is spent on services from companies like Bloomberg and Thomson Reuters to help them summarize and understand the data. “What we do as a business is to make the consumption of the XBRL based digital financial information easier, faster and automatic. That’s the fundamental idea or value

1 .The basis of financial analysis was a time and resource consuming job of data gathering, input in Excel models and analysis. With the introduction of open financial data format, this work will disappear and automated models will be able to run high level comparative analysis. The commoditization of financial data will make it possible for small companies and small shops to efficiently provide financial analysis. (For parallel, the same process happened when ETF commoditized the base of Fund Management by automating strategies and reducing the role of the Fund Manager).

From my understanding, Trefis is a perfect example of this evolution. Built by MIT students and finance specialists, it provides detailed financial analysis for several companies within a small startup structure, which would not have been possible before. It also allows users to modify the values of key hypothesis to verify how models would evolve under different circumstances and propose their own numbers. The commoditization of financial data has clearly made possible the emergence of new services providing financial analysis for free or a fraction of the price it would have cost before.

Another company aiming at the financial analysis market is ValueCruncher, which provides a platform for interactive analysts reports.

2. On the other hand, other players could benefit from this evolution: Yahoo and Google mainly. Yahoo and Google Finance have made the basic access to stock market information free (ad sponsored) and could continue to attack the markets of companies such as Bloomberg, Reuters.  ValueCruncher has a great post on what opportunities this disruption in Financial Information provides to Yahoo. Even if I believe it might not be the most fitting candidate for disruption, I agree with the overall run toward complex information due to the commoditization of Financial Information:

“The traditional financial information providers are worried that on-line finance sites could do to them what Craigslist did to newspaper classifieds. Take a multi-billion dollar industry and make it a multi-hundred million dollar industry – with the benefits flowing to consumers of financial information. Financial information market disruption.

The consequence is a push toward value added information for companies like Bloomberg and Reuters. However as seen in the first part of this post, other competitors  are willing to change this market too. What do you think will the traditional financial information players do to address this new competition? (Reuters free platform and move towards blogging show they are willing to challenge these competitors directly)

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