Implications of Public User Generated Data on Public Company Investing
With the emergence of platforms such as Twitter, Blippy, Gowalla, Facebook, UStream, Flickr, TwitPic, Foursquare, Meetup, Digg, Brightkite, etc, there is now an explosion of public user generated content marking the events of one’s life. Through these lenses, we can now easily see where a person is every day and where he or she visits and spends money. We have a window into one’s stream of consciousness and a record of some of the digital content consumed. We can see one’s new friends and videos and photos. While diaries and memoires used to tell the story of a life well lived, the breadcrumbs left from these above services are now leaving digital footprints for everyone.
In previous posts, I wrote about the value of this user activity data (UAD) with regards to targeted marketing and local search, but there are a number of other implementations. For example, if a service was able to aggregate and make sense out of daily UAD for an individual, employers could use it to better screen candidates. Dates could use it to better screen their mates! A most interesting implication and one that I often think about relates to public market investing (in a past life I was a research analyst for internet stocks). Specifically, if I was able to aggregate and make sense of all of the UAD around key employees at public companies, I believe I could predict things like when a company was in the process of selling itself or working on a key business development deal.
On Wall Street, information is everything and even having just a slight edge can result in excess returns. Now imagine if UAD was able to give you significant proprietary information. I’m not sure about the legality of all of this, but since most UAD is publicly available, my guess is there is nothing wrong with leveraging it to benefit in public market investing. After all, if I can derive conclusions from the information in a company’s public filings that others can’t, it is perfectly legal for me to benefit financially from that analysis.
I’m sure there are hedge funds already doing this type of thing and I am excited to see services that aggregate UAD to create robust profiles of individuals. In the words of the immortal Gordon Gekko, “You stop sending me information, and you start getting me some”.
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