Not all Bloomberg users are traders though, and that's where I would try to challenge them. I worked on software for many years that was used side by side with Bloomberg. Many of our customers were Bloomberg customers as well -- although our software was a bit more niche and we didn't hit the heights that Bloomberg did. But when I doubted if we were in the right business, I would look over to Bloomberg and convince myself that the money was there for the right products.
While Bloomberg has almost any conceivable piece of data in real time, what they were missing was presentation. For instance, if you wanted to make a presentation to your board which demonstrated your value as a money manager, you'd have to leave Bloomberg to do it. That's how we were able to share space with them. But I've heard rumors they are moving in this direction now.
I also agree with the author that the data is really the lynch pin. Some commonly used data can be very expensive to acquire if you are able to get it at all. For instance try finding out what stocks and weights make up the Russell 2000 index (and then legally redistribute that data). We were fortunate in that we got in the business when data vendors were willing to negotiate with small software vendors. And much of the value we offered was in those accumulated contracts.
Once those contracts are in place it is very difficult for either side to cancel them without pissing off their customers. For instance a couple years ago FactSet and Morningstar got into a spat and FactSet's contract to provide Morningstar data wasn't renewed. All hell broke loose on both sides. They made a deal. Data is pretty big chasm for a startup to cross. And users are particular about what data vendors they use, even for nearly equivalent products.
There have been some reasonable exits in the financial software business that don't get much play in the Valley. For instance BlackDiamond sold their reporting package (again presentation) to Advent in San Francisco for about $70million and eVestment has been taking on investment and growing like crazy. But neither of those companies competed head to head with Bloomberg's core business. But they are big enough markets that I could see Bloomberg wanting to grow into them.
In general, if you want a slice of the market that Bloomberg is in, I don't think it would easy to do it head on over data. You have to outflank them where they are weak, and hope to chip away at their mindshare that way.
I never found presentations that hard. For most presentations I kept an Excel template with the BBG Excel plugin, which would then be linked by Powerpoint.
But I do agree with the point that not everyone is a trader. The quality of a lot of macro data often wasn't there. For this I also had a Datastream terminal, which excelled in longer term macro data.
Certainly Excel works for many people, but there was a significant number of users who wanted a vertically integrated presentation/reporting platform. I think there is still room for innovation in this area.
I agree that there may be space for vertically integrated presentation/reporting platform, but do you think this space is as lucrative as the actual data streaming? My guess would be that financial services customers would be very price insensitive to mission critical/directly revenue generating data/analysis (hence, Bloomberg's subscription costs) while a reporting platform would be just a nice plus but a much harder sell. Thoughts?
Presentation is pretty important in much of the business because that's how the products are sold and fees justified.
Let's say your firm trades bonds. Your product is your expertise in trading those bonds, and you have to sell that expertise. How are you going to do that? Much of it is still reputation, but the days of closing a pension fund with a few martinis and your good looks are coming to an end. You have to have the numbers to back up your claims.
You might be able to do something with the correlations of the index returns and stock returns, but I doubt their would be enough information there to depend on results.
While Bloomberg has almost any conceivable piece of data in real time, what they were missing was presentation. For instance, if you wanted to make a presentation to your board which demonstrated your value as a money manager, you'd have to leave Bloomberg to do it. That's how we were able to share space with them. But I've heard rumors they are moving in this direction now.
I also agree with the author that the data is really the lynch pin. Some commonly used data can be very expensive to acquire if you are able to get it at all. For instance try finding out what stocks and weights make up the Russell 2000 index (and then legally redistribute that data). We were fortunate in that we got in the business when data vendors were willing to negotiate with small software vendors. And much of the value we offered was in those accumulated contracts.
Once those contracts are in place it is very difficult for either side to cancel them without pissing off their customers. For instance a couple years ago FactSet and Morningstar got into a spat and FactSet's contract to provide Morningstar data wasn't renewed. All hell broke loose on both sides. They made a deal. Data is pretty big chasm for a startup to cross. And users are particular about what data vendors they use, even for nearly equivalent products.
There have been some reasonable exits in the financial software business that don't get much play in the Valley. For instance BlackDiamond sold their reporting package (again presentation) to Advent in San Francisco for about $70million and eVestment has been taking on investment and growing like crazy. But neither of those companies competed head to head with Bloomberg's core business. But they are big enough markets that I could see Bloomberg wanting to grow into them.
In general, if you want a slice of the market that Bloomberg is in, I don't think it would easy to do it head on over data. You have to outflank them where they are weak, and hope to chip away at their mindshare that way.