- REUTERS/Sue Ogrocki
Traders are turning to Twitter to get in front of big market-moving trends.
That in turn is creating an eco-system of companies looking to make sense of Twitter data and pull the signal from the noise.
According to a TABB Group report issued last week, the industry is growing at a rapid pace.
“There’s not going to be one firm on top,” said TABB’s Valerie Bogard, a research analyst. “There’s going to be multiple firms.”
Some of the startups have already been snapped up by bigger corporates looking to get an early edge on analytics.
Twitter itself spent upwards of $130 million just a year ago to buy Gnip, now used to help disseminate data to startups that in turn relay that information to hedge funds, among other clients.
Elaine Ellis, a marketing manager at Gnip, told Business Insider that Twitter also sells data to banks and hedge funds directly.
She said: “We know Tweets move markets. Our public, real-time nature positions us perfectly to be a source for the financial industry. We believe that in the future, this will evolve from a nice to have to a must have for all industry participants.”
Bogard told Business Insider that everyone from investors in munis to traditional funds with long-only strategies are trying to turn real-time commentary into critical analysis ahead of the tape.
Not all social signals are created equal, of course. In fact, some are createdto throw Wall Street’s brightest minds off the scent of what’s actually happening.
Here are some of the startups looking to turn Tweets into trading signals:
Selerity is partnering with Wall Street disruptor Symphony
Selerity put itself on the map earlier this year when it broke the news of Twitter’s earnings on Twitter, of all places. The startup paws through about 8 million documents daily, also factoring in social signals on top of media reports to generate insights for users.
Now, it has also partnered with Symphony, the messaging system out to chip into one of Bloomberg’s key lines of business. The New York company will be filtering key data to network users and also directing them to related media away from the messaging system. Selerity last raised capital in 2013, and has taken on little funding to date, and charges based on a “per-user licensing fee,” CEO Ryan Terpstra said.
iSentium has backing from Goldman Sachs alums
iSentium is one of the older players in the social sifting game. That’s part of the reason it’s already profitable, having raised cash from Goldman alum David Heller and Marc Spilker, former president at Apollo Global.
The Miami-based startup is even working with a yet-unnamed investment bank to launch a Twitter sentiment ETF product, although CEO Gautham Sastri says it won’t launch until next year, thanks to regulatory approval issues. He says social analytics is here to stay on Wall Street. “If you don’t look at social media, you’re blind,” he told Business Insider.
TickerTags puts 350,000 social cues to work
Dallas-based TickerTags tags social media cues and draws trends together over time to view how they impact companies. That entails anything from “gluten-free” dieting fads to people complaining about the lines at a theme park.
The angles for analysis are endless; there are more than 350,000 “tags” that are filtered against 50 million tweets. But, at $10,000 a month for its API (once they want to customize their profile), it isn’t cheap. For about $30 a month, users can also access a limited number of “tags.” The company also offers a free version of the product. “You can see things bubbling up on the social web in real time,” said CEO Chris Camillo.
PsychSignal wants to become the next volatility measurement tool
PsychSignal co-founder James Crane-Baker is out to supplant the VIX, Wall Street’s volatility index. Backed by a large quantitative hedge fund, Crane-Baker told Business Insider that “in five years, social data will be on every trader’s screen.”
Crane-Baker said that the prospect of being able to analyze tweets and other social media for relevant analysis wasn’t even a real business until 2012 or 2013. Now, the entire world has ‘gone social,’ he said.
TheySay may look to China next as it tries to turn data into trades
- TABB Group
What they say – what they all say – is processed into TheySay, a London-based startup that starts its data packages at just under $5,000. Some hedge funds are already loading the social sentiment tracker’s data directly into algorithms.
Chief Technology Officer Karo Moilanen told Business Insider that Twitter, via Gnip, is the “main” social sentiment driver right, now, but that one day startups in the industry could take their analytics to Weibo.
Given how volatile China’s markets have been, a little extra analysis into Chinese sentiment could go a long way for hedge funds.
MarketPsych is another example of an analytics firm partnering with a bigger financial services firm
- PsychSignal website
Just like Selerity’s partnership with Symphony, MarketPsych is going with a bigger, more established financial services firm to broaden its reach. Since 2012, it has partnered with Thomson Reuters to gauge the psychological state of the market and today the company analyzes 7,000 social media sites and 40,000 sources of news to create a mosaic of social sentiment. “Larger data providers are.. partnering with startups to enhance and provide offerings to clients,” said Valerie Bogard, a research analyst with the TABB Group.
Contix wants to bring social context into markets like commodities trading
There are a lot of Twitter algorithms breaking down daily signals on stocks, but Contix is taking its technology in to the commodities trading arena for its institutional clients.
The Hawaiian startup factors in metals, grains, livestock and energy commodities and uses weather reports to keep its traders on top of their game. Package prices including commodities and stocks range from a few hundred dollars a year to a few thousand for pros.
Dataminr is perhaps the best-funded startup among its competitors in the social analytics space
- REUTERS/Dado Ruvic
Startup Dataminr is one of the bigger – and better-funded – startups working in the social analysis arena. En route to a funding valuation of around $700 million, the New York-based startup has run into some recent headaches – including the departure of its CFO this summer. But the company is backed by boldface names to go along with its nearly $180 million in funding: ex-Citigroup CEO Vikram Pandit, former Thomson Reuters CEO Tom Glocer and former Morgan Stanley chairman and CEO John Mack.
Eagle Alpha goes beyond Twitter for real-time social signals
- BOB STRONG/REUTERS
“Just looking at Twitter is too narrow,” says Emmett Kilduff, founder and CEO of Eagle Alpha, a London-based analytics firm. Eagle Alpha reels in data from other forms of social media, like Yelp, to use customer reviews as a barometer for hedge fund clients. Kilduff said his goal is to get data in front of analysts and portfolio managers running billion-dollar funds.
Market Prophit knows if your stock picks are good (and, how good they really are)
- Market Prophit
Market Prophit, the New York-based social sentiment analytics firm, has partnered with or licensed products to Nasdaq, S&P and Dow Jones on various initiatives. Though Twitter is the top focus for Market Prophit, according to CEO Igor Gonta, his language analytics can be applied to other social networks around the world.
Gonta’s startup tracks social media ‘prophets,’ or market watchers who call stocks’ tops and bottoms. When top Market Prophit ‘prophets’ make calls, they are often the opposite of broader sentiment on social networks like Twitter, he said.
Next, Gonta says, he’s working to develop an ETF. “The interest level was pretty strong” in developing that product, he told Business Insider.
Lexalytics derives all kinds of sentiment data for analysis — not just social media
Boston-based Lexalytics gathers data from a variety of different sources including Twitter, according to CEO Jeff Catlin.
“Our dominant market position has been the social listening world,” he told Business Insider.
This includes call centers that provide de-identified data from hospitality companies. Through a variety of sources, the company can derive data pertaining to customer metrics – from waiting times on customer service calls to hotels being booked up faster during travel season.