Commoditization of Financial Data Demands New Business Model
The ubiquity and rapid commoditization of standard data points, especially as they relate to public documents, is causing firms to question high price tags. That's according to Dave Frankel, president of EDGAR Online, a leading distributor of company data and public filings for many publicly traded assets. While EDGAR Online is long known for distributing PDFs of corporate filings, over time they have evolved into the data and analytics business, taking part in the creation and distribution of fundamental data, largely around financial disclosures and footnotes.
Up until now, if a firm wants balance sheet cash flow data, they would subscribe to a whole database and pay annual subscription fees that are pretty high. For larger firms that can be upwards of half a million per year, although typical firms pay an annual price tag just north of a couple hundred thousand. It was a model that made sense for the time, but today the difference between Bloomberg's net sales data is no different than Thompson Reuters and countless other providers, leaving customers wondering why they pay exorbitant fees while the market value of those feeds is going down.
Besides, clients now see customized feeds as more valuable and as an opportunity for differentiation, says Frankel. He adds clients often come to them with requests for unique data sets mined from disclosures in hopes of finding hidden gems. Mining value from data in US disclosures (never mind global) is just the tip of the iceberg, but even within that niche there remains a ton of unearthed information. "It's data people don't normally see… And we would all agree value is in the analytics and what you can do with that data."
Industry Push Back
Models are changing, purse strings are tight, and products are developed differently. These changes all take shots at the long standing business models of data providers. Their high quality data was historically difficult to acquire, and customers were happy to pay a premium. But it is much easier to use and obtain that information than it was ten years ago, and consumers are much more conditioned to a commoditized model, such as utilities and mobile data plans that allow customers to only want to pay for what they use.
"When looking at EDGAR's place in the market, [commoditization] was an "aha!" moment. People just don't care about financial service statement data, balance sheets, etc. It just doesn't hold the same value in the market place that it did 10-15 years ago," explains Frankel. "Talk to any market data person and investment manager, they are already valuing it much less. They say, "cut your price" but they wont do that on analytics - that has value! If there's a visualization data that saves someone time you'll pay a premium. But with regards to data, the two things come together with technology making things more pervasive. I wasn't going to fight value, I want to change the way people consume data."
Embracing Commoditization: Evolving a Business Model
EDGAR online recently partnered with Mashery to enhance their APIs and more easily provide data from financial disclosure to financial analytic developers. Mashery is a leading provider of API management services and will allow the customer to see what data points it is using and getting from APIs like a utility bill.
Through the partnership EDGAR Online will be able to deliver customized and specific data feeds at a pay-what-you-use cost structure that benefits smaller players. A particularly savvy move considering, according to a Gartner report, the ratio of mobile to PC based projects is expected at 4 to 1 by 2016. This is playing a huge role in how data is used and delivered. "Basically you've got small mobile developers that only need a couple data items, and they can't afford a couple hundred grand per year that the big guys are charging," says Frankel. "Our relationship with Mashery will give us a good sense of the data points people are using, and help us to meter it and charge accordingly."
He adds, "The partnership allows us to unlock data to make it so you can pay for data you use and need. We adapted the business model to meet the needs of the market place, basically assisting developers in investment banks or people developing applications for mobile. They are able to get the financial information they want quickly, easily and reasonably priced. That's something that's going to be different moving forward." Becca Lipman is Senior Editor for Wall Street & Technology. She writes in-depth news articles with a focus on big data and compliance in the capital markets. She regularly meets with information technology leaders and innovators and writes about cloud computing, datacenters, ... View Full Bio