Today Seeking Alpha announced the acquisition of CressCap which provide quantitative ratings and data. This acquisition will turn Seeking Alpha’s into a blended platform that provides crowd-sourced articles as well as quantitative stock ratings. SeekingAlpha’s traffic has been stagnant for the last 6 months but it is still the 5th biggest financial news website operating in the US.
I talked to Steven Cress earlier today about the acquisition as well as developments in the financial news space. The user experience at the top financial portals like Google Finance, Yahoo Finance, and MSN Money has been declining in recent years. Steven Cress believes that this is because readers aren’t interested in news stories that summarize one or two bullet points from press releases or regurgitate known facts about earnings releases. Quality financial content requires a strong skill set from the authors and portal sites can’t provide this.
I think the user experience at top financial portals has been deteriorating because ad rates dropped to unsustainable levels. We used to generate enough display advertising revenue from each article to pay our writers sustainable rates. Those days are long gone and we put most of our high quality content behind a paywall. Big portals aren’t willing to invest in a business with declining revenues, so this is creating an opportunity for sites like SeekingAlpha to fill the void.
Steven Cress says that sell side analysts put out research reports about a company about 6-10 times a year. So investors don’t always have access to timely reports. Quant analysis and ratings provided by CressCap is based on real-time data. Steven Cress believes “robo research” provided by CressCap coupled with SeekingAlpha’s crowd-sourced articles will equip retail investors with superior tools and help them achieve better returns.
I believe this is plausible but not optimal. Retail investors are known to underperform the market because they are trading against institutional investors such as hedge funds that have access to much higher quality data, research, and analysts. Having access to more data and nice looking quant ratings and ratios is better than not having these but at the end of the day retail investors are still trading against hedge funds or quant funds who are much better equipped.
Insider Monkey has a unique approach to investing. We know that we can’t outspend hedge funds, so we ride the coattails of the best performing hedge funds. Not all hedge funds are created equal, some hedge funds consistently outperform the other hedge funds. Our flagship strategy invests in the consensus stock picks of the 100 best performing hedge funds. Unfortunately we share these stock picks in our premium newsletter (ad rates don’t provide enough revenue so we have to charge $449 a year to cover our costs). Since its inception in May 2014 our flagship strategy returned 74% versus 50% gain for the S&P 500 Index ETF (SPY). So, we were able to outperform the market by about 5 percentage points annually by riding the coattails of the best performing hedge funds. I doubt that an average SeekingAlpha reader generates this type of outperformance but SeekingAlpha as a website is doing fine.
Based on data from Similarweb 30 million readers visit SeekingAlpha on a monthly basis. This puts SeekingAlpha at the 5th spot among the most visited financial news websites. WSJ stands at the 4th spot with 67.5 million monthly visitors. Marketwatch ranks 3rd, Bloomberg ranks 2nd, and Yahoo Finance is the most visited financial news website in early 2019. WSJ is already behind a paywall. Bloomberg is in the process of moving to a subscription model. I believe most financial news websites will be forced to move to a subscription model or shut down over the next few years. Somebody has to cover the cost of producing stock research.