Development Seed Blog

The Financial Times has a fascinating article on its front page today about a new system in development that will track “market gossip” on the internet – from blogs to regulatory filings and everything in between.

Its initial purpose will be as a filter for hedge funds to analyze online chatter, and ten different hedge funds have already signed up to try out the system. I can see how this could be extremely beneficial to hedge funds, and I bet this would be useful for a myriad of other purposes too. But I’ll get to that in a minute. Here’s one reason from the article of why this system is valuable.

"It's important to know that the smoke is out there and that others see it," he [Scott Lessing, from Citigroup] said. "There may be more information value in online trends in the aggregate: 5,000 more web mentions of a product than the week before could be an important signal for an analyst covering the product's manufacturer."

That’s certainly true, and I’m sure tracking trends and managing news like this is appealing to lots of organizations. An advocacy group could track key words in its field to find out what is being talked about and why, and then act on this information before its opposition or competitors do. This not only gives the organization a significant advantage, it also improves its outreach and overall knowledge.

Another way a system like this could be used is to monitor buzz. Say a controversial organization or political candidate has this system. They could then easily listen in to the internet and play better defense when negative things are said about them. There are a ton of examples of media blow-ups that are caused in part by poor initial handing – most recently with George Allen’s racist comments on the campaign trail.

To do its tracking, the system relies heavily on RSS. But the key in its value (and its newness) is that is analyzes the information for you so you don’t have to. Here’s more.

Monitor110 can search for individual pieces of data and trends in online activity. Users are able to filter the data by defining particular companies or investment themes they are interested in watching or by setting "tolerance levels" that would screen sources by reputation.

Roger Ehrenberg, the former head of Deutsche Bank's fund of hedge funds who is president and chief operating officer at Monitor110, said: "The platform is similar to the data portals that investors are used to, but the difference is that it tickers the unstructured universe."

It will be interesting to see how this system is received and how it changes the world of hedge funds. It’s due for release next year and does have initial funding – from, among others, Draper Fisher Jurvetson, a venture capital firm that back Skype in its early days.

You can read the article here but you do need a subscription to read the entire piece.