Monetizable Sentiment Indices

Quick Read: Recently we’ve seen how being able to smartly parse the chatter on social media becomes valuable – especially for speculative trades. This heralds an interesting opportunity: i.e., monetising such knowhow of social sentiment, at scale.

Have you heard of BUZZ – the social sentiment ETF?

Social Media ETFs

In a previous post, we argued that there is a certain premium attached to being able to smartly parse and capitalise on the knowhow of the social media chatter on forums like r/WallStreetBets. This is best exemplified by the recently launched ETF by New York asset manager VanEck the Buzz NextGen AI US Sentiment Leaders Index. Quoting the FT article..

The Reddit rebellion might have died down for the moment, but New York asset manager VanEck is betting that there is long term value in listening to social media chat and is launching a social sentiment exchange traded fund. The fund will invest in the stocks being most talked up on social media. (..)

Its underlying benchmark, the Buzz NextGen AI US Sentiment Leaders Index…aggregates investment-related content from social media sites such as Twitter and StockTwits, blogs and news articles. Machine learning and artificial intelligence are then deployed to attempt to “identify patterns, trends and changing sentiment which can affect market-based outcomes”. The 75 US large-cap stocks judged as having the highest degree of positive investor sentiment and bullish perception then form the portfolio, which is rebalanced monthly. (..)

Source: Financial Times

The following tidbits from the interview with Jamie Wise, CEO of Buzz Holdings and the originator of the index, shed more light on some further specifics related to the ETF.

“This is not a Reddit meme stock ETF,” said Jamie Wise, CEO of Buzz Holdings. “This is about the broader conversation around stocks mentioned on social media platforms. We are using broad social media sources, principally Twitter and StockTwits.” Wise said it also uses Yahoo Finance, Benzinga and Reddit.

How to determine “social media buzz?” Wise says the index uses natural language algorithms that examines whether the comment is positive, negative or neutral, then ranks each stock based on the degree of positive sentiment and breadth of discussion. That’s key to understanding the index: stocks are weighted by sentiment, not market capitalization, and no one stock can exceed 3% of the index. It is rebalanced every month. 

“We are aggregating the collective sentiment of the community” that comments on stocks on social media, Wise said.

Source

Is social media popularity a good way to pick stocks? Can stocks be manipulated on social media? Well the jury might still be out on that. But given the current dynamics, it is more likely that the larger question here might soon be skewed towards ‘when’ vs ‘if’.

Extending this thought further

If we are to extend this concept further, new opportunity pools could become evident. Start with any category where popular social sentiment matters, and you would see a monetizable product waiting to be packaged and sold. Few examples:

  • Sports
    • Today, there are social media networks for sports gamblers like BetSperts, but if and when these networks manage to capture, index and channel the emergent sentiment on their platforms, they could very well monetise the same. (obviously this would be subject to the prevailing legal, regulatory and policy frameworks.)
    • The idea: Derivatives for sports betting based on social sentiment indices built on realtime social media chatter. (BTW did you try Locker Room – the Clubhouse for sports fans, insiders and athletes?)
  • Music
    • In 2003 iTunes revolutionised music ownership by letting customers purchase and download the music they want for just 99 cents per song. Now, how about letting the general public participate in the actual funding and co-ownership of their favourite artiste’s tracks/albums by facilitating fractional ownership à la securities on the stock market.
    • The idea: Letting artistes raise funds for their album(s) through an IPO kind of offering to their fans/community. The value of these ‘stocks’ could be pegged to the sentiment/chatter/metrics on platforms like Spotify, SoundCloud etc. And we could have ‘exchanges’ that facilitate trading of these ‘stocks’ among the community. (Taylor Swift would perhaps not have to bother with her rerecordings then)

SoundCloud seems to have already taken a step in this direction by launching ‘fan powered royalties‘ last week.

Source: SoundCloud

Quoting from SoundCloud’s press release announcing the launch..

Fan-powered royalties levels the playing field for independent artists by tying payouts to fandom. Artists are now better equipped to grow their careers by forging deeper connections with their most dedicated fans; and, in turn, fans can directly influence how their favorite artists are paid. Fan-powered royalties reflect feedback from the independent artist community on SoundCloud who want equitable payouts, transparency, and control over their own careers.

Essentially, any context where popular sentiment (now readily available through the hose pipes of social media) lends itself to be indexed and tracked, could potentially be transformed into a monetizable opportunity to unlock value and disintermediate the equation between creators and fans.

And we might perhaps see more such opportunities becoming evident thanks to the alignment of these three forces:

  1. the emergence/growth of platforms that democratise and aggregate media of all types on the Internet
  2. the rapidly growing creator economy and associated ecosystems and
  3. the rise of new modes of interdependencies between (1) and (2) connecting the users’ utility, consumption and communications patterns at scale

Even then we are perhaps just seeing the tip of the possibility iceberg.

[Featured Image: Source]

One thought on “Monetizable Sentiment Indices

  1. Excellent Best wishes

    On Tue, 9 Mar 2021, 20:13 Riffs on technology, marketing & culture, wrote:

    > Chaitanya Chunduri posted: ” Quick Read: Recently we’ve seen how being > able to smartly parse the chatter on social media becomes valuable – > especially for speculative trades. This heralds an interesting opportunity: > i.e., monetising such knowhow of social sentiment, at scale. ” >

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