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]

Mainstream, not meme

Quick Read: The next time you see something labelled as a meme, ask yourself if it is actually actually the expression of a mainstream culture (or counter culture) albeit within a specific societal context. Calling something a ‘meme’ strips off the necessary nuance and clouds comprehension. So – it’s mainstream, not meme.

1: r/Wallstreetbets

Would I expect to find Jeff Bezos or Bill Gates or Warren Buffet on r/WallstreetBets?

Unlikely.

After all, why would some of the world’s richest people fancy a speculative bet on fundamentally weak stocks? So I would be surprised if they’d even know, much less care about stonk memes.

Park that thought and we’ll be right back.

2: The 3-Ladders of Social Class

Alex Danco’s “The Michael Scott Theory of Social Class” has been one of the most thought provoking posts that I have read in the recent past. A highly recommended read in case you haven’t yet.

In it, he speaks about ‘Michael Church’s 3-ladder system’ and how once you recognise it and its constituent dynamics, you cannot unsee it play out across demographics and domains all around you. He writes:

Several years ago, Michael Church wrote a neat summary of the American social class system, and how the traditional metaphor of “climbing the ladder of social class” is wrong in an important way. There isn’t one single ladder; there are three – each with different values, norms and goals. You have the first, and largest ladder, Labour. Next, you have the “Educated Gentry” ladder that corresponds to what we typically call the Upper Middle Class. And finally, you have the elite ladder.

Climbing the labour ladder means making more money. At the bottom are really tough jobs, typically paid hourly, informally, or with tips. Above that there are stable, but modest blue collar jobs; then high-skilled or good Union-protected careers. Finally at the top you find “Labour leadership”, which doesn’t mean being a union boss, but means, “You’ve made it. You own stuff. You drive a new F-150, you have income properties, you enjoy nice things.”

If you’ve made it to Labour leadership, you are by no means hurting for money. But you have not actually escaped the category of “economic losers”, because the Labour ladder does not create paths to leverage. That is the fundamental difference between how the labour ladder works versus how the elite ladder works. The people on the labour ladder fully understand this. (…)

Skipping the middle ladder for a second, we move to the Elite ladder. The Elite ladder has a lot in common with the Labour ladder: it’s straightforward. You move up by getting more money and more power. The only fundamental difference is that you climb the Labour ladder by working hard, whereas you climb the Elite ladder by acquiring leverage. (..)

The middle ladder works completely differently from the other two. This ladder isn’t about money or power; it’s about being interesting. You climb this ladder by being more educated, and towards the top, by having costly habits and virtues. 

At the bottom is also a transitional layer: it’s how you get onto this ladder if you weren’t born there, often via Community or 1st generation College. Above that is the upper-middle class Petite Bourgeoisie. Higher up the ladder are “elite creatives”, people with obscure or virtuous-sounding PhDs, notably interesting lives, or Blue Check Marks on Twitter. (They may well earn less money than those below them on the ladder – this ladder isn’t about income.) At the very top of this ladder is an exclusive group: “Cultural leadership”. The litmus test for attaining this group is, “could you write an opinion piece in the New York Times.” 

Source: The Michael Scott Theory of Social Class. By Alex Danco

When I accept this construct even at a broader level, I’m tempted to posit the following.

Just as there is no single ladder, but three – each with different values, norms and goals, there is no single cultural construct, but (at least) three – each with different values, norms and goalsthat correspond to each of these social/societal ladders (this is diversity in cultural constructs that is over and above the conventional manifestations of cultural diversity that we usually recognise around the dimensions of region, religion, ethnicity etc). The idea here is that culture is contextual to its underlying societal ladder.

This might sound obvious (and it is to a large extent). But when we accept this thesis, one should also accept the corollary – there is no one counterculture. Because, different people relate in different ways to what is labelled as counterculture in popular discourse. For, what might resonate with me as a ‘cultural norm’, or what might appear to me as an artefact of an emerging counterculture in my social/societal context, might appear as an entirely different thing (or sometimes might not even be evident) for someone on a different societal ladder living with different constructs/conceptions of culture. So the emergent idea for me here is that counterculture is contextual to its underlying ladder (vs being a universally applicable relic of time).

Caroline Busta in her thought provoking article recently said that The internet didn’t kill counterculture—you just won’t find it on Instagram. I’d add a little further to this argument and say that I may, after all, perhaps find manifestations of counterculture on Instagram – but only I ; while others may perhaps find that on Reddit and others on Clubhouse.

The Internet has only siloed the contexts where the drivers of the (counter) cultural forces emerge and the canvas on which the strokes of (counter) cultural expressions takes form and shape. That’s why for people who worship at the altar of NYT Op-eds or meticulously follow the blue checkmarks on twitter, the Gamestop short squeeze would have come as a sensational meme or ‘breaking news’, while for those that are on r/Wallstreetbets it was just another day when a topically relevant cultural expression found its restless voice.

Gully Boy, Source

That’s why when the rest of India was enjoying it as a Bollywood movie on Netflix or Amazon Prime, the artists in the slums of Dharavi were discovering and finessing their craft through TikTok (now banned in India) and ShareChat.

3: Gamestonk!!

And that’s why I find Elon Musk’s tweet revealing.

When even those like Hedge Funds that have an existential stake in the emergent buzz cooking up in the worlds of Reddits and Robinhoods were caught unawares of the power of the ‘Gamestonk’ phenomenon, an unlikeliest person seems to have not just understood but also arguably played an influential role in the unraveling of a grassroots phenomenon on r/Wallstreetbets.

After all, that’s the world’s richest person showing that he is more culturally attuned to what is cooking up among the crowds versus anyone else that one may expect to care. He seemed to be able to see something as a mainstream force of a cultural expression – that has just been waiting for its time within a societal context – versus just as some amusing meme unleashed by Robinhood frenzy.

In a parallel universe he might have been a true blue marketer (which he perhaps already is albeit a wealthy one) or better still ……….. a President of a nation state*.

*Did you know that Elon Musk holds triple citizenship? US, Canada and South Africa. (source)

Twitter and Condoms

Two companies. Two successful IPO debuts in the same week. But two different stories.

Let’s start with Twitter.

Twitter shares surged 73% at market debut this week, and closed at $44.90, after hitting $50 at one point – or almost double its $26 offer price. Financial Times reports that at that level, Twitter was more valuable than market heavyweights such as Time Warner and Yahoo! In fact, by some reports, there is also a sentiment that by pricing its  shares at only $26, Twitter has ended up leaving an awful lot of money – nearly $1.3bn –  on the table!

[Amidst heaps of articles out there currently on Twitter, if there is one article that you need to read this week, this would be  it – Bloomberg Businessweek’s cover story on the ‘Surprising Sophistication of Twitter’.  

Twitter Businessweek

(Cover Page, Bloomberg Businessweek, November 11 – 17, 2013)

A small teaser from the article:

Millennia from now an intelligence coming across a single tweet could, like an archaeologist pondering a chunk of ancient skull, deduce an entire culture.

Deducing an entire culture from a single tweet? Do read the full post to appreciate the wealth of data that gets encapsulated in each tweet that we send out and its implications.]

For hints on how Twitter could possibly go about driving growth and revenue, one just need to look at these two statistics:

  • 77% of current Twitter users are from outside the United States. And given the potential swing of the demographics in many Asian economies in the coming years, Twitter’s target user base in these markets is expected to grow at a sustainable pace.
  • However while the advertising revenue that Twitter currently realises from every 1,000 interactions from the US is $2.58, this figure is only 36 cents for the other 77% of the interactions. (source)

These clearly underscore the tremendous growth potential that Twitter has in several Asian markets.  No wonder then Twitter has started to strengthen its focus in markets like India over the last 1 month.

Meanwhile on the other side of the world earlier this week…

Karex, a Malaysian company – the world’s largest maker of condoms –  has debuted on the Kuala Lumpur Stock Exchange with a 30% surge in share value on day one. The company, which supplies to prominent global brands like Durex besides also selling its own brand Carex, has nearly 10% global market share in condoms. (source)

Carex_Condoms_Firefly(Carex Condoms, Agency: Grey Group, Kula Lumpur, Source)

Today by Karex’s own estimates it cranks out almost 10 times more condoms than Trojan – the key condom brand in the U.S. Karex’s IPO was a tremendous success amidst analysts’ forecast that greater awareness of family planning in developing Asian countries will spur demand for condoms.

So while one company that went public this week has a story of exponential growth expected from the ‘powerhouse’ Asian markets, another company that went public during the same week from the other side of the world has a story that counts on the contrary – family planning and control in population growth in the Asian markets!

Couldn’t help noticing the contrasts.

Two companies. Two successful IPO debuts in the same week. But two slightly different stories.

(Featured Image, Source)

Technology: Catching up with Human Behavior

What is the most expensive piece of real estate in the world?

Many know that it is – arguably – the white space on the Google home page. Obviously it was a user interface design principle laid out by the founders of Google to keep its interface as clean and simple as possible. We know that it is user centered design at work. The fonts, colors, sizes, layout and design of every single element on every single page of Google are known to be ideated, brainstormed, prototyped, tested, validated, fine tuned and refined before finally dishing it out to the end user. The objective: to facilitate the user’s interaction and her journey of finishing the task at hand without drawing unnecessary attention to itself.

  • That’s what has made Facebook dramatically redesign its interface – The Timeline
  • That’s what makes Twitter roll out changes/improvements in its interface on a continuous basis
  • That’s what makes Apple.com to be consistently ranked as the Best Designed Website in the world
  • That’s what stokes the passion flames in Mac fanatics and equally…
  • That’s what is creating great levels of anticipation for the next iteration of Microsoft Windows as it is slated to be a game changing redesign of its UI to what is called as the Metro interface.

That’s all good and inspiring. But if we take a step back and ask ourselves why is this so pertinent to the current world order, the answer could be simple. Information.

Simplistically put, computers, web portals, websites, web browsers and Operating Systems are nothing but our interfaces for information consumption, data processing and finally content creation. Given that the information that is becoming available online is growing by leaps and bounds by every passing second, it is but natural that user interface design takes utmost precedence. The goal: Facilitate information consumption to be as intuitive as possible.

What further complicates the access and consumption of this boundless information is this word called ‘social’. Given that information is increasingly taking social attributes and contexts of time and space (almost in real time) the complexity of information retrieval has seemingly multiplied over night. Hence the goal now is not just to make information consumption as intuitive as possible, but also as instinctive as possible.

For e.g. if you want to search for restaurants in a new town, you naturally Google for it, pick some names from the search results, read their reviews on Yelp and then choose one that looks promising for your needs and budget. Of course search engines are now dishing out the search results in such a way that all these activities can be collapsed to one single search action. That could be intuitive design at work.

Now comes the interesting part. What if you know of a friend who lives in that town or who had visited that town recently? Naturally you would give her a buzz and take her recommendations and bingo your search is complete! It is instinctive of us to seek out references/ advice / suggestions to many things that we search for from the people that we know and trust. That’s how we fundamentally seek out information.

Sounds very natural isn’t it? Only, our online search experience has been antithetical to this very social attribute that we humans are instinctively used to. Not any more, the guys at Microsoft seem to say. See the video here.

In what looks like a paradigm shift in search, Bing has announced today that it is soon going to make search socially relevant to you like never before. Read the full story on this post on Bing’s blog.

This has many interesting ramifications.

  1. Everyone is now a key influencer: If I like Nikon on my Facebook page, a friend of mine searching for this brand on Bing could potentially get to know of my affiliation to this brand and can thereby start a conversation with me. And given that I already ‘like’ Nikon, chances that I would recommend this brand to her are high.
  2. Marketing on Facebook can now become even more challenging (and expensive): Facebook ‘Likes’ can become much more valuable than they are now and could even be monetized a la AdWords
  3. Online Privacy: Online privacy is slated to become even more complex and interesting as Social Networks evolve into these bigger entities
  4. Trust, Connection and Attention as the core assets of ‘connection economy’ can be radially redefined (for good or for worse)
  5. Mashup: This could open up very interesting possibilities of mashing up info from geo tagged sources, social networks, along with conventional web pages to make search results even more relevant and contextual in terms of time, space and connections.
Facebook is known to quote often that “Technology is now catching up with human behavior”. And today they seemed to have proven this again with Microsoft.
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