Back in March, Wall Street Journal reporter Dana Mattioli tweeted out this breaking news.
Within minutes, more than $110,000 worth of options in Altera had been purchased by one specific buyer. By the end of the day, those options had increased in value from $110k to $2.4 million. And the thing is, those options were purchased incredibly fast - faster than any human could have actioned the news. While it's impossible to confirm, the speculation is that that $110k in options were purchased by a bot, an automated system that scans Twitter for financial news then reacts immediately, buying and selling faster than human beings can possibly react.
And, as demonstrated, such systems work.
In 2010, Johan Bollen, a business professor from Indiana University, demonstrated, through research, that Twitter data could predict the Dow Jones industrial average with 87.6% accuracy. In March this year, social analytics company Dataminr highlighted how their algorithms could detect stock market falls well ahead of normal news outlets, alerting their clients to an issue with Royal Carribean Cruises 48 minutes ahead of anyone else. By using the many signals contained within the more than 9,000 tweets sent every second, savvy analysts are gaining insights that they'd once have only dared dream about, and gaining an advantage on the competition by tapping into the collective consciousness of social media.
Tweets of Influence
So effective has Twitter become as a data source for stock market analysts that today Bloomberg and Twitter have announced a new deal to integrate more tweet data into Bloomberg's analytics suite to help financial professionals capitalize on this data source.
From the official announcement:
"Bloomberg (@Bloomberg) was the first financial software platform to integrate Tweets for its customers, beginning in April 2013. Today, they are significantly increasing the amount of Twitter data available on their platform @TheTerminal, improving the alerts provided through the Bloomberg Social Velocity tool. Twitter data plays a crucial role in helping watch for unexpected jumps in conversation volume, which can be a critical indicator for traders."
The new deal will enable the financial community to track data based on a greatly expanded volume of tweets, helping users to action data insights, similar to the two examples above, in order to maximize trading outcomes. Bloomberg's platform will include "a live feed of curated financial tweets, alerts on spikes of tweet activity related to companies, sentiment analysis and the ability to graph historical Twitter volume related to securities or topics". More than just a value-add, such insight is becoming crucial in the modern financial marketplace.
Ben Macdonald, Bloomberg's Global Head of Product, outlined the rising importance of social data in Bloomberg's official release.
"Our customers have told us that Twitter helps them uncover early trends, breaking news, and sentiment shifts, which may be indicative of changing market conditions. By incorporating real-time information from Twitter into our customers' workflow, Bloomberg makes this data accessible and discoverable so that our clients can react quickly to important news and trends."
This sentiment was underlined by Dave Greenberger, a trader with Quad Capital, who said that:
"Twitter, for us, is an irreplaceable tool given the market impact it has along with the valuable information it can convey."
Such sentiments are particularly interesting given the troubles Twitter has had of late in highlighting its value to the market - as an investment proposition, as opposed to a data source. As more and more interactions take place on social networks, more companies have also been able to tap into those exchanges to glean valuable information, something that Twitter, in particular, facilitates very well. Amidst the gloom of their growth struggles and their ongoing CEO search, there's a huge amount of value in the real-time insights and data the platform offers - it seems the framing of that value is what's presented the company with its biggest challenge thus far.
The Importance of Insight
What the new Twitter/Bloomberg deal underlines, more than anything else, is that social media insight is powerful. The data available via social media platforms is transformative, we now have access to a wider range of insights and perspectives than we've ever had in history, enabling businesses and individuals to make smarter, more informed choices on everything. In this regard, the brands that succeed are those that are analysing this information, taking in these new data inputs and finding the relevant signals amidst the noise, then using them to create incisive, intelligent decisions that enable them to reach their customers at the optimum point in the purchase cycle and provide information most relevant to their decision making process.
If social data can be used to map stock market shifts, it can definitely be used to maximize your decision making and marketing choices. The information is there, the conversations are happening every day. Modern businesses need to be tuning in - they risk losing out if they don't.
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