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Investing in the future with alternative web data

Investing in the future with alternative web data 44

Investing in the future with alternative web data 45By Omri Orgad, Managing Director, Bright Data

The concept of fully understanding what a business entails has changed significantly over the years.

Businesses now find themselves living in a rapidly moving digital economy, influenced by countless new factors that span borders, time zones and most importantly, never sleep.

To survive and thrive in this ever-evolving landscape, businesses are reacting in real-time to the market, making decisions and predictions on the fly, using insights backed by live web data to showcase the best opportunities that can capture their much needed market share.

While the advent of big data began in the 1990s, during the coronavirus pandemic the pressing need for real-time data pushed many traditional industries relying on traditional or internal data to look towards the use of web data to secure more reliable insights.

Today, every industry relies on public web data in some capacity. Even once reluctant industry sectors such as finance, typically categorised as a more traditional vertical, are beginning to shift away from using traditional data sources – realising they have to also rely on external web data sources to achieve a complete picture.

So, one of the key changes in the finance sector has been its increased use of financial alternative data sources, such as public web data, to more accurately project the valuation of their investments in real-time.

The fundamentals of financial analysis before web data were contemporarily understood by the company’s historical track record, such as annual projections and quarterly reports.

But now it’s more than that, considering the “new normal” we’re living in, and the fact that historical models are broken, there’s a need to update datasets which financial institutions are continuing to base their decision-making off of with real-time data. In fact, almost three-quarters (74%) of hedge funds have begun incorporating alternative web data sources into their financial datasets, according to a 2021 Vanson Bourne research conducted in cooperation with Bright Data.

By combining web data sources with existing historical data models, financial institutions are essentially able to enrich the datasets they pull their analysis from with live web data, to ensure they are providing organisations with the most up-to-date information.

This publicly and readily available information helps investment firms such as financial institutions, banks, insurance agencies, private equity and venture capital firms, better understand the companies that span across their investment portfolios. Overall, helping to minimise risks while maximising gains with forward-thinking predictions backed by data.

A strong example is by aggregating stock market data, whereby investors can always be sure their analytical models are fed with the updated stock prices of the companies which they are monitoring. 

By focusing on consumer sentiment, social media or related press, financial analysts can predict whether or not a company’s valuation will be positively or negatively affected by public opinion

Using real-time transactional data investors are able to pinpoint spikes or dips in stock prices, as well as paint an overall picture of what drives success throughout the organization.

The recent ‘short squeeze’ of Gamestop’s stock is another example. In January 2021, thousands took to forums and trading platforms such as Robinhood to drive up the stock of the popular video game retailer, ultimately leading to millions in losses for hedge funds and short sellers alike. 

But let’s say you were a Gamestop investor before all the commotion took place. By monitoring forums, such as Reddit, for keywords such as Gamestop, you would have been able to see ahead of everyone else that there was a plan in place to drive up its stock price and could have planned accordingly to sell off the stock before it crashed.

If you were a short seller, by looking at transactional data, or the news, you would have been alerted to the fact that the rise in stock price has nothing to do with an increase in sales, or the release of a new product, but instead through some other anomaly urging you to stay clear of the stock.

Those are just two examples which web data could have helped these hedge funds or short sellers escape catastrophe. But there are thousands of other applications of public web data strategies being used to better decision-making for investments.

In line with the ever-growing emphasis being placed on ESG compliance and given the diverse set of potential ESG data points available online today, investment firms have all begun relying heavily on external ESG specific alternative web data as a prime means of evaluating ethical, environmental and financial performance across all organisational structures.

These data sources include self-reported metrics such as company disclosures, annual reports and filings. Information displayed on company websites surrounding ESG objectives and effort, as well as internal company metrics.

It could also include third-party data sources providing ESG data statistics that can be found by searching reports by non-governmental organisations (NGOs), government reports, websites and statistics.

As well as real-time ESG data, which can be compiled from news reports by reputable and established media outlets, posts shared on social media discerning positive or negative sentiment around ESG concerns, company reviews or reviews surrounding employee sentiment, satellite imagery to track deforestation as well as other environmental factors.

The main caveat, however, is that investment firms no longer base their decisions solely based off dollars and cents anymore. It has grown much beyond that, and alternative web data sources are a must have in any financial dataset.

Just keep in mind that this is an ever-expanding database. With each new post, comment, news article, annual report, release of new statistics, transaction, stock price fluctuation and so and so forth, the dataset gets larger, more complete and complex as time moves on – offering financial professionals unabated visibility over their investments.

But all in all, with the amount of public web data and alternative financial data sources online today, there is no shortage of information available out there for those looking to make better investment decisions, as well as better understand the companies they choose to buy in with.

So, as this set of criteria is now continually being used by the bulk of investment firms to consider companies’ financial as well as non-financial related metrics – a trend that is not projected to slow down anytime soon – misunderstanding and misinterpreting the role and importance of this alternative dataset can have far-reaching negative implications for financial organisations who choose to ignore the teachings present within data.

Speak directly with Omri on LinkedIn and find out how your business can achieve success using web data collection.    

For more information on how web data collection can help your business, please visit Bright Data 

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