Podcasts

Money.net’s Morgan Downey: ‘You can’t compete solely on price’

  • Many have tried and failed to knock Bloomberg off of the mountaintop of financial data.
  • Money.net's Morgan Downey is familiar -- he used to run one of Bloomberg's largest divisions.
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Hundreds of millions of dollars — and in some cases, billions – have been spent trying to create a Bloomberg killer. So far, no one’s come close to succeeding. But there’s a chink in Bloomberg’s armor. Except for 2009 in the throes of the financial crisis, for the first time since its founding in the early 80s, Bloomberg terminal sales declined last year.

To Money.net‘s Morgan Downey that’s Bloomberg’s “Blackberry Moment,” the inflection point that shows that consumers are now able and willing to leave a legacy product. Downey should know — until relatively recently, he ran Bloomberg’s commodity division before stepping out to create his own Bloomberg competitor, Money.net.

Downey joined on the Tearsheet Podcast to discuss the market for financial data, Bloomberg’s strengths and weaknesses, and where he things the market for financial data is headed in the future.

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Trends in financial data
“If you’re working in any part of finance — a hedge fund, a bank, or a CFO in a corporation— the raw materials to do your job (financial statements, market prices, economic data) has to be delivered to you via some type of mechanism to do your job. Whether you’re working on a merger or an acquisition, or a investment or trade, you have to get financial information to your desktop or your mobile device.

It’s not an industry that many people outside of finance know about. It’s a $28 billion a year industry. The biggest players include Bloomberg, a private company and my former employer, Thomson Reuters, and Factset. The industry is dominated by a few, very large entities with a very large demand for a disruptive company to deliver a more intuitive, affordable product.”

Why it’s so hard to unseat Bloomberg
“It’s a market where the last major disruption happened in the 1990s when Quotron went out of business. You have two major players — Bloomberg and TR — with roughly 80 percent of the market. It’s a duopoly to a certain extent.

Financial terminals have very high fixed costs which acts as a major barrier to entry for new competitors. There’s a huge number of things you have to build before you get a single dollar of revenue from a customer. There’s a whole back end system which needs to deal with huge amounts of data and news in ultra real time. We’re kind of like a cable company in the sense that we have to license all this data on behalf of our customers.

It’s a very daunting industry to enter. People have tried. Some have spent hundreds of millions of dollars, billions even, building new entrants.

But Bloomberg is going through its own ‘Blackberry Moment’. Last year, 2016, was the first year (except 2009’s financial crisis) since the founding of the company in the early 1980s that Bloomberg’s terminal sales — their software licenses — declined by a couple of percent. That inflection point is similar to what happened with Blackberry in 2011. For a technology company, it shows that the market is willing and able to move away from legacy products.”

 

What wins over clients in a bakeoff
“The challenge with the financial data industry is that you can’t compete solely on price. It’s great being 10x less expensive, but you have to have a compelling reason for someone to use you for your job. Our customers aren’t using us for entertainment — they’re using us to do their jobs better. You have to have a better product and be significantly less expensive.

I always bring the analogy of NASA to SpaceX. NASA lifts a payload for $300 million. SpaceX tried to do it for just $30 million. But SpaceX also tried to land a rocket. That’s what we’re trying to do: be a more affordable product and much more intuitive product than incumbents.”

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