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Investors and Google Buzz: a threat to StockTwits?

With much fanfare yesterday (they even arranged a blizzard for much of the googlebuzzU.S.), Google announced its social media offering, Google Buzz (see video below).

What is Google Buzz

So, what is Buzz?  I like Matthew Ingram’s description on GigaOm of the Google Buzz service:

Google’s new service looks and feels a lot like many other social media tools and networks. The primary input is a box for status updates, just like Twitter and Facebook. You can use @ replies, just like Twitter, and you can share photos and other media content easily (there’s even a photo gallery function like Facebook’s). If you’re mobile, you can give Google Buzz your current location and get comments about that location, just like Foursquare and Gowalla and Yelp. But the single biggest difference between Google Buzz and all of these other services is that Buzz is tied to email.

I think what’s interesting here is that it looks like a take on Twitter and Facebook that will allow more intellectual collaboration.  And by that, I mean an ongoing, multimedia, conversation centered around specific content.

How Investors use Social Media

Beyond the back-and-forth whether Google Buzz is a big hit or flop, I began thinking how investors could use this service. When I do this (it’s a messy process, sorry), I tend to use the New Rules of Investing framework.  Investors using social media tend to piggyback gurus (cloning super investors’ portfolios a la AlphaClone), crowdsource ideas (like Piqqem), participate in expert communities (like Covestor and kaChing), and use new technologies to better screen for investments.

StockTwits: What it does

We all know of the initial successes of StockTwits — it’s a good service, run by competent, thoughtful people and has created a pretty loyal (can I say, rabid?) following of users.  Built on Twitter, StockTwits layers in functionality specific to traders and investors (they’ve even skinned their own Twitter software client).

StockTwits users are plugging into what I call (in my upcoming book) the Tradestream: online investors’ publicly available trading logs, complete with their thoughts and theses behind the trades and market conditions.  These are short thoughts, 140 characters or less in length, and typically stand alone.  It’s hard for someone participating in a conversation — let alone, someone who is merely a spectator of one — to group together thoughts into a cohesive conversation (think of how Gmail deals with emails/chats as part of a discussion).

How Google Buzz improves on Twitter/StockTwits

Google Buzz changes this.  Buzz groups thoughts, however errant or short, together into an ongoing discussion.  For example, assume someone posted their thesis on whether Google (GOOG) is a long or short candidate.  In yesterday’s pre-buzz world, an investors would use StockTwits’ Twitter client and post, “Thinking Google’s a long here.  Any thoughts?”.  This would be followed by a string of responses over the next few minutes and trickling in over the next couple of hours.  To view this unfurling chat, users could check the StockTwits Google Page online or access this data through a Twitter client.

But, and here’s the thing, there is nothing cohesive pulling these scattered thoughts into a conversation to help me make a decision regarding GOOG.  Of course, I can scan the output — the tradestream — and piece it together myself.  The power of the conversation is lost on Twitter and instead turns the stock research process into an incessant deluge of sound bites. That process of vetting ideas is especially important to investors.  This is not a ding on StockTwits as much as its the product of how Twitter works.

Google Buzz changes this.  And more, it inserts the tradestream into my email client, where I’m already spending my time — not a game changer, it just enables me to close one more window.

Is this something StockTwits can address?  Surely.  Howard Lindzon and team understand what investors/traders are looking for and are rolling out tons of functionality (have you seen StockTwits TV?  Loving it, actually).  It’s this focus on the investor/trader/analyst that will continue to trump Google’s more general efforts in this space.

Thoughts?

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Recommendation for Tradestreaming from Cliff Wachtel, Chief Analyst, Ava FX

As part of our service to our readers we occasionally point out books that are uniquely worthwhile. Here’s one, Zack Miller’s Tradestream Your Way To Profits.

Finally, here’s a one-stop guide to the Internet for investors and traders.

This is one of the few new investment books that any serious investor or marketer of financial services truly, truly must read, likely to become the definitive guide to using financial social media to improve investment performance. I’d been looking around for something like this, and now, here it is.

All serious investors and traders realize that they need guidance, and that there is a lot of great advice on the internet, much of it for little or no cost.

Few would dispute that they’d be more profitable following the moves of proven experts.

The trick is to sift through the vast online universe to locate the best sources.

The idea is simple enough, but it took someone with deep expertise in online media, financial planning, and fund management to distill the best the Internet has to offer.

The book provides an overview of how changes in the internet, financial research, social media and online content have given us unprecedented access to some the best investment advice. It then examines 8 different strategies for using online investing resources and provides practical advice for how to implement these 8 approaches, which are:

  • Expert Bloggers: How to access the best blogs for new ideas
  • Imitate Proven Stars: How to build a portfolio made of the top picks of your chosen gurus.
  • Join Expert Communities: How to locate and use online communities to identify and monitor professional or amateur experts.
  • Online Resources For Monitoring Crowd Sentiment.
  • Screening 2.0: How to create screens suing the same parameters as the pros.
  • Tracking Insider Moves
  • Tracking Rumors
  • Non-Financial Online Resources

The summary chapter’s look at how the Internet is changing the financial services industry is a must read for those interested or working in the field.

As an analyst who covers forex, commodities and bonds in addition to equities, I only wish that there wasn’t such a heavy concentration on resources for the equities markets, though the focus is understandable given that stocks have a much more established online presence.

However, the ecosystem of online resources for these other markets is growing.

Can we look forward to a follow up volume covering these markets? — Cliff Wachtel, Chief Analyst, Ava FX

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Recommendation for Tradestreaming from marketfolly

From the August 6, 2010 marketfolly review of Tradestreaming:

If you’re looking for another book on the same old topic of stockpicking, then this isn’t for you. However, if you’re searching for a new-age approach to investing that incorporates the use of copious online resources (including social media), then you’ve found the right book. Readers of Market Folly should find this work of particular interest given its focus on mimicking top hedge fund managers, a topic we cover on a daily basis…

The review ends:

Novice investor? This book is a great place for you to start. What better way to learn the ropes than by watching and mimicking the pros. Intermediate or advanced investor? There’s guaranteed to be plenty of new resources and tools for you to learn about that will highly complement your regular research regimen. There’s hundreds of different books out there that train you how to pick stocks. This book does not do that. Instead, Tradestream Your Way to Profits teaches you how to incorporate new online tools, methods of research, and investment approaches in order to construct a more profitable portfolio. — marketfolly

Read the rest of marketfolly’s Tradestreaming book review.