Google’s (GOOG) next billion dollar business: Financial Data provider (part 2 of 4)

By: ispeculatornew
Date posted: 04.07.2010 (5:00 am) | Write a Comment  (2 Comments)

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Yesterday, I discussed different thoughts I had regarding Google’s next big business. The more likely possibilities were discussed including Youtube, Cloud Computing, Nexus One and Android. These all seem likely because they are already launched products that have active users and it’s clear how the businesses could generate revenues & profits.

A look at less obvious possibilities

The three that I will discuss are all related to the financial markets. Let’s face it, financial markets are all about knowledge and nothing beats good and early numbers when trading. For those reasons, Google seems to be in a fairly solid situation and I can see 3 different ways it could make major revenues in the next decade. The first one seems like most probably of the three at the moment; a competitor to Bloomberg.

What is Bloomberg?

Talk with anyone involved in the financial markets, trading or research and they will most likely be raving about Bloomberg. Why? Bloomberg is the heart and soul behind the financial markets. It is basically a information center for financial data. You can hardly imagine all of the data contained by Bloomberg from world news to estimates, research, etc. It is unmatched in terms of speed, information depth and accuracy. Try to find a competitor and you will struggle mightly. The company is private but annual revenue estimates are over $5 billion! How? Well it provides a platform that is almost required to trade and has incredible pricing power thanks to the lack of competition. Because of that, it charges nearly $2,000 USD per month per user. Depending on the exact settings, that goes between $20-30K per user. Not insignificant right?

Google Finance

If Bloomberg was a sand castle, Google finance would be 3-4 grains of sand just next to it. There is nothing to compare and right now you could never compare the two. But I believe that the difference margin will diminish over time. Google Finance currently provides stock charts, live prices for US stocks, information about companies financial statements, management, etc. There is a lot missing but it’s a start. For most part time investors, that is more than enough and certainly much better than paying a few thousands per month right? Google also has a less organized but probably even more powerful network to gather news than Bloomberg. That could and probably will be improved over time.

Adding Data

I would say that there is no secret recipe, competing with Bloomberg will take years of hard work and improvement.But Google seems to be already working on it. It is looking for bond and forex traders. In both cases, those could very well be to help integrate forex and fixed income data in Google finance, a step that would take them closer to Bloomberg but also help distance itself from competitors such as Yahoo Finance.

While Bloomberg is almost a monopoly, it has continued to innovate and it will require a lot of time and money to compete with Bloomberg’s service.But if one company is great at organizing data, it is Google. And I believe Google could gradually enter this market. How long will it take? It would be very gradual but over 5-10 years, this could easily become a multi-billion dollar business.

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2 Comments

  1. Comment by Alvin — December 14, 2010 @ 1:53 pm

    The one advantage Google has is technology. Bloomberg is a bit hamstrung by their technology platform. From an insider, I hear that “bloomberg, while it looks good on the outside, is made up of a lot of creaky bones on the inside”. As a former Bloomberg user, I was shocked to hear this; their service works well, but who knows what it takes to support it, or enhance the product. Google can leverage the latest in technology to out-do Bloomberg on many fronts.

    As the gentleman above mentioned, most people use it for only a fraction of what it provides. And most users hate the company from what I’ve seen.

    You also have to admit that they do hire hot saleswomen though? Amazing the ACLU hasn’t filed a lawsuit on them yet!

    Anybody else have any comments on this initiative?

  2. Comment by IS — December 15, 2010 @ 4:14 am

    @Alvin – Thanks for the comment!

    -Was not aware of the old technology used by Bloomberg, it’s not shocking but still seems to be working fairly well.

    And yes, I think the right strategy would be not trying to be “Bloomberg” but simply move more and more towards that. Many users would certainly pay to get access to the data, even if it was less.

    hahaha…not sure hiring hot saleswomen can be prosecuted though:)

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