Reddit + ICE = Old News

The news about Reddit & ICE teaming up to create a new product for capital markets investors isn’t something revolutionary. We have seen this story and this type of product many many times. We saw this in the early days with Twitter. Twitter then did a partnership with Gnip, which they ultimately bought, to help them sell their data feed. Gnip and Twitter at one point had hundreds of partners that took the feed and created products on top. I know this because I was a buyer of dozens of these derivative products. The most common thing that was sold to Hedge Funds and financial institutions were sentiment feeds. Positive and negative scores on every single stock. It was as simple as a score from -1 to +1. Or a simple gauge of the mood on each tweet that mentioned a stock. Were they talking about AAPL or apples, well that was solved when Stocktwits.com created the cashtag and put a $AAPL to make it easy to talk stocks.

We then saw Stocktwits.com roll out sentiment feeds and derivative products with partners. This type of offering makes sense as many financial institutions and hedge funds aren’t skilled enough to take a full firehose. Or they don’t have the data, quant, data scientists, or manpower to take a text feed, structure it, and then figure out if there is alpha. But if you create a simple file daily, of each stock, and put some scores next to it, well that’s easy to consume. Good news on $AAPL ( ▲ 0.12% ) PL +1, bad news on $NVDA ( ▲ 5.05% ) A -1. Pretty Pretty easy.

What $RDDT ( ▲ 5.23% ) & $ICE ( ▲ 1.52% ) are doing is trying to make it easier for Reddit to monetize their data feed in capital markets. My guess is they tried selling the full firehose of data to hedge funds, and they found out there were probably only a handful of funds in the entire world, that could make sense of it, and there were maybe only 1 or 2 willing to pay 7 figures a year for the data. But if you dumb it down, make it easy, and sell the feed for somewhere between $120k-$250k annually, well then you have dozens of potential buyers. And that’s just hedge funds. Reach out to long-onlys, asset managers, and some banks and maybe there is more. Then create some more derivative products and upsell another $120k, and slowly you might work your way up to selling a million dollars in data to a hedge fund that couldn’t make sense of the full fire hose.

Anyways, it’s good for the industry. Goes to show there is likely still lots of demand for social data. It’s good for Stocktwits, which invented the cashtag, and it’s good for the partner ecosystem that’s thinking of reaching out to these social platforms as there is likely a good amount of demand for these sentiment feeds.

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