Inside "the richest niche there is" -- StockTwits announces new CEO, funding
Not everyone agrees that founders make the best entrepreneurs. Exhibit A: Howard Lindzon has confirmed reports that he has "fired" himself as CEO of StockTwits and hired John Melloy, formerly of CNBC, as his replacement. "I've been doing this for five years and I'm just tired," Lindzon said when we caught up on New Years Day. "I look like a pear."
"A pear?" Pears are a symbol of fatigue?
"Yep," he said. "I look like a pear. A Jewish pear."
Fruit or no, Lindzon has done an impressive job building a business from something that started out as a way for hedgies to chat about stocks on Twitter. The hire coincides with a modest "couple million dollar" round of capital for the already-profitable company. That's a total of just over $10 million raised to date. Lindzon will remain Chairman of the Board.
The biggest sign that StockTwits may be building something interesting was CNBC's reaction to Melloy's departure. The news that Melloy was joining StockTwits leaked several months ago, when BuzzFeed reported that the network was considering a breach of contract lawsuit since StockTwits is essentially a media company.
Melloy can't comment on the details of the situation but confirms it has been settled. We've confirmed reports that he'd first suggested a broader digital role at CNBC -- which was rebuffed, essentially driving him into the Lindzon's arms.
StockTwits was an important tool for Melloy at CNBC, where he was in charge of shows like FastMoney. The constant flow of bull/bear opinions on stocks was a useful way to find stories as they were happening. For a news network that has to fill, fill, fill for 17 hours a day, it provided a valuable stream of consciousness feed of what viewers and traders were thinking at any given moment. "It helped guide my news judgement," he says.
Amongst Melloy's assets are his sources on Wall Street. Expect him to gently push StockTwits more in the direction of curated content, helping to surface "stories" appearing through the feed.
Here's an example: When Google bought Boston Dynamics in December, all the financial networks were talking about was that already announced deal. On StockTwits, the discussion quickly turned to another company in the space, iRobot, and people started to buy it as a derivative play on the news. "All these smart people were leading us to where the real action was," Melloy says. "Later on that week, iRobot got an upgrade and it's continue to run up. I want to shine a spotlight on that insight."
These are all goals shared with sites like Seeking Alpha, of course, but the bar of blasting a 140 character message is lower than maintaining a blog, and in many cases more people will see the tweet.
Thats said, there's a big difference between journalism and curation. Not just anyone can sit in an anchor or guest chair at CNBC, but anyone can Tweet and throw a dollar sign tag in there. The user generated controls of StockTwits might miss an impending financial collapse like the one experienced in 2008, oh, wait a minute... CNBC was mostly as shocked as everyone else when Lehman collapsed.
That's not a totally fair jab, but it speaks to the lingering mistrust that networks like CNBC are more entertainment than financial advice. As Jim Cramer said in the above "Daily Show" link part of the problem is they "have" to fill 17 hours of content a day.
In a world where there's a program like "Frontline" doing excellent, incisive work on the economy and StockTwits showing you a stream of conscious free-for-all on market sentiment for more than 17 hours a day -- CNBC is increasingly living in an uncomfortable middle. Hence, the lowest ratings in 20 years for the 25-54 age group towards the end of last year.
The sentiment that CNBC isn't quite trusted by grown ups or hip enough for kids is where Lindzon is hoping to make hay. There just isn't a lot of trust for the existing names in finance when it comes to the younger generation of money gushing semi-uncomfortably from the tech world. It's the same trend that Wealthfront has been trying to tap into from a very different direction of sophisticated money management. As companies like Facebook, LinkedIn, and Twitter mint thousands of new millionaires, these newer companies hope to be the ones they turn to instead of Yahoo Finance chat rooms or eTrade.
Lindzon has been a great ambassador to that world. He has bonafide financial chops but has always loved poking fun at that world too. His previous company was Wallstrip, which faded from the zeitgeist after it was sold to CBS and the network poached its star Lindsay Campbell.
Lindzon quickly saw Twitter's power for anything that relied on real time public communication long before hashtags were all over the networks. Financial trading can't exactly be time-shifted.
His biggest bet was moving off Twitter's platform and building its own site that could leverage Twitter's APIs. StockTwits grew in users, messages sent, and revenues since then, he says. Right now, it makes the bulk of its money via a data product, with some ad sales too. But in the future, Lindzon expects people will be able to buy and sell stocks natively from links inside Twitter, tied to the dollar sign tag. It won't be a broker dealer, but likes the idea of connecting traders to them quickly and seamlessly.
"StockTwits will eventually be in the transaction space," Lindzon says, describing what he calls a "dream" scenario for brokers. "The walls are coming down. We could be a great lead gen engine for all the brokers. There's a lot of new wealth coming into the market that has no allegiance to any of the pre-crisis brands. They hate them. Maybe not this year but those walls are eventually coming down. Why can people go on AngelList and put $10,000 into a startup but they can't buy 100 shares from a message?"
Indeed, a lot of people think you shouldn't be able to do that either. Jason Calacanis answered those concerns at a recent PandoMonthly by asking why, if someone could bet on black in Vegas, they can't bet at a startup? At some point, that logic turns into a slippery slope. No doubt, plenty of people would be concerned about the ability to buying and selling shares motivated by a 140-character burst. In fact, the very disrupters who are building companies that are going public might wince at the idea of encouraging more activist trading based on short term chatter, not long term promises of innovation.
This is where Lindzon is in an interesting position. While a lot of the tech set is horrified already by the rise of activist traders, he and Melloy are seeking a way to get more young tech money trading actively. Says Melloy, "They can't get anyone under 40 to trade actively. They are salivating looking at our demographics."
That's OK. Lindzon relishes the role of outsider as much as he's a rare Venn diagram between the two worlds. He isn't out to please everyone. "We're going to stick to our niche," he adds unapologetically. "We're in the richest niche there is."
[Image courtesy The Next Web]