The new wave of online stock brokers is harnessing the next generation power of the web like blogging and social networking to create their own market niche rather than compete with the big boys, observes research firm Gartner.
Traditionally stock brokers have been mainly using the internet as an extension of day-to-day trading much in the same way as they would use telephones or mail, bypassing new platforms and programming techniques that could give them greater market reach and functionality.
“Rather than build a business model on mass marketing and economies of scale, the new class of brokerages emphasises discrete sets of functionality,” said David Schehr, research director for Gartner.
Schehr calls this new technique “ambient findability”: a move from the push to the pull type of marketing.
This involves drawing people in by giving them valuable, targeted information deployed on a more personal scale through popular online avenues like social networking sites rather than mass mailing the same information, relevant or not, to a huge audience.
“Many of the new-era brokers are adopting aspects of the collaborative web, including blogs, community-based interaction and ongoing efforts to develop ‘mashups’ and other composite applications,” said Schehr.
Although much of Gartner’s research observed this shift to Web 2.0 integration for the neo stock exchange, it also looked at traditional financial advice media like MarketWatch and The Street, which have a strong web presence.
The ethos behind Web 2.0 is the free flow of information, organised in communities and given from informal podiums like blogs.
Stock exchange and general financial advice is still being dispensed in a ‘many to one’, or expert to masses, fashion.
“Generations X and Y were raised on the internet and use it as a primary means of information gathering and communications,” said Schehr.
“Investment services firms must begin to understand the role of the web as more than just another channel for traditional forms of communication and interaction.”
By Marie Boran