TheStreet.com Acquires Stockpickr: A Web 2.0 Success Story

Since becoming a blogger, running a vertical Web 2.0 company and making investments in the digital media space, I have come to learn a decent amount about the intersection of technology, domain expertise and social networking.

One such example is Stockpickr, the site founded by my friend and fellow Internet denizen-cum-writer James Altucher.

Now James isn't your ordinary tech-geek: he has been a technology entrepreneur; a hedge fund manager; a widely-published author; and is currently doing all of these things at the same time. And in a stunningly short period of time, built Stockpickr into arguably the premier site at the intersection of blogging, technology, investment management, and social networking around these three pillars.

And yesterday it was announced that TheStreet.com (TSCM), Stockpickr's 49.9% owner, is buying the remaining 50.1% in order to fully leverage its impressive traffic into sticky eyeballs and advertising dollars.

Congratulations, James. You have built an asset of real value in record speed, and it is to Tom Clarke and TheStreet.com's credit that they had the vision to take you out right now. This is a true win-win; this is how vertical Web 2.0 deals should be done. Strategic buyer, informed and value-added seller.

I have been quite critical of social networking sites for stock-picking. In fact, I penned a scathing post in the wake of socialPick's write-up in TechCrunch way back in August last year. If you want a granular explanation for why I think social networking for stock picking, in a vacuum, is both stupid and potentially dangerous, please check out the post.

However, this is not what Stockpickr is about and I made this distinction clear in an interview I did on Wallstrip back in January. Stockpickr provides the portfolio data for some of the top investors of all-time and today, offers a wide variety of investment resources, and supports a vehicle for social networking as an overlay. This is a model that combines domain experts (legendary investors, their portfolios and investment philosophies), data and social networking to enable investors to make good, informed decisions.

This is a much more robust, scalable and less variable model than one based upon "wisdom of crowds" or short-term tracking of an individual's trades which may or may not work out over time. While I personally don't invest in single stocks many, many do. If you are going to do so on your own, it's better to understand the principles of highly successful investors with long-term track records than a group of people who may or may not generate attractive and sustainable investment returns. If this doesn't resonate with you, I'm sorry. Good luck and good bye.

I think we've just scratched the surface of vertical Web 2.0 applications, and I believe we are in the early stages as these applications relate to finance and investing. I see interesting and compelling business plans all the time that are targeting investors using zippy, Ajax-fueled Internet technologies, and the question is less about getting eyeballs than it is the monetization of these eyeballs. Especially where video is concerned. I've seen the explosive traction of vertically-oriented online content first-hand through my Board seat at Wallstrip, and the creative use of different methods of advertising that are palatable to consumers and effective for advertisers without disturbing the presentation of the content.

This is a painfully hard balance to strike, but one where we are closer to cracking the code every day. Further, strategic acquirors of these Web 2.0 assets can turbocharge these scalable business models by leveraging existing content together with a massive book of legacy advertisers (not to mention squadrons of highly effective ad sales professionals). As I said above, this is a win-win.

All that remains is for smart, insightful, dedicated entrepreneurs to develop new, relevant vertical apps and for the large strategic acquirors to get with the program and get busy extracting maximum value from the Internet. They can use the help. Keep your eyes open for some new and interesting deals in the next 12 months. The best is yet to come, my friends.

Comments

[Frank Li]

There's way too much mutual back-slapping between chummy entrepreneurs in this article. I tried Stockpikr, and stopped using it, and I don't know any other money managers who use it. The pro portfolios are just taken from SEC filings, but are full of errors. And the amateur portfolios and social networking elements are totally useless. Since when has anybody ever bought a stock because someone who owns a stock you own also owns something else?

What would make the amateur portfolios more useful is if the site tracked their performance. But many of the "portfolios" just report one time events like this weekend's barron's picks or some stock screen, so you can't track the performance of that.

The success of stockpikr is due to the traffic sent to it by thestreet.com -- they link to it after ever stock symbol, and james altucher frequently uses half the links in his "blog watch" column to link to the site, although it's not a blog. (I bet that drives real bloggers mad.)

This doesn't mean the acquisition of stockpickr isn't good for thestreet.com. Looks like they are selling the ads on stockpikr themselves, and they've got a lot of traffic and need more content on their own site, so the synergies make sense, and word on the street is they bought it for only a couple of million bucks.

But "arguably the premier site at the intersection of blogging, technology, investment management, and social networking"? Gimme a break -- if it is, that just shows the total lack of imagination in this space. Wake up, Seeking Alpha guys -- you've got a big readership among hedgies, and should be doing much more exciting stuff. The opportunity is there, and you've completely failed to take it. Your site design is crappy, the site goes down too much, and there's nothing new or innovative about it other than a ton of great articles. Wake up, guys, wake up.