Group Co.
Winning the Research Battle
Traders Magazine Online News, June 29, 2017
The battle for research supremacy has historically been one-sided and the bulge bracket firms that pump out the most content typically find themselves at the top of the analyst rankings year-after-year. Quantity often prevails over quality and investors are left sorting through massive amounts of research to find actionable ideas.
As regulatory pressure continues to grow, firms are now being held accountable for the first time for content they produce and the value they provide. Once viewed as a profitable engine for the sell side, the research arm has become a loss leader for independent broker-dealers and banks that can no longer count on trading commissions to offset the high cost of production.
According to estimates from Street Contxt, which distributes research and analyzes readership, assuming each person only spends an hour producing each piece of content, it costs the average sell side firm approximately $1,700,000 per year to produce content.
As investors pay more attention to the cost of research, ultimately deciding its market worth, firms will need to become more data-driven in their approach to content distribution. This data will not only inform pricing, but will ultimately be essential to generating future returns.
UNDERSTANDING THE DISTRIBUTION CHANNEL
By understanding where content is going, who is engaging with it, and what that readership says about overall client interest, institutions can begin to accurately value their own content and hold clients accountable for the resources they consume. The issue is that legacy platforms and common methods of distribution, like email, do not provide the level of data needed in order to draw helpful insights into client behavior. New technology is making this analysis easier, as firms can now use centralized research platforms to automatically monitor client engagement with content as soon as it is sent. Content producers are able to receive real-time alerts about open rates, click-throughs, and forwards to better understand what is resonating with clients and who finds their information useful. In addition, they can also identify important changes in consumption, such as shifts in engagement, which can help firms identify potential at-risk clients and target their sales efforts more intelligently.
OPTIMIZING CLIENT ENGAGEMENT
With better data, firms can A/B test and analyze such variables as format, headlines and timing to ensure their content stands out. For example, at Street Contxt, we have measured millions of interactions with research, desk commentary, and news updates delivered through our platform to over 220,000 individuals at more than 28,000 firms. The insights that were gleaned show that 63.5 percent of research sent via email is opened within the first hour of its being received, with 46 percent of readership happening within the first thirty minutes. After five hours, 80 percent of the people who will read the piece already have, and the average client will not open anything from 44 percent of the authors sending them research.
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