In December, Nasdaq announced they intended to acquire Quandl, an alternative data company. As we wrote at the time, this represents an inflection point for the industry as alternative data goes mainstream.
The early adopters of alternative data were the most sophisticated quantitative hedge funds who had the expertise and resources to take in the often unstructured data and incorporate into their investment models. Now however, usage of alternative data is expanding to more traditional asset managers. Recent Greenwich Associates research shows that 50% of institutional investors plan to increase their usage of alternative data in the coming year. Among the various types of alternative data available, web-scraped data is the most popular.
Note: Based on 40 respondents. Source: Greenwich Associates 2018 Alternative Data Customer Journey Study.
Web scraped data, as the name crudely implies, refers to data that has been harvested from public websites. The companies that specialize in this type of data collection write programs that access targeted websites and collect and store the scraped information on a periodic basis. In some cases vendors will use public APIs as a way to access the data within those pages directly without visiting the actual website. Vendors in this space include Quandl, Savvr, Thinknum, and Yipit.
With 4 billion webpages and 1.2 million terabytes of data on the internet there is a mountain of information that can be valuable to investors. Types of web scraped data include:
Job Listings: A company that is increasing hiring and headcount is likely experiencing growth.
Company Ratings: Sites like Glassdoor allows employees to rate their company; increasing ratings, especially (in conjunction with increasing job listings) can be another growth indicator.
Online Retail Data: High product rankings on online retailers suggest strong sales for those product manufacturers. On the flip side, heavy discounting of products suggest weak sales.
Of course, alternative web-scraped data doesnt have all the answers. While it may indicate which products are selling well, it doesnt quantify the impact that may have on a large diversified company like Amazon. And although an increase in job listings is an indicator of growth, it could also mean an increase in cost which could impact profitability.
However, it is clear that alternative data such as web scraped data can provide important new information about a companys business and outlook. Sometimes this data has value on its own, but more often true value is derived when combined with other data sources, both traditional and alternative, and qualitative analysis.