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Using Mobile Device Geolocation Data to Generate Alpha

Traders Magazine Online News, May 10, 2018

John D'Antona Jr.

The search for alpha continues.

For asset managers and hedge funds, it’s all about generating alpha—faster, better, smarter. Alternative data for use by asset managers is one of the most rapidly growing areas in the capital markets. Within that space, mobile device geolocation data is gathering considerable attention and is expected to grow at more than 30% per year.

Alternative data for asset management purposes is one of the most rapidly growing areas in capital markets currently. Within that space, mobile device geolocation data have gathered a considerable amount of attention over the past two years. This segment is growing particularly quickly, at over 30% per year. We expect that, by 2020, asset managers will be spending about US$250 million annually on mobile geolocation data. This figure covers not only spending on data sources, but also on data science, predictive analytics, IT infrastructure, and related data management.

A new Opimas report, "Generating Alpha with Mobile Device Geolocation Data," authored by founder and CEO Octavio Marenzi, examined how mobile geolocation data is collected, how it is distributed, and how it can be analyzed and leveraged by portfolio managers (I have attached the full report for your perusal). Key findings of the report include:

•             Overall, asset managers are spending more than US$5 billion annually on alternative data, a figure we expect to grow by almost 30% annually for the next few years. While mobile device geolocation data currently represents a relatively small segment of the alternative data market, it is expected to grow quickly, exceeding US$250 million by 2020. This figure covers not only spending on data sources, but also on data science, predictive analytics, IT infrastructure, and related data management. Spending on data sources is growing particularly fast, at more than 40% annually.

•             In pursuit of Alpha: Since mobile geolocation data must frequently be used in conjunction with other datasets to be of value, the ability to estimate alpha generation is difficult. In general, a very good alternative dataset can generate up to 10 times its cost; a less good one, up to 2-3 times. With mobile geolocation data, Opimas believes that the figure is closer to the latter number. This multiple will improve over time as the quality and granularity of geolocation data increase and asset managers gain familiarity with the data and how to best employ it.

•             There are well over one billion smartphones in circulation in the world. Billions of data points are generated every day. The vendors with the largest panel track over half a billion mobile devices, often being geolocated 100 times or more per day. Each of these devices can geolocate itself, and the data captured in this process can be leveraged to estimate foot traffic at locations—retail shops, amusements, factories, or other facilities—around the globe. Once foot traffic is determined for specific companies, the data can be used to make or to refine revenue estimates, with the potential to generate Alpha by providing a more accurate forecast of revenues.

•             Many of the mobile geolocation data technology providers have limited their coverage to the US market. There is a dearth of alternative data in other regions, particularly in Asia. While there are some initiatives targeting China and Japan, these are very much in their infancy.

For more information on related topics, visit the following channels:

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