The social media side of stockbroking?

Putting theory into practise and working with internet legend
Alpesh Patel. part two of conversation with JSM editor, Peter Friedman.

Part two of an interview with Peter Friedman

SF: So when did you get the chance to actually apply what you learned from analysing what CNET and ZD were up to?

PF After PI, I got a call from Pantelis Kokkalis, who invited me to conduct a research project for a company he was working with - called Kyte Securities.

Kyte was a Futures and Options trading company and the directors could see what was happening with online trading (by now the Web 1.0 bubble was billowing) and were considering spinning off their stockbroking operation into a separate online venture.

They were very interested in getting into online trading – remember this was during the bubble and that online trading was one of the top three bubble phenomema.

My mission was to investigate the state of the online broking industry to determine how Kyte might make the move to becoming an online broker too.

So I was essentially conducting a best practice analysis – problem was that when I did the research I couldn’t find any best practice – everything that was really radical and new and driving enormous amounts of online traffic was happening outside of brokers’ sites.

This was of course part of the problem – nobody really knew what a broking website was supposed to do.

Kyte’s brief to me was ‘how do we attract attention to our online presence?”

What I discovered was that all of the broking activities which all of the online brokers were engaging in had absolutely nothing to do with what was driving activity on their sites.

The real stuff was all taking place beyond the frame of their corporate websites.

The critical factor to driving traffic  to the brokers' sites was the online news and community process (because of the news-intensive nature of financial analysis) and so what I had to tell Kyte took them by surprise.

I said that what they needed to do was to harness the news process to drive interest in what they were doing.

In other words, they shouldn’t just be 'indirectly affected' by the news process (as the other online brokers of the time were).

I told them that they should 'become an integral part of the news process'.

My findings showed that, in order to take advantage of the traffic generation opportunities open to them competitors, they should become a media company first and an online brokerage second.

Although this would have struck many as being extremely perverse advice – I was advising against spending lots of money on advertising – you can imagine that they were also very turned on by this.

This news-driven approach was totally against the prevailing marketing trend, you see, which was (even in online marketing, in fact especially in pre-bubble online marketing) to throw huge amounts of money at advertising.

SF: And it’s now very 'a la mode' to say that 'everyone is now a media company so don’t waste money on advertising' - get involved with the news process instead.

PF: Yeah, though people obviously don’t know what they mean when they say that – I mean what type of media company? As for the media companies – now that every business is supposedly a media company, what are the traditional media businesses going to do? Melt down? Try and hide? I don’t see media companies making the kind of lateral moves that will be required of them.

Anyway, I digress, this is what I advised Kyte to do – to become what we would now describe as an online media company.

This was back in 2000 and here I drew upon the research I’d undertaken in my spare time while I was working at PI.

SF: So what happened? What did they actually do about it?

PF: They started the Eden group and they brought in the legendary Alpesh Patel (author of the bestselling Net Trading) to make the whole news driven approach really happen.

Part Three: Link-blogging before the blogosphere?:

Peter Friedman tells me how he persuaded a training services company to embrace the blogosphere, before it existed! Shurely shome mishtake?

Part four: Social media and its discontents:

A conversation with Peter Friedman about his fears about what happens after what happens next.