Investing Strategy in the Wacky World of Web 2.0

Dead 2.0 takes a sad and hilarious look at the announcement by Mr. Web 2.0 that he is an investor in Dogster. It’s a great read for anyone who thinks Web 2.0 business is the same as non-Web 2.0 business. Among my favorite quotes from the story is this one (quoting the wonderfully named Bambi Francisco):

A smaller number pay roughly $20 a year, to get storage for videos, and photos, and the ability to IM other members on the site, using their pets as avatars.

I honestly don’t know if that’s true or not. I actually hope it isn’t true, but you can never tell.

I had a flying squirrel as a pet when I was a kid. I’m looking forward to Flyingsquirrelster. Other of my childhood pets would hang out at Duckster, Owlster, Rabbitster, Greensnakester, Tadpolester (later that one would graduate to Bullfrogster) and, of course, my pet Ben would spend his time at Crawfishster.

I will say that at least Dogster has a targeted demographic that should make ad buys appealing to pet food makers, pet supply stores, the Hallmark Channel, etc. And Peter Lynch made a fortune for himself and others by investing in things he liked.

The problem I have with Dogster is the problem I have with a lot of the Web 2.0 companies de jour- the play dough doctrine. The apparent approach of so many of these companies is summed up nicely by The Stalwart:

It only reinforces my conviction that few people have any idea of what will work and what won’t. There’s a lot of spaghetti throwing in business, just to see what noodles stick.

The exposure from Mr. Web 2.0 will likely quadruple the prospects of Dogster, so maybe in a year or so it will be an internet juggernaut (or bought by Petco).

In the wacky world of Web 2.0, anything is possible.

Tags: dogster, web 2.0

Why Blogging Stocks is a Horrible Idea

In a move that boggles my mind, AOL has launched Blogging Stocks, where bloggers will write about individual stocks. Further boggling is the fact that the bloggers are not only allowed to own the stocks they write about, they are encouraged to own them.

Are blogs becoming the new message boards?

I am having nightmares of the Yahoo stock message boards of the mid-nineties. Visions of all those people who don’t know a PE ratio from a bullfrog either bashing or praising a stock based solely on whether they are short or long.

Sure, there’s a code of ethics in place and I suspect that most of the bloggers will comply with it. But one thing you can count on is that some people, be they bloggers or commenters with a hundred aliases, will try to game the system. At best it will be a chaotic blend of legitimate attempts at writing, infighting and position talking.

Steve Rubel says Blogging Stocks will drag more companies into the blogosphere. I think that’s probably true at first. But once the inevitable chaos begins, companies will write off these blogs just as they wrote off message boards long ago.

To begin with, if I don’t take financial advice from some guy who cold calls me early in the morning, tries to sound familiar by calling me “Jon” (Kent is my middle name; my first name is Jonathan) and tells me how he wants to do me a favor by letting me pay him to tell me what stock to buy, why am I going to listen to someone I don’t know who is blogging about a stock they likely own?

This is such a bad idea, I can’t believe it’s really happening.

The Stalwart shares at least some of my concerns and says:

For one thing, people who are interested in investment stuff are really concerned with credibility. They may be willing to take advice from a guy that throws around chairs while blaring heavy-metal, but they want him to be a successful hedge fund manager. Looking over bloggingstocks, you’ll instantly see the credibility problem at work.

I am not saying that the stock market should be completely off-limits to bloggers. To the contrary, I have mentioned the market here once or twice. I read Henry Blodget every day. Fred Wilson (who isn’t all that impressed with Blogging Stocks, but thinks stocks and blogs are a “perfect fit“) mentions the market from time to time.

But a network specifically designed for and devoted to bloggers blogging and commenters commenting on individual stocks they likely own (or in the case of the commenters, may own or short) is a recipe for chaos.

In September 1999 I was quoted in Money Magazine about stock message boards. I said that I would absolutely not look to them for stock ideas or strategy and that I believed doing so was very risky. I feel the same way about stock blogs.

Some will undoubtedly argue that as long as the network blogs only about huge companies and stays away from the penny stocks, where most of the manipulation allegedly occurs, there is little or no danger of gaming the system. While I agree that a few people blogging and commenting about Google or Microsoft is not going to affect the stock price, I don’t see a benefit (other than another stab at the almighty ad dollar) that supports a step down this slippery slope.

And that’s just it. Like every other internet-related business venture we read about these days, this one is chasing the online advertising dollar that many think is both permanent and infinite.

Also problematic, of course, is that the AOL association will lead many to believe, rightly or wrongly, that this information is more credible than some post by some anonymous poster on a message board.

Maybe it will be, maybe it won’t. And that is the problem.

The combination of individual stocks and a blog network is, in my opinion, a train wreck waiting to happen.

Google Finance: Stumbling Out of the Gate

I didn’t have a chance earlier today to test the newly released Google Finance service. Om, whose judgment I trust (even if I do have to beg him for the link love smallicon-793225 ), says it’s disappointing.

First a word about the finance sites I currently use and then let’s dive into Google Finance.

A Little Background

I am not really an active stock trader these days, but I was back in the mid to late nineties. I told the quick version of my story in an excerpt from my podcast the other day. The bottom line is that I have made a lot of money and lost a lot of money in the stock market. Along the way, I have tried a lot of different financial sites. Some were free, some were made available to me by media companies I provided content for and some I paid for.

Presently, I use two and only two (not counting the brokerage sites where I do my trading, but which I use only lightly for research). My Yahoo, where I track the market and my stocks in my left column, and Morningstar, where I do a lot of my research (Disclosure: I have owned Morningstar stock since the IPO).

So lets take a look, in real time, at Google Finance.

Initial Impressions

The front page looks desolate. What is appealing about Google’s search page doesn’t work here. I see a link to add stocks to your portfolio, but unless it’s well hidden I see no way to add stocks other than one at a time.

Some sort of import feature is a must in future releases.

I added a few stocks, all but one (Google) of which I actually own. The Ajaxy entry screen is fast, but there needs to be a way to import portfolios. Once more- there has to be an easier way to add your portfolio.

Oddly enough, your portfolio doesn’t show up on the front page. There is a list of recent quotes you have looked up, but I see no way to personalize the front page. Surely I’m missing something?

What About the Quotes?

OK, so let’s look up a quote. I own AT&T and have been thinking about selling it for a while.

Here’s where Google Finance gets a little more impressive.

The quote info and chart are pretty neat. I love the way the times of the news stories are reflected on the chart. The news story links are logically placed and easy to access. I like the blog post links at the bottom, but I don’t read blogs for stock buying ideas.

Message Board into Chaos

There are message boards (called discussions) that you can join or start, and I can imagine a horde of pumpers and dumpers lining up outside the walls. There do seem to be some safeguards in place and one of the current pump and dump favorites did not have a link to join or create a discussion.

But I can tell you from vast experience that these message boards will rapidly descend into chaos and will become useless in short order. I predict they’ll kill them all off within a year.

At first I didn’t see links to major holders, insider sales and SEC filings, all of which are available at Yahoo, but there they are at the bottom left of the screen. I wish there was a Morningstar link down there.

Conclusions

My initial conclusion is that Google Finance is underwhelming as far as customization goes, but that the data returned when you lookup a quote is reasonably impressive.

Om’s right, however, when he says “[I]t will be a long time, and I mean long time in Internet years that is, before Google Finance really catches up to Yahoo Finance, which in fact is the gold standard.”