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Saturday, 2 May 2009

StockTwits vs Covestor

Taylor Davidson asked an interesting question:

How would you compare StockTwits and Covestor?
(yes, that's a lazyweb request...)

The answer is not as straight forwards as the question suggests : )

Firstly, some statistics on the two services. Covestor has over over 20,000+ traders/investors who upload—most automatically, some still manually—their brokerage statements so they can get ranked and verified by Covestors. On the other hand, StockTwits currently has over 40,000 subscribers and adding 500 new subscribers per day. I don't not sure whether these numbers are comparable but if they are, it is showing that StockTwits is becoming more popular especially considering that it launched later than Covestor.

On the ideal level, both services are attempting to democratise investment by empowering people. On that level, I would say both are pretty similar. However, there are some fundamental differences in the way they approach the problem.

Filtering and Publish vs Publish and Filter
Covestor requires users to upload their trading statements so that they can be ranked and verified. This is the filter and publish model favoured by traditional media. StockTwits, on the other hand, lets anyone participate but surface the cream using filters. This is the publish and filter model. The Web obviously favours the latter. (If you want to learn more about this, read the chapter in Clay Shirky's book titled “Publish First, Filter Later.”)

Metadata vs Content
Covestor is about actual trading performance. In a sense, it is a 'content's play. As such, it suffered the same economics as media. Content is 'valuable' and hence cannot be disclosed publicly. StockTwits, on the other hand is about metadata. It is about discussions, opinions, thoughts etc that sit on top of the content and add useful layers of data. This is user generated context. Context is much more powerful than content in our age of abundance.

Open vs Closed
StockTwits is built from day one to be very open. This facilitates the flow of data such that complementory services can be built easily (see the chart.ly example). In terms of strategic advantage, that is a big leverage because value gets created so much faster. Co-vestor, on the other hands, feels very closed out to me. It is a network within itself that has very little connections available for the rest of the Web to leverage on.

Heavy vs Light
StockTwits is as light weight as they come. I am not sure about the numbers in terms of employees but I am certain it is lower than Covestor. Why is this important? One of the strategic advantage is that they will be more nimble. If you create a model where the core team is light but where competencies are gained through the edge (using APIs, affiliates programmes et al), you tend to be more responsive to external changes. This is critical in our age of constant disruption.

These differences are based on my observations. I have not dealings whatsoever with either of the companies so I may be completely off. If you have other perspectives, facts, opinions etc, do share them in the comments.

Updated: If you are new and want to really learn how to pick stock, I recommend checking this blog that is like a stock market for dummies. It covers a lot of basic information about stock picking and would be a great learning ground before going to more advanced communities like stocktwits. If you are buying stocks for the first time, check it out!