Let us suppose that one wants to start a successful financial blog. The start up costs are low, so many will take a shot at this. What defines success?
Part of our experience is advising early-stage companies. It is a good model for a blog. What should one do?
- Learn the market. The blogger needs to understand the readers -- who they are, their viewpoints, and what they want to hear.
- Understanding behavioral finance. Most readers track on what worked most recently. That is how the heroes are found.
- Go for the rankings. The various ranking services start -- and mostly end -- with traffic. If you write something that appeals to the online audience, you have a better chance of success. Most of those doing rankings are not qualified to evaluate the content, so ratings dominate.
- Post frequently. The more you write, the more people visit your blog. Many raters use frequency of posting as a filter.
- Exchange links. Be willing to trade links with nearly anyone. Offers abound.
Identifying the Online Audience
Here is a dramatic example of what works online. The best example is the recent online poll by Time.com.
In a stunning result, the winner of the third annual TIME 100 poll and new owner of the title World's Most Influential Person is moot. The 21-year-old college student and founder of the online community 4chan.org, whose real name is Christopher Poole, received 16,794,368 votes and an average influence rating of 90 (out of a possible 100) to handily beat the likes of Barack Obama, Vladimir Putin and Oprah Winfrey. To put the magnitude of the upset in perspective, it's worth noting that everyone moot beat out actually has a job.
This tells us very little about who is most influential, but a lot about those taking the poll.
The frequent polls on CNBC and other sites tell us a great deal about the trading audience -- what they believe, their positions, and what they expect. These polls are mostly skeptical of any government program, the future of our country, and the prospects for the economy. They are widely divergent from polls that use a scientifically selected group. These polls show a wide acceptance of Obama and his policies. This is not a political statement, but merely a look at some facts.
It pays to cater to the online audience. Andrew Leonard's Prophets of Doom list is also a list of the most popular blogs and commentators (with a few prominent omissions).
Popularity Pays -- for Someone....
Popularity clearly pays for the bloggers. They are wisely following a successful model for an early-stage effort.
Our mission is quite different. We attempt an objective interpretation of data, an effort to find the best sources, and a willingness to alter short-term perspective. In particular, we are skeptical of sources swinging outside of their "happy zone" (hat tip to Ted Williams -- click through to see the famous strike zone picture).
For the individual investor trying to find help from the Internet, this is a minefield. The information from the popular sources is unrelentingly negative. Meanwhile, the real story is not so clear.
Investors should pay attention to data, not opinions -- and especially not political opinions. There is a time lag in the impact of government policies. It is time to start monitoring the lagged effects of lower interest rates, innovative Fed policies, and the stimulus package.
