- Alternative data provider Quandl is making a push towards creating more proprietary data feeds as large, traditional data providers like Bloomberg and S&P push further into their space.
- Tammer Kamel, Quandl’s CEO and co-founder, told Business Insider it’s gotten very difficult to obtain exclusive rights to alt data feeds due to the increase in competition from larger players.
- Click here for BI Prime stories.
Adapt or die.
One of the first alternative data providers has taken that message to heart, as larger, traditional data powerhouses move into its market.
Quandl, one of the early sellers of unique data sets from nontraditional sources, has been forced to rethink its business strategy as industry giants such as Bloomberg and S&P have launched alternative data offerings of their own.
Tammer Kamel, Quandl’s CEO and co-founder, told Business Insider that the company, which was acquired by Nasdaq in 2018 for an undisclosed amount, now sees more opportunity creating proprietary data sets as opposed to just selling others’ feeds. The change in philosophy comes at a time when larger data companies have gotten into the lucrative business of selling alternative data.
“I don’t want to be offering a data product that’s on eight other platforms,” Kamel said. “What’s my case to the customer that they should buy it from me as opposed to anyone else? … I can’t out compete Bloomberg at that game, so why would I get into it? I will out compete Bloomberg by offering better data products.”
Read more: Wall Street’s appetite for alternative data has turned into a gold rush, but investors say there’s more dirt than nuggets
Alternative data has exploded in recent years, as investors are increasingly using datasets that range from flight records to satellite images to get a financial edge. What started out as area explored by only the most advanced quantitative hedge funds in the world has now trickled down to fundamental traders.
Traditional data companies have taken notice of the increased interest in the field which, according to Deloitte, could surpass $7 billion in spending by 2020. S&P was one of the first movers of the larger players, offering alt data feeds in September 2017. FactSet, meanwhile, moved into the space in April 2018. Finally, and arguably most notably, financial data giant Bloomberg entered the fray in February when it announced a marketplace for alternative data.
With each new entrant, Kamel said it has gotten increasingly harder to get the owners of data feeds to agree to sell exclusive rights to Quandl. And while competition is a good sign because it means there is more opportunity, he said, it also makes obtaining valuable feeds vastly more difficult.
“So these people come to us and say, ‘I’ve got data. How many zeros are you going to put on the check you are going to write me?'” Kamel said. “They’re empowered by the fact that there’s eight or 10 different organizations they can go to.”
As a result, Kamel said he believes the biggest revenue driver for the company going forward will come from creating proprietary data feeds. Doing so means Quandl doesn’t have to push for exclusive data feeds.
Instead, it can use a combination of widely-used alternative data sets it purchases, combined with some of its own data and data science techniques, to create a feed that isn’t easily replicable. Manpower that previously spent time cleaning up new data feeds Quandl had acquired the rights to can focus on creating these internally-developed ones.
The strategy has already been proved out at least, according to Kamel. Quandl was able to combine a handful of data sets based on jet tracking to create a unique feed that has been very successful, he said.
The company also has two more feeds in the works. One is based on mobile phone sales globally while the other is regarding retails sales, combining data from brick-and-mortar stores and e-commerce.
“We’ll have a moat around them because they’re so hard to construct,” Kamel said. “Also, at the same time, by doing that work it is value add to the customer.”
Kamel said he doesn’t have a specific timeline on when the two proprietary data feeds will go live, but said he’d like to bring five to seven new datasets to market every year.
See more: The opaque bond market could be the next frontier for the booming alternative-data business that’s on track to grow to $7 billion
To be clear, Quandl won’t completely avoid buying exclusive rights to data sets. In fact, Kamel said one of the most statistically powerful data sets the company has released came from obtaining its exclusive rates.
Quandl’s Earnings Quality Ranking feed helps users ascertain if a company’s earnings numbers are genuinely strong or just a product of some “accounting Jiu-Jitsu”, Kamel said.
However, where Kamel sees the most opportunity in the future is in the company creating its own feeds. For him, it’s a representation of the evolution of the space.
“I like to think it’s us staying ahead of the curve,” Kamel said. “We were one of the pioneers in this space. … For us to continue in a leadership position, we’ve got to be on to the next thing.”
Join the conversation about this story »
NOW WATCH: Jeff Bezos is worth over $160 billion — here’s how the world’s richest man makes and spends his money