Max Bowie: Thinking About Retail? Think Hard About Your Brand

On Oscars night, I quipped that Hugh Jackman’s only hope of winning best actor was to change his name to Daniel Day-Lewis—then I spent the rest of the night hoping he wouldn’t find out and send Les Misérables co-star Russell Crowe around to beat me up (or worse, sing). But the truth is that bringing together venerable brand names like Day-Lewis and Steven Spielberg on a movie about iconic US president Abraham Lincoln virtually guarantees Oscar success.

Associating with the right brand can bring rewards—hence the saying that no one ever got fired for buying IBM. So for market data and technology vendors, picking the right brand is crucial when trying to establish oneself against the IBMs of the world among clients who don’t like to take risks.

The 1980s start-up Innovative Market Systems soon realized the value of adopting the name of its big-personality founder, Michael Bloomberg. Some firms spend a lot of money on research to find the correct branding. Others, like West Highland Support Services CEO Steve Roe, name their company after something memorable—Roe’s favorite breed of dog—although this also ensures the company is never overly tied to any one individual.

Brand Value
Name recognition doesn’t just apply to companies, but also the “brand value” of individual execs. When low-latency event data provider Selerity recently raised $3 million in funding, it wasn’t so much the amount that raised eyebrows as who it came from—former Thomson Reuters CEO Tom Glocer, former Thomson Financial CEO Sharon Rowlands, and Tradeweb founder and CEO Lee Olesky, among others.

One reason this is so important now is that data and technology providers are targeting solutions at an increasingly retail-focused base of investors and advisors. Without the ability to conduct bake-offs in a lab, this base relies on trusted brands that reach them through word-of-mouth or retail marketing—such as Super Bowl ads, where companies pay millions of dollars for a 30-second slot, in the hope of emulating Victoria’s Secret, whose 1999 Super Bowl commercial reportedly generated 1 million website hits in an hour.

When Selerity recently raised $3 million, it wasn’t so much the amount that raised eyebrows as who it came from—former Thomson Reuters CEO Tom Glocer, former Thomson Financial CEO Sharon Rowlands, and Tradeweb founder and CEO Lee Olesky.

One vendor that would have loved Super Bowl airtime is AlphaTrade, a small vendor of market data displays that struck sponsorship deals with various sports organizations, two of which sued for non-payment. AlphaTrade filed for Chapter 11 bankruptcy protection in 2011, and has since liquidated, selling its website and client list to Canadian exchange TMX Group, demonstrating that the retail brokers, financial advisors and active traders targeted by AlphaTrade are now the subject of much activity from vendors who realize that an audience of institutional users in the hundreds of thousands, with an install base dominated by a handful of providers, pales against an audience of millions of potential consumers and the professionals who serve them. And with staff cuts still in force across the financial industry, the big money may no longer be in selling tools to banks, but in bringing them to a wider audience in the name of democratizing trading.

While these products may not rival Bloomberg or Thomson Reuters terminals, they have more in common with screens used on trading floors than with the antiquated models used to attract retail traders. To attract flow, give traders tools and ideas that encourage them to trade, says Kevin Ashby, chairman of UK-based startup analytics provider Rising Sum, which is targeting end-users from investors to advisors and small hedge funds by seeking to strike distribution agreements with brokers.

But how long can current commercial models for market data be sustained if the industry’s focus shifts to consumers who lack thousands of dollars to spend per month? Pro rata, it costs retail investors much more to trade than institutions, which discourages them from using certain quantitative or technical trading strategies. Until this inequality is addressed, attempts to diversify vendors’ revenues by targeting data and tools at a higher volume of lower-paying customers will meet limited success—something that no amount of brand name recognition can fix.