How much is Twitter worth to high-frequency traders?

By Felix Salmon
October 8, 2009
Kara Swisher says that Twitter might start selling access to its "firehose" -- the full stream of all public tweets from its tens of millions of users -- to Google and Microsoft. Such companies, she says, might be willing to pay "several million dollars" for such a product.


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Kara Swisher says that Twitter might start selling access to its “firehose” — the full stream of all public tweets from its tens of millions of users — to Google and Microsoft. Such companies, she says, might be willing to pay “several million dollars” for such a product.

Which raises the obvious question: if the Twitter firehose is worth millions to a search engine, how much would it be worth to algo traders and data miners? And how much of a premium would they be willing to pay to get that information a few milliseconds before anybody else? Indeed, would they be willing to pay Twitter a huge amount of money just for the privilege of hosting its servers in a the same location as their own proprietary stock-trading black boxes?

There’s been a lot of speculation of late about how on earth Twitter could be worth $1 billion. Maybe this is it! After all, the stock market, like Twitter, is basically a reflection of real-time sentiment. If you could somehow mine Twitter to isolate changes in sentiment, that could be worth billions.

Comments
9 comments so far

“Indeed, would they be willing to pay Twitter a huge amount of money just for the privilege of hosting its servers in a the same location as their own proprietary stock-trading black boxes?”

The problem if they did would not be latency from twitter-server to block-box-server, it would be latency from twitter poster in his office to twitter-server. Twitter is not real-time because it is relying on the internet (to clarify, it can’t guarantee response time from your fingers twittering to Tokyo traders hearbeat outpacing his fingers because the internet just doesn’t work like that, the packets go all over the place and no guaranteed end-to-end time is provided by nature of the IP protocol). Even traders at home using FIX protocol pay for duplicate high speed links, a ms here, a ms there and soon you’ve lost real money.

Posted by SP | Report as abusive

“The problem if they did would not be latency from twitter-server to block-box-server, it would be latency from twitter poster in his office to twitter-server.”

Except that, in the words of the joke about the hikers and the bear, “I don’t have to outrun the bear. I just have to outrun you.”

The trick among the millisecond traders will be to work on information that’s perhaps 12.005 seconds old while the rest of the world is back maybe 13 seconds. Plus wicked fast algorithms that out-NSA the NSA by extracting The Real Truth from All The Information In The World. I think I hear the next bubble inflating.

Posted by Mel | Report as abusive

the smart guys in finance have been looking at this stuff for a while and trying to stay on top of it. it does not sound like they see anything there yet, at least according to the guys i know.

the good thing is that there is already a market there (low latency news feeds). here is dj’s product: http://www.dowjones.com/product-elementi zed-news-feed.asp

Posted by capitalcalls | Report as abusive

Filtering all those tweets for meaningful information would be like sifting through a garbage dump looking for a ring. Even if you want to develop software to look at their “firehose” (the image I have is more like a sewer line), you then have to factor in things like context and source – not quite yet a job for computers, even google’s.

Sounds like yet another attempt by twitter’s great PR machine to drum up interest in the company so somebody will buy them. Too bad Meg Whitman isn’t running ebay, she might buy them.

Posted by KenG | Report as abusive

And if Important Decisions are being made on the basis of tweet-analysis, about how long do you think it’s going to take before we have tweeters tweeting away with the sole purpose of trying to influence said decisions? Especially if there’s, like, you know, real money at stake?

Probably be a good business opportunity for the botnet masters of the world… beats generating spam.

Posted by Howard | Report as abusive

This caught my eye and made me laugh. There are may be 5 guys out there who are seriously trying to trade on the news using non discretionary systems. And I doubt they make any real money. The idea that one would worry about milliseconds in this context is preposterous. This often happens when one combines things one hears about, but has no real understanding of them. I supposed this is what some people call blogging…

Posted by ZS | Report as abusive

I’m with Important Decisions guy.. would only be gamed from the outside. Already so much sentiment info out there, it jumbles into worthlessness IMO.

Plan your trade, trade your plan. Thats it.

I run a social media analytics service and have considered numerous times times marketing it to traders, specifically the high frequency ones.

Overall, there doesn’t seem to be a huge demand for tracking Twitter, or they just don’t care. Their internal risk tools and buy / sell sentiment indexes are probably more accurate and actionable

With that being said, I don’t see the traders running for this Twitter data. The causation vs. correlation is too questionable.

And perhaps then Twitter could be used to manipulate markets?

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