Types of Alternative Data the Market is Excited About
In the simplest sense, alternative data is what investors use to evaluate a stock or an investment, derived from non-traditional data sources. By traditional sources, we mean the usual company earnings previews, financial statements, press releases, macroeconomic data, geopolitical news from traditional media, central bank meeting minutes, SEC filings, and presentations by the management, and so on.
However, sources of alternative data are as diverse as:
1. Web Crawled Data
This includes information related to demographics, click-through rates, popular keyword searches, number of unique visitors to a website, etc. These metrics can enable investors to evaluate the user base of a business, the popularity of an advertising campaign, the stickiness of the user base, future trends in various products and services. Web traffic data can provide insights into diverse industries, for both small and big, B2B or B2C, companies. It can provide information about the condition of the labour market in a sector. Some investors are looking into topics that employees in a company are searching for to understand internal dynamics and predict upcoming products of the organisation.
2. Social Media Chatter
Posts and comments on social media platforms, blogs, management communications, and more can provide great insights into public sentiment regarding a product or service. This includes online reviews on various platforms. Apart from current trends and brand virality, today’s traders also use Twitter to gauge overall market sentiment in the stock market, after a particular data release.
3. Geo-location/ Satellite Data
Satellite data providers can offer information about foot traffic in stores and malls, giving traders a picture of a company’s sales growth (or decline). Satellite imagery can help track empty or full parking lots near places of interest. Similar data can be available from Wi-Fi signals and Bluetooth beacons. Geo-location data from flight and shipping trackers provide insights into global mobility and supply chains. It can also help track construction activities, agriculture yields, and oil/gas storage. This can help investors ascertain the health of sector-specific entities or the global economy.
4. Transaction Data
Data provided by aggregators of credit and debit card transactions and point of sale can provide insights into the sales figures of a company. This data set can be highly accurate when including a large number of users from similar backgrounds. Payment data cannot be tracked extensively, but it can also provide investors with a direction of where the stock might be heading ahead of public company disclosures.
5. Email/Consumer Receipts
This includes electronic receipts obtained on product deliveries or purchase of services. It also comprises responses to opt-in emails, invoices, and other forms of such data which can help track retail revenues. This data can be accurate, but smaller than the datasets offered through transaction data.
6. App Usage Data
Considering that a huge number of companies offer apps today, their usage data can provide insights into the business. This includes data like the number of downloads, the number of times per day the app is used by a user, and other quantitative and qualitative data. This can provide information about projected revenues, especially for companies in eCommerce, food delivery, and streaming services.