From Matt Turck:
In the eye of some entrepreneurs and venture capitalists, the
Bloomberg terminal is a bit of an anomaly, perhaps even an anachronism.
In the era of free information on the Internet and open source Big Data
tools, here’s a business that makes billions every year charging its
users to access data that it generally obtains from third parties, as
well as the tools to analyze it. You’ll hear the occasional jab at its
interface as reminiscent of the 1980s. And at a time of accelerating
“unbundling” across many industries, including financial services, the
Bloomberg terminal is the ultimate “bundling” play: one product, one
price, which means that that the average user uses only a small
percentage of the terminal’s 30,000+ functions. Yet, 320,000 people
around the world pay about $20,000 a year to use it.
If you think that this sounds like a perfect opportunity for
disruption or “unbundling” at the hand of nimble, aggressive startups,
you’re not alone. I spent four years at Bloomberg Ventures, and this
was a topic that I heard debated countless times before, during and
after my tenure there. Most recent example: a well written article in
Institutional Investor a few weeks ago declared the start of “
The Race to Topple Bloomberg“, with a separate article highlighting my friends at Estimize and Kensho as startups that “
Take Aim at Bloomberg“.
Yet, over the years, the terminal has seen its fair share of would
be disruptors come and go. Every now and then, a new wave of financial
data startups seems to be appearing, attempting to build businesses
that, overtly or not, compete with some parts of the Bloomberg terminal.
Soon enough, however, those companies seem to disappear, through
failure, pivot or acquisition.
What gives? And where are the opportunities for financial data startups?
Frontal assault: good luck
To start, Bloomberg is not exactly your run-of-the-mill, lazy
incumbent. Perhaps I drank too much of the Kool-Aid while I was there,
but I left the company very impressed. Bloomberg, which was itself a
startup not that long ago, comes armed with a powerful brand, deep
pockets, a fiercely competitive culture, a product that results from
billions of dollars of R&D investment over the years, and a
technology platform that basically never goes down or even slows down,
supported by generally excellent customer service.
But great incumbents have been disrupted before. So there is
perhaps another set of less immediately apparent reasons why the
terminal has so far been very resilient to disruption by startups:
1. It is protected by strong network effects. One surprisingly
misunderstood reason to the long term success of the Bloomberg terminal
is that, beyond the data and analytics, it is fundamentally a network.
In fact, it was probably the first ever social network, long before the
term was coined. Although some believe that its cachet as a status
symbol is starting to
erode,
“the Bloomberg” (as it is often called) has been for decades the way
you communicate with other finance professionals (for legitimate or
not so legitimate reasons).
In its relevant target market, everyone is on it and uses it all day
to communicate with colleagues, clients and partners. Web based services
(Facebook, Dropbox, Gmail), often banned in financial services
companies, haven’t made much of a dent in that, at least for desktop
communication....
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