How Social & Search Engine Data Can Aid Traders
While trading is a hobby of mine, my real work revolves around crunching and acting on data provided by Internet giants, such as Google, Facebook and Twitter. As I'm aware this data is a hot topic in the trading community, I wanted to share a few useful resources for analysing stocks using search & social data.
Why use search & social data?
I've always been an advocate of 'focus on what people do, not what they say'. A lot of the information we hear about companies is hearsay and based on pure speculation. The reason why social & search data is so valueable is because, much like a company's financials, the numbers speak for themselves.
If there are 1,000 Google searches per day made by people looking to open a bank account and 700 of them include 'Barclays' in their search query, we can make an assumption that Barclays are in a strong position to dominate this market. This data becomes incredibly useful when we compare competing brands over a number of years in different regions.
Which company is most searched for?
One of the first things to check when considering whether to buy a stock is the trend of online searches around their brand. Using Google Trends, this data will tell you whether the company is gradually increasing or decreasing in popularity, as well as a rough idea of their market share relative to competitors. This data can be easily segmented by country to see which areas people are searching for different brands around the World.
For example, here we can see that Barclays were the clear leader online for many years, although they're now facing stiff competition from Lloyds.
When we dig into the regional analysis in greater detail we can see that while all of the banks have a European focus, Barclays have the largest global influence, with relatively high search volumes in a number of countries outside of Europe.
This data is not limited to companies. In fact, virtually anything that is searched in Google can be viewed on Google Trends. If you wanted to see how the rising binary options trend has swept the globe you can clearly see the exponential growth in popularity this form of trading has gained since 2011. A regional breakdown on this term highlights the massive growth of binary options in Asian markets.
Analysing a company's sentiment
One of the most useful aspects of social data for stock traders is measuring the sentiment of conversations around a brand. Two years ago the sentiment around Apple was incredibly positive, but since Steve Jobs passed away and Apple released their buggy iOS7 platform, their sentiment has decreased - along with their stock price. This is slowly on the increase now.
There are many advanced paid tools, such as Brandwatch and Radian6 for measuring this. Of course, the main thing to remember here is that this data is not particularly useful on its own, but when compared against other competitors or over time you get to see a better picture of how the public's perception of a certain company is changing.
Real-time company information
Perhaps one of the most obvious benefits of social data for traders is the real-time nature of information on companies that is now available. Even for companies such as Apple, who are notoriously mysterious with their social presence, it's very easy to get a quick overview of what people are saying about the company by running a real-time search on Twitter.
The tools and techniques mentioned really only scratch the surface when it comes to collecting and analysing online user behaviour data. I think it's reasonable to assume that over the next few years we're going to see a lot of interesting ways of collecting and making sense of the firehose of data that is being gathered by companies like Twitter, Google, and Facebook.