Market View: Alternative Data Brokers in Financial Services

Author: Will Jan

Date: June 23, 2020

Description

COVID-19-induced volatility in the financial markets is driving investors and traders to seek all data that could provide direction at the front line of the pandemic. This report offers insight into opportunities for companies to create new revenue streams by brokering data into financial services.

 

Market Definition and Methodology

This area of coverage falls under Outsell’s Financial Information & Solutions segment and is comprised of alt data brokers in financial services. To be clear, while many of these brokers position themselves as alt data providers or platforms, they are, indeed, data brokers. This means they do not create their own data or information in support of financial research but rather help third-party data suppliers refine their content for monetization in financial research, then broker this content to the financial community in return for a commission.

That said, the data suppliers (data owners and originators) could effectively be companies in any industry, since all companies produce some type of data, either as part of their offerings or as byproducts of their operations (data exhaust). Were it not for alt data brokers, these companies would likely remain unaware of the tremendous value (insight) that their data and information may hold for traders and investors in financial services. As such, the alt data broker market has grown exponentially to help companies monetize their otherwise useless data.

From a business model perspective, the alt data brokers in this market generate/create no data or information themselves, deriving their revenues from brokerage fees that they charge to the data owners/suppliers. The data is then offered through the broker’s platform, from where the data is either subscribed to or licensed in a recurring model (e.g., for continued research) or purchased transactionally (e.g., a dataset for a project). The brokers then charge a commission fee, usually ranging from 30% to 50% of the total deal price, while the data owners retain the rest. The fee is closer to 30% if the data requires minimal cleansing and formatting for use by financial services and can range up to 50% if the data requires significant cleansing and formatting before use by financial services.

Alt data is not a replacement for core financial data as commonly supplied by the financial research desktops today, such as company filings, reference data, earnings information, indices, pricing, asset- or company-specific news, or price-to-earnings ratios. In fact, all the major financial desktop providers, like Bloomberg, Refinitiv, S&P Global, and FactSet, have already created portals that offer alt data to their users. As such, alt data analytics must be viewed (at least for now) as a supplement to traditional financial research tools (as a form of research enhancement) and not a replacement.

Outsell’s methodology starts with its robust database of over 9,000 global media and information companies, which are assigned to the appropriate segments in which they operate. Outsell uses all publicly available information and its own insight and research with the companies themselves to size each player in the space. Outsell sizes public companies primarily on their reported results, though it also applies analysis to further segment and align their revenues according to Outsell’s industry segmentation. Outsell uses the best available information on private companies, augmented by its own primary proprietary research, to assess platform characteristics and revenue performance.

This study combines primary on-the-record vendor research and secondary desk research by Outsell and an earnings assessment of the top pure-play alt data brokers, by revenue within the data categories in which they operate. It further includes information derived from Outsell’s daily contact and interviews with these firms’ CEOs, CDOs, CPOs, and CTOs as well as Outsell’s deep knowledge gained from our unique, ongoing market analysis history spanning 25+ years.

 

Table of Contents

Why This Segment

Market Definition and Methodology

Market Drivers and Inhibitors

Market Size and Share

Competitive Analysis

Competitors at a Glance

10 to Watch

Implications

Essential Actions

Related Research

About the Author

About Outsell

 

List of Figures

Figure 1: Alternative Data Brokerage Market Size & Forecast 2018-2022 ($millions)

 

List of Tables

Table 1: Top Alternative Data Brokerage Players and Market Share, 2018-19



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