Top Alternative Data Streams To Spot Promising Deals
Investors are constantly looking for methods to get a competitive advantage in the market. Alternative data sets are one such instrument that might assist them in doing so. With more companies embracing digital channels, there is an explosion in digital footprints that investors can use to their advantage. These footprints are collected, analyzed, and transformed into alternative data sets for investment purposes.
With access to alternative data, investors can identify trends and opportunities before others do. For instance, for a digital-native e-commerce business, tracking app download and usage rates, customer reviews and ratings, and visitor footfall can provide valuable insights into online sales, customer engagement and satisfaction. Additionally, tracking the pace of employee headcount growth can give investors an understanding of how fast is the company growing. By mapping sales data against local population density and demographics, investors can identify areas with higher sales volumes, indicating a strong customer base.
Information asymmetry is a key driver of investment returns, and the ability to gather and analyze alternative data can help investors uncover valuable insights that others might miss. In this blog, we will explore some of the most useful alternative data sets that investors can use to identify emerging trends and lucrative investment opportunities.
Most popular alternative data sets that investors should watch
- Employee growth and review: Employee growth and employee review are critical alternative datasets for investors as they provide insights into the company’s talent acquisition, leadership, culture and growth aspirations. Growth in employee count over time can act as a proxy to company growth. Step growth in employee count means the company is growing fast, increased hiring in sales and marketing could indicate that the company is eyeing more revenue. Investors can utilize employee growth metrics such as average tenure to assess the company's ability to retain and develop talent, which can ultimately drive long-term performance. Similarly, employee reviews can offer valuable information on workplace culture, leadership skills, employee satisfaction, internal issues and conflicts, and future aspirations of the company. For example, Glassdoor reviews provide rich insights into a company's performance, culture and leadership.
- App and website data: App data and website data offer valuable insights into company growth, consumer behavior, customer engagement, online reach and overall market position. By analyzing app usage and website traffic patterns, investors can assess a company's ability to attract and retain customers, identify emerging trends, and evaluate the efficacy of marketing campaigns. For example, an investor analyzing a social media company might look at its app data,such as daily active users and time spent on the app, to track user engagement, and gauge the platform's popularity and stickiness. Similarly, an investor analyzing an e-commerce company might examine website data such as bounce rates, conversion rates, and cart abandonment rates to evaluate the effectiveness of the company’s acquisition strategy and messaging, and benchmark it against competitors in the market. Similarweb and Semrush are some players that provide deep analysis of website and app traffic information with detailed breakups like organic traffic, AdWords traffic, breakup by keywords, etc. Below is a quick comparison between two leading travel companies based on their total website visits data.
- Jobs listing data: Jobs listing data is a valuable alternative dataset for investors as it provides insights into a company's hiring activity, which can be an indicator of growth and expansion. By tracking the number and types of job listings posted by a company, investors can gain a better understanding of its hiring needs and potential expansion plans. For example, an investor analyzing a technology company might track job listings for software engineers or data scientists to identify areas of focus and gauge the company's potential for future innovation. Similarly, an investor analyzing a retailer might monitor job listings for positions in engineering or supply chain management to evaluate the company's digital transformation efforts and ability to adapt to changing consumer behavior. LinkUp is one such data source that provides insights into active job openings and total job openings across roles, seniority and geographies.
- Product review and rating data: Product reviews and ratings data provide insights into a company's product quality, customer satisfaction, and overall market reputation. Positive reviews and high ratings can indicate a strong brand, higher customer satisfaction and loyalty. Additionally, tracking review and rating trends over time can help investors identify changes in customer sentiment and potential market shifts. For example, an investor analyzing a technology company might monitor product reviews and ratings for software products to gauge customer satisfaction, analyze customer retention/stickiness, and identify potential competitive threats. G2 and Capterra are examples of websites that offer in-depth product reviews and ratings. Below is a quick comparison between two leading online payment companies based on the overall product ratings and review graphs.
- Transaction and credit card data: Transaction and credit card data are critical alternative datasets for investors as they offer valuable insights into a company’s financial performance, consumer spending behavior and potential risks. By analyzing transaction and credit card data, investors can identify patterns in a company’s online sales, customer demographics and consumer behavior such as spending patterns and purchase frequency. For example, an investor analyzing the retail sector might use credit card data to track online sales and demographics of customers making the purchase along with average order value. ConsumerEdge is one such dataset that provides comprehensive intelligence into credit card and debit card transactions. Below is a quick comparison between two leading food outlet companies based on observed sales and observed customers.
- Developer activity data: Developer activity data is a crucial alternative dataset for investors evaluating opportunities in the software development space. Datasets like GitHub can provide useful insights into a company’s development process. By analyzing the repositories a company has contributed to, investors can gain insights into the company's focus and strategic direction. They can also identify promising new technologies that the company is working on, which could potentially be disruptive in their respective markets. Using GitHub metrics, investors can also spot innovative projects and also filter the ones with commercial intent. For example, by analyzing the number of GPT-based projects listed on Github, investors can estimate the level of AI-based innovation happening within top tech companies.
- Social media data: By analyzing social media data, investors can identify trends in consumer demand, monitor changes in brand perception and customer sentiments, and evaluate the effectiveness of marketing activities. Google, LinkedIn, Twitter and other platforms can directly supply a lot of data to run such analysis. For example, an investor analyzing a specific company might use social media data to track consumer interest in the company’s products, brand perception, and assess the potential for future sales growth.
- Geospatial data: Geospatial data can provide insights into location-based trends and activity, which can be further used to identify potential opportunities and associated risks. By analyzing data on footfalls at a company's physical locations, investors can gain insights into its market reach and sales. It can provide valuable insights into the movement of goods, services, or people between locations. For instance, such models can estimate the volume of trade between countries or the flow of people between cities.
In November 2018, The Restaurant Group considered acquiring Wagamama and its existing stores. The acquisition raised concerns about the potential reduction in market share for both entities. To assess the feasibility of the acquisition, demographic data and store catchment information were analyzed to map the affluence of local populations in each location. The analysis revealed that Wagamama's locations and the Restaurant Group's portfolio were complementary, serving different kinds of customers. As a result, the combined entity would be unlikely to cannibalize the clientele of the existing Restaurant Group locations. This kind of analysis can be extremely helpful to investors who are considering acquiring or investing in companies. By providing insights into the compatibility of different entities, such analysis can help investors make informed decisions about which companies to invest in or acquire, and how to maximize the potential for growth and profitability.
It's worth noting that user reviews should be taken with a grain of salt, as they can be subjective and may not be representative of the overall sentiment towards a company. Additionally, some companies may engage in tactics to inflate their user review counts, so it's important to investigate the authenticity of the user reviews.
So, how can investors review each of the alternative datasets and metrics related to a company's performance quickly and put them together in perspective? This is where alternative data platforms come into play.
A unified alternative data platform that combines both traditional and alternative datasets can provide investors with a more complete and accurate picture of a business. By bringing together a range of data sources, such a platform can help investors identify patterns that might not be apparent when looking at individual datasets in isolation. This can lead to more informed investment decisions and better overall performance. In addition to providing a more comprehensive view of a business, a unified alternative data platform can also help investors save time and resources. This can streamline the research process, allowing investors to make more efficient use of their time and make better decisions more quickly.
Learn about Synaptic’s alternative data platform here.