MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING FRIDAY, NOVEMBER 19, 1997
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Financial Sites In Battle For Internet Market Share
Seldom a week passes these days without a new financial Internet site making its debut. There have been at least three major launches in Canada since October: The iMoney "financial supermarket," the Globe and Mail's mutual fund site and a belated entry from the Toronto Stock Exchange.
If this abundance of free financial information makes your head spin, there is a simple way to cut through the hype. It is ironic, given the topic in question is money. Ask yourself whether you would be willing to pay for the information if it were not free.
One of the few sites that Internet author Rick Broadhead is willing to pay for is the Wall Street Journal Interactive Edition (www. wsj.com), which includes Barron's Online and a publications library search service of almost 4,000 periodicals, all for about US$50 a year.
Broadhead and colleague Jim Carroll are co-authors of 18 Internet books. Their latest work, due out the end of this month, is Mutual Funds and RRSPs Online (Prentice Hall Canada Inc., 1997).
The two are enthusiastic about this field in general, but lukewarm toward the most ballyhooed of all recently unveiled Canadian financial sites: iMoney (imoney.com)
Launched Oct. 9, iMoney describes itself as one-stop investment supermarket that allows consumers to compare services from participating financial institutions. Its list of more than 20 suppliers is far from complete, although it includes TD Bank, Canada Trust, the Canadian Imperial Bank of Commerce and Trimark Investment Management Inc.
Carroll says iMoney is trying to be an intermediary in a medium that has thrived by cutting out intermediaries. He has issued a mock press release heralding iMoney's demise a year from now.
There are a "zillion Internet financial supermarkets," Carroll says. Of iMoney, he says "while the list of original participants is impressive, why would I, the CEO of TD Bank, want to give any money to this type of initiative to bring people to my Web site, when I can bring them there directly through my own efforts? Why would I want to spend money to list myself in iMoney, when I am listed in so many hundreds of other online financial sites at absolutely no charge?"
Dozens of older sites already do at least some of what iMoney claims to do. "I can hit Cannex (www.cannex.com) and get comparative interest/GIC rates for a hundred financial institutions, or get comparative mortgage rates," Carroll says.
"I can hit Canada Stockwatch, and get stock information on any exchange, and then hit ETrade (www.canada.etrade.com) and do my trading online. What the heck do I need an iMoney for?"
To this, iMoney chairman Michael Ginsberg says: "That's exactly why consumers need iMoney. They're task-oriented and want rates on different products and perhaps to purchase them. They don't want to skip around six or seven Web sites."
He says several banks are anxious to work with iMoney because they realize the value of convenience to consumers. Unlike rival sites that merely provide information, iMoney's focus is on financial transactions. It aims to be the single Internet intermediary between consumers and financial institutions, although it also hopes to provide enough information to make the decisions leading up to transactions.
The first phase of the site hardly represents Ginsberg's complete vision, which is about facilitating electronic funds transfer between consumers and the institutions with which they do business. The company name would have been E Money, for Electronic Money, had the name not already been taken, Ginsberg says.
iMoney is the offspring of an earlier Ginsberg Internet venture called Financial Services Network, and later, at Bayshore Trust, the creation of Canada's first online loan transactions on the Internet. He insists there is nothing like iMoney elsewhere. It has hefty initial backing from Bayshore Capital and Ginsberg says there are several corporate suitors who would love to take an equity stake in it.
Far from being threatened by global giants, Ginsberg is busy forging alliances with them: last week he announced deals with Microsoft Canada Inc. and is about to announce two more deals with other online giants. Eventually Ginsberg hopes to work with the government of Canada for purchase of Canada Savings Bonds or electronic filing of taxes.
iMoney's real competition may be from giant American sites, all of which offer plenty of generic personal finance material, rich deposits of news, basic updates of stock prices and portfolio data, and at least some Canadian content.
Chief among these are Intuit's Quicken site (www.quicken.ca), the Microsoft Corp./NBC joint venture (msnbc.com) and Cable News Network's financial news (www.cnnfn.com).
MSNBC is innovating Personal News, a concept pioneered by PointCast
(www.pointcast.com) and unveiled a year ago with comparable fanfare, including billboard advertising, similar to that of iMoney. Both sites are experimenting with push technology, where the user specifies areas of interest and the sites alert you when an article of interest has come up. Broadhead gives the nod to MSNBC, saying Pointcast takes up too much in the way of personal computer resources to be practical.
However, MSNBC's success has resulted in a clutter of annoying paid advertisements and other graphics-intensiveapplications that sometimes crash the system.
The presence of such giants is evidence that the Internet is becoming a game of deep, giant pockets. Even when a small Internet entrepreneur spots a vibrant niche, the big players are quick to move in.
A case in point is the David-and-Goliath struggle shaping between the Globe and Mail (www.globefund.com) and the two-and-a-half year old Fund Library (www.fundlib.com), which lives off sponsorships from about 30 major mutual fund companies.
Fund Library co-founder Tracey Wood says the Globe twice offered to buy her out. Rebuffed, the Globe launched its GlobeFund site a few weeks ago. "They may have deep pockets, but they don't have as much deep content on their Web site," Wood says of her new competitor.
GlobeFund is also pitted against Sun Media Corp.'s Canoe Money (www.canoe.ca), part of the broader Canadian Online Explorer site. Canoe Money provides the latest mortgage and GIC rates, stock and mutual fund data and access to most of The Financial Post's investing section coverage.
Like many other sites, Canoe Money also lets you track up to 20 stocks you own, highlighting gains in green and losses in red. It is telling that the Globe has placed a well-positioned advertisement on Canoe.
For all its diversity of content, it seems the Internet is becoming more like the mass media in both its ownership and consumer usage patterns. The sites likely to survive will have deep pockets and be broad in content.
Internet users will tune in to only a handful of sites on a regular basis. Web mindshare will be measured by how many sites are bookmarked on user systems.
Investor Misinformation Clutters Internet
There is an immense amount of financial information on the Internet. But it is easy to spend more time surfing than actually making money.
An old technology joke goes that if the post office ever got electronic mail, it would allow them to lose letters at the speed of light.
For all its wealth of financial information, the Internet can allow you to lose money at the speed of light, if you fall prey to the frauds and schemes that now abound on it.
There are definite risks in using the Internet as an investment tool, warn the authors of the soon-to-be-published Mutual Funds and RRSPs Online (Prentice Hall Canada Inc., 1997).
"The Internet offers the perfect environment for fraud artists to operate," write co-authors Jim Carroll and Rick Broadhead. "They can publish any information they want, create their own identities, and reach millions of people with little effort."
The Net is ideal for manipulating obscure, thinly traded stocks. It is potentially a hotbed of conflicts of interest, exotic scams and unlicensed investment advisers. Questionable information frequently originates from electronic investment newsletters, bogus web sites, news groups and chat sites.
The Internet's role in the run-up of the stock price of Bre-X Minerals Ltd. is among the more notorious examples known to Canadian investors. As Carroll and Broadhead point out, Bre-X used its own web site to distribute press releases, and investors sometimes relied on the information without questioning its accuracy or independence. Online discussion groups fanned the flames further.
On the one hand, the Net is the world's largest printing press. On the other, its users demonstrate an appalling "lack of information skepticism," Carroll and Broadhead write.
It is easy for fraudsters to conceal their true identities on the Net. The authors tested this by electronically posing as Jean Chr‚tien, Bill Gates and Bre-X's John Felderhof. While neither legal nor ethical, this is easy to do on the Internet. "It is easy to become whoever you want to be online," they say.
Pyramid schemes are also endemic on the web. In just one day late in 1996 the U.S. Federal Trade Commission found more than 500 web sites that may have been involved in illegal pyramid schemes, Broadhead and Carroll write.
Even if you are not a regular web surfer, and use only electronic mail, you still need to be on guard. Spam, or electronic junk mail, frequently originates from fraud artists who can reach millions of potential victims at low cost.
Internet users cannot rely on securities regulators or governments to police the Internet. The Ontario Securities Commission and other regulators do have staff monitoring the Net but their resources are limited, compared to the vast world of cyberspace.
Fortunately, there are several sites designed to raise awareness of the Net's dark side. Check out Cyberspace Fraud and Abuse at the North American Securities Administration Association's site (www.nasaa.org). Telemarketing and Internet fraud is also addressed at the National Fraud Information Center (www.fraud.org), which allows consumers to report online incidents.
Such investor education sites are rare in Canada, although Broadhead and Carroll give kudoes to the British Columbia Securities Commission's Be an Informed Investor (www.bcsc.bc.ca).
Mutual Funds and RRSPs Online lists 10 tips for avoiding Internet fraud. One is just as applicable outside the Internet world: Don't expect to get rich quickly, and if something sounds too good to be true, it probably is.
Be particularly wary of thinly traded stocks hyped online. If someone conceals their identity, you should not make an investment decision based on that advice. Such popular sites as The Motley Fool (www.fool.com) and Silicon Investor (www.techstocks.com) allow users to remain anonymous.
If a site is too quick to ask for your credit card number, that should also rouse your suspicions.
Much of the Internet may not consist of outright frauds, but nevertheless has information of questionable objectivity or quality. Too many sites, particularly those of some banks and mutual fund companies, amount to little more than electronic brochures.
An example cited in Mutual Funds and RRSPs Online is the site of the Bank of Montreal's First Canadian Mutual Funds, which features an education supplement called Retire Right. Broadhead and Carroll "were amused to discover that all of the solutions to the questions posed on the site seem to suggest that you buy First Canadian Mutual Funds.
"This is the type of thinly disguised, shallow sales pitch that you should be cautious of as you use the Internet." They suggest Toronto Dominion Bank's site is more useful.
Generally, investors who use the Internet need to distinguish between raw data and useable information. There is a torrent of news and updating of prices of securities on financial Web sites, but the amount of analysis and advice synthesizing such data is more limited.
Some of it is outdated or not applicable to Canadians -- or just plain wrong. "There is no guarantee that anything you read online is accurate or true," Broadhead and Carroll write.
Even if the information you get is accurate, it is still not a substitute for sound judgement or proper financial advice from a professional adviser.
A Gertrude Stein quote used in Mutual Funds and RRSPs Online sums the situation up nicely: "Everybody gets so much information all day long that they lose their common sense."
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