Internet guru Bill Gross, whose e-commerce successes include eToys, Inc. and GoTo.com, has launched iExchange.com, a site where individuals can sell their stock tips to the public.
iExchange.com is the latest product of Gross’ Internet incubator idealab!, the three-year-old Pasadena, California-based company that has become a factory for Internet startups.
The newly-launched site provides investors with a public forum where they can earn recognition and money for picking winning stocks. iExchange.com officials claim that the site’s goal is to offer investors an environment that will help them make profitable investment decisions.
Bringing Order Out Of Chaos
“iExchange.com creates a unique e-commerce model that encourages a fresh source of ideas that are tracked, ranked and can be monetized,” said Gross. “Its tracking system will bring order to the chaotic mass of financial information available today both on and off-line.”
How It Works
Individuals, called analysts by iExchange.com, are allowed to post their stock picks at no charge and set a price for selling the information to investors. Typically, the prices for tips range anywhere from a few cents to a few dollars. Each sale that is processed by iExchange.com is split equally between the company and the analyst who penned the report.
Anyone can post his or her research on iExchange.com. All an “analyst” has to do is fill in a simple electronic form that states a target price, a date by which the stock will hit the target and a brief explanation of the why it will happen.
Company officials say that there are already more than 50,000 reports on over 2,500 companies posted on the site, including 450 of the S & P 500. Currently, the majority of these reports are free.
iExchange.com will track each stock pick and score them on such factors as rate of return. The participating analysts will then be ranked against each other. Those with the highest scores will be given prominence throughout the site and allowed to charge more for their reports.
Some industry observers point out that iExchange.com’s model is similar to a model rolled out by Fatbrain.com last month. Under its eMatter program, aspiring writers can sell their articles or books on Fatbrain.com’s Web site, in return for splitting their revenue with the online bookseller.
Analysts feel that the problem with both models is the issue of whether the consumer will take the time to separate the wheat from the chaff. But some experts note that iExchange.com’s scoring component could be a way to quickly bring the cream to the top.
Nonetheless, some wonder how many financially savvy investors will be willing to fork over their money to get advice from amateurs.
iExchange.com is backed by some Wall Street heavyweights, including Michael Lipper, founder of New York mutual-fund research company Lipper, Inc. Additionally, David Eisner, iExchange.com’s founder and president, is a former executive at Jefferies & Co., a Los Angeles investment banker.
The company raised $1 million (US$) during its first round of funding, with more than half of the money coming from Idealab! In addition, Kleiner Perkins Caufield & Byers, a San Mateo, California-based venture capital firm, pumped $5 million into the iExchange.com in May.