There aren't many people who would be brave enough to take on billionaire businessman Michael Bloomberg, but Irish man Morgan Downey is one of them.
The New-York based, Limerick-born entrepreneur is going after the tycoon's cash cow – the Bloomberg Terminal – with an alternative browser-based market data platform known as Money.Net.
Given that Downey’s offering costs about a twentieth of Bloomberg’s and is, he says, more user-friendly, he could yet succeed in taking down a product long seen as essential on trading desks around the world.
"Our goal is that if you're working in finance, even if you're not a trader, then you should have Money.net," Downey told The Irish Times.
He is so confident he can make a success of the product, which allows users to interpret market information in real-time, he believes he may be about to turn the $30 billion business information industry on its head by running Bloomberg’s company and its main rival, Thomson Reuters, out of business.
Given that Downey has successfully gained thousands of paying customers since launching his product last year, he may be right.
“Money.Net is an existential problem to both those companies right now because we’re a small start-up and they’re massive, but this is how disruption happens. You have a small firm that everyone dismisses, but they come up with a better product than what’s currently available and they change everything. In three or four years’ time the existence of Bloomberg or Thomson Reuters is questionable,” he said.
Michael Bloomberg knows all too well how such a scenario can play out. The former mayor of New York, whose fortune is valued at $33.7 billion, made his money with the Bloomberg Terminal, a dual-screen proprietary computer system that provides messaging, data, analytics and news to finance professionals.
The terminal first hit the market in December 1982. It was so revolutionary that it quickly became a must-have for traders and investors, easily pushing aside older rivals such as Quotron and Telerate.
The Bloomberg Terminal now provides market data and trading services to more than 320,000 subscribers globally, with companies paying up to $24,000 a year to have one of the machines sitting in their office.
According to research firm Burton-Taylor International Consulting, the terminals account for about a third of the global market in financial information and generate as much as 75 per cent of Bloomberg company revenue.
The terminal is so powerful that when it experienced a network outage in April, the disruption led the UK to postpone a scheduled £3 billion debt auction.
But now, the terminal and the 13-year-old rival messaging service offered by Thomson Reuters are both under threat from Money.Net and a number of other solutions out to disrupt the market.
Money.Net is a cloud-based platform that provides all the market information and tools that you’d find on the Bloomberg Terminal for a flat $95 a month.
Launched in the second quarter of 2014, Money.Net now has thousands of paying customers, including all the major US banks and many of the leading hedge funds, asset management firms and financial advisory companies.
Downey says that because of the low cost, the solution is also being adopted by organisations that would be unlikely to pay for a Bloomberg Terminal, such as business schools.
While cost is a compelling reason to switch to Money.Net, Downey insists it is not the primary motivation for customers.
“The reason why people are using it is not simply because it’s cheaper than more traditional services, but because it is much more intuitive and has a lot of additional tools that don’t exist on Bloomberg or Thomson Reuters,” he said.
Downey, who established Money.Net after serving as global head of commodities at Bloomberg from 2008 to 2013, said he decided to set up his company after seeing how frustrated traders were using standard financial information services.
Downey, who left Ireland just days after completing a degree in finance at the University of Limerick to move to New York, spent 15 years running trading desks, as manager and head trader, for banks such as Citibank, Bank of America and Standard Chartered, in the US, UK, Australia, and Singapore. He also previously wrote Oil 101, a best-seller that helped explain the oil industry.
“There is a demand for an alternative to Bloomberg or Thomson Reuters because people simply aren’t happy using them. Between them these companies control about 80 per cent of the financial data market and so are kind of like an oligopoly controlling what information traders around the world have on their desktops.
“But clients aren’t content with this situation for a variety of reasons. Firstly, there is the cost factor, but a second issue is that there’s been no real innovation in those products for years. They have become bloated and unintuitive, and so people are looking for something better,” he said.
“Those companies say you can do a training programme to use their systems, but you shouldn’t have to. Admitting customers need to do training to use the products is not something to be proud of. It is a failure in terms of design,” he added.
Downey admits advances in technology have put him in an enviable position because he’s been able to build out his solution cheaply. He believes that while both Bloomberg and Thomson Reuters know their systems have become bloated and almost unusable, they can’t rectify the situation.
“The cost of building a Bloomberg-like product has collapsed in recent years and so it is easy for newer entrants to come up with solutions, but difficult for older firms to adapt because their products were expensive to develop.
"Those companies (Bloomberg and Thomson Reuters) are similar to how the likes of Pan Am and TWA were in the 1980s. Those airlines had high cost structures and eventually went out of business because they couldn't adapt quickly. Bloomberg and Thomson Reuters are similar because they are old legacy systems based on a high-cost model. They can't take advantage of newer technology to cut costs."
It wouldn’t be too surprising if one of the big players tried to acquire Money.Net, but Downey insists the company is not for sale.
“The cultural differences are so large that it wouldn’t work. We’re a young tech company and those guys are like old bureaucracies. I don’t think it would fit at all,” he said.
Unusually for a technology start-up, Money.Net is self-funded and Downey is planning to keep it that way for now.
“Most companies in our position have vapourware and no revenue, and are living on venture capital money. We decided early on we didn’t want VC funds. We figured it would be better to run as long as we could without external funding because the terms aren’t usually great,” he said.
Downey admits he doesn't have the playing field entirely to himself as there are other entrants coming into the financial data space. One is Symphony, a new messaging platform backed by a consortium of 15 investment banks including Bank of America, Goldman Sachs, HSBC and Morgan Stanley.
“We’re big fans of Symphony and have that hooked up to our system. A lot of side players like them are building part-solutions such as chat, but we have a full platform,” he said, confirming the firm is now also developing its own breaking news service.
Money.Net currently employs 50 people in New York and about 65 per cent of its customer base is in North America, with the remaining 35 per cent of subscribers scattered across the world in Europe, Australia and Japan. There are even a few in Ireland.
Downey says that over the next year the company is focused on making its platform even more compelling.
“Our goal is to build out the platform more to make it even more of a must-have platform and encourage people to switch from Bloomberg or Thomson Reuters. We don’t just want them to do it because we’re cheaper though. We want them to have a holy-cow-I-have-to-have-this experience rather than an it’s-less-expensive-and- will-get-the-job-done one,” he said.
Money.Net is also considering establishing an office here as it seeks to gain more customers in Europe, the Middle East and Africa.
“I went straight to New York after I graduated because I wanted to be at the centre of capitalism. But I love Ireland and it has a great reputation in the fintech space. We’re seriously looking at opening an office overseas early next year. I’m expecting it will either be in the UK or in Ireland,” he said.