Information, money and power - a vital triad for business. Whatever about power, information and money are hand-in-glove in the financial world. So, with the vast array of business websites offering real-time quotes, news, gossip and analysis, and with more information delivered faster than ever, the Internet offers strong lubricant for the engine of capitalism.
The principle that the best decisions are made by the most informed minds is one which long predates the Internet. In 1815, financier N. M. Rothschild made a tidy sum because his hot-footed messengers brought word of the victory at Waterloo to his desk before the other budding stock traders heard of Napoleon's defeat. Rothschild bought war bonds cheap and sold for a healthy profit when news finally reached London.
In Rothschild's time, news took days to travel from Paris to London, giving clever investors a chance to get the word and act on it before anyone else. But today, news flits from Dublin to Delhi in nanoseconds and investors can follow every twitch in a stock as closely as intensive-care doctors monitor changes in a patient's pulse.
The financial services industry, renowned for its conservatism, has had to revolutionise procedures to handle the challenges of new technology. Today it is possible to arrange loans and mortgages, buy insurance, apply for a credit card and, of course, trade stocks and mutual funds online.
While the Internet may represent only a tiny percentage of the overall retail business of financial institutions, financial websites are attractive additions to their services. Figures show they are the "stickiest" for Web users, with visitors spending longer on them than on others.
Audience ratings agency A.C. Nielsen claims that, while financial and investment websites represent just 4.5 per cent of Irish Internet usage, ahead of travel sites but below shopping, visitors spend longer on them than any others. Sean Kaldor, vice president of e-commerce ratings at the agency, says: "As people seek out others with a common interest and take advantage of the Internet's unprecedented financial services capabilities, these areas experience average usage times nearly twice that of areas like travel, classifieds, education, and others." Globally, finance and investment websites attract 26.63 per cent of Internet users, ninth in the usage table, but they enjoy the highest time spent per visit, at 14.58 minutes.
Statistics such as these are driving the growth of online financial information. For profit-barren content providers, the idea of retaining visitors on your site with valuable data and analysis may just be the route to solvency. While most sites offer the information free of charge, more are offering premium services, such as searchable archives and e-mail alert systems, on a subscription basis.
The problem for users and investors today is one of information overload. From quotation sites like quote.yahoo.com, to investment analysis sites like www.thestreet.com or the Motley Fool (www.fool.com), and mainstream media sites such as The Irish Times website, www.ireland.com or the Financial Times's www.ftmarketwatch.com, the variety of services is enough to make your head spin.
Investors are having problems digesting this feast of financial information. A little knowledge may be a dangerous thing, but too much knowledge can be paralysing. Users must realise that when they watch the market, much of what seems like news turns out to be nothing more than noise.
Recently, the financial media was virtually unanimous in declaring southeast Asia one of the best long-term investments. Next, the Asian markets crashed and everyone was advised to bail out. Then, when those markets bounced up early this year, the coverage went all bullish again; and now, with Asia once more in retreat, the bears are making all the noise. Trying to follow all this could give you whiplash.
What is more, information on financial bulletin boards and discussion forums may be, at the very least, misleading. Earlier this month, US federal agents arrested a 23-year-old in California in connection with an Internet hoax involving a US technology company Emulex. The company fell victim to an Internet fraud that cost investors millions of dollars in losses.
Shares of Emulex lost up to 60 per cent of their value in midday trading after a bogus press release was posted on an Internet-based wire service. The phoney release claimed the company had issued a profits warning, that it was being investigated by securities regulators and that its chief executive had stepped down. The release was reported as fact by wire services and various websites before a strenuous denial was issued.
Emulex lost $2 billion on the market before the stock resumed trading later that day, regaining nearly all its losses. The man is believed to have made profits of $240,000 before being arrested. He now faces up to 15 years in prison.
Similar concerns over fraud and security have arisen in the area of online banking. Here competition is between the new generation of online banks and the established bricks-and-mortar monoliths.
British-based Egg, launched by insurance company Prudential in October 1998, captured a remarkable 22 per cent of net new deposits in Britain in 1999. However, recent media coverage has centred on an attempt to defraud the bank, the first case of online bank robbery. While the perpetrators were unsuccessful, the spotlight has been focussed on the security of online banking.
However, online bankers can take comfort from a recent survey of more than 15,000 consumers in 15 European countries, conducted on behalf of Europay International, the European arm of MasterCard. It found that 68 per cent of those questioned trusted banks to keep personal data safe, despite the recent security breaches. This compares with 44 per cent who trust telephone companies and only 15 per cent who trust online retailers.
In the end, questions over security raised in recent weeks may slow the sector's growth. But continued developments in overall online security should reassure the public about both banking and conducting e-commerce online.
In Ireland, AIB and Bank of Ireland have developed online products for customers, while Ulster Bank this year made the first foray onto the wireless market, allowing customers to call up their account balance and make daily transactions using a WAP service.
While the early running is being made by the Internet start-ups, it is likely that the established banks will hold their own in the new marketplace. Charles Schwab's coCEO David S. Pottrock, who coined the term "clicks and mortar", has said: "Sooner or later you need more than an outpost in cyberspace. Online commerce has to be about technology plus people."
You can't really hope to beat the professionals in terms of speed of reaction to breaking news, but private investors now have a variety of cheap or free ways of keeping abreast of events.
For Irish audiences, ireland.com's business website, www.ireland.com/business, offers a wide variety of updated national and international news, information and analysis. It also features an Irish share price section - updated four times daily - allowing visitors to track a share's performance over the previous three months and match it against another quoted company.
What's more, the site was relaunched recently with a special mutual funds section. In conjunction with Moneymate, it allows visitors to track a portfolio of funds online.
APART from the financial portal sites, investors can get the exact text of a company announcement at sites such as UK-iNvest (www.uk invest.com).
The site operated by Hemscott (www.hemscott.net) has a full RNS and AFX service available, along with the chance to look up individual company details. Some brokers also have a news offering available to clients, such as Davy's (www.davy.ie).
Of the business and investment magazines online, both the Economist and Businessweek offer limited services to visitors, with searchable archives for subscribers. In the Irish market, Business and Finance (www.businessand finance.ie) offers an updated news service along with full text of the latest edition.
In the end however, users will likely settle on three to four sites that suit their needs and cover the topics they are interested in, with the chance to monitor and manage their investment portfolio online being a big attraction. For the rest, it will be hard to get their voices heard.