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In a ploy to win users and influence the online trading sector, Fox News Online began offering real-time stock quotes free of charge on Wednesday - a service likely to send a few shockwaves through securities camps.
Financial information sites, like Quote.com and PC Quote, have long charged for up-to-the-minute data, offering quotes with 15-minute delays to their nonpaying visitors. And online brokerages have typically only given away real-time quotes in conjunction with an actual trade.
Analysts view Fox's move, which it made in partnership with Thomson Financial Services and online broker Etrade, as yet another competitive salvo in the battle waged by market-oriented Web sites to lure small investors with Wall Street-style perks.
Thomson has been offering real-time quotes since last November on its own Web site, and intends to work with other sites in the coming months, according to Ray Kingman, president of Thomson's consumer products group. "This isn't an exclusive," he said of the Fox deal.
"We're now on the slippery slope towards free real-time quotes everywhere, for everybody," said Bill Burnham, a senior analyst with Piper Jaffray in Minneapolis, who was not quite impressed by the new feature. "Once that becomes fairly widespread, it's on to the next trick."
Fox's offering is a new model for real-time quotes. Since the major exchanges charge for the freshest stock prices (usually a penny per quote), Fox is covering the cost through a sponsorship fee being paid by Etrade. In return, Fox will display Etrade banner ads and link users to Etrade's site to consummate a stock purchase.
But there are limitations to Fox's service, owing to exchange requirements and a desire on Thomson's part to prevent professional investors from abandoning their high-priced data feeds, which Thomson also sells, in favor of a freebie Web site.
The biggest barrier is a registration process that forces users to fax or mail in a signed waiver. The exchanges don't want to be held liable for monetary losses based on bad ticker information, and while Nasdaq will let investors fill out a waiver online, the New York and American Stock Exchanges are still skittish about such a form's validity.
Users of the Fox site are also limited to 50 quotes a day, and they can only get a "snapshot" of one stock at a time, rather than following multiple stocks dynamically, as a broker would.
For those reasons, companies like PC Quote, Data Broadcasting Corporation, and Quote.com aren't worried about their services - which can cost upwards of $79.95 - becoming obsolete in the short term. Quote.com CEO Chris Cooper, for example, says that even users of his $19.95 a month snapshot service want the ability to get prices for several stocks at once, and to receive more than 50 quotes a day.
Neither Fox nor Thomson are likely to duplicate that functionality free, Cooper said. "If you're paying a penny or two for each quote, and you show the user five or ten quotes on a single page, it's hard to get advertising or sponsorship revenue to cover that cost," he said. Even so, Cooper says his company is not married to the practice of charging monthly fees, and will likely offer more advertiser-supported services in the future.
Still, as real-time quotes become a commodity, there are probably few individual investors who can appreciate the advantage over a 15-minute delay.
"For the day traders" - people who make dozens of rapid-fire trades throughout the day - "it might be a significant advantage," said Lucy Calwell-Stair, publisher of "The 1998 Online Investing Sourcebook." But Caldwell-Stair says the hype of real-time quotes for individual investors may be the result of online brokerages and financial information providers getting caught up in a PR spitting match. "They're competing on commission fees and the amount and quality and timeliness of the investment research data," she says. "They're competing on just about anything they can think of to compete on."
Dale Wettlaufer, a writer and analyst at the Motley Fool, points out that the overarching goal of online brokerages is to encourage as many trades per customer as possible, since they are paid on order flow. "So if real-time quotes prove an inducement to getting people to trade more often, that's fine with them," said Wettlaufer. "But we believe that the individual investor should be buying great companies at fair valuations and holding onto them, rather than trading his entire portfolio every week."
Wettlaufer also said that it's possible the exchanges will drop the fees they charge per quote since their objective, like the brokerages, is to generate more trades. "[The real-time quote fee is] not revenue that the exchanges depend upon," Wettlaufer said. "And besides, what they lose in revenue they'd be making up in increased trading volumes."
Ultimately, real-time quotes seem to be just the latest gimmick of cut-throat Web competitors striving to make money while providing cheap or free services. And as one competitor finds a way to lower the price, others have no choice but to follow. Says Piper Jaffray's Burnham: "As Netscape is finding out, it's tough to charge for something that someone else is giving away for free."
