If you still haven’t caught up on the concept of alternative data, it’s time to get up-to-date. Alternative data is quickly gaining popularity, especially among financial companies and hedge fund managers. Below the article here find gather alternative data successfully.
Even though it comes with its own complexities and challenges in the asset collection process, alternative data is the next best thing in the internet-driven world. Suppose you’re interested in finding out more about it. In that case, we’re going to break down the concept of alternative data to better understand the different types, their uses and benefits, and more.
Understanding the concept of alternative data
Traditional data sources like sales figures, SEC filings, presentations, charts, and financial statements can be quite valuable to business organizations as they provide a wide range of useful insights. However, the problem is that these data sources can’t help the user create a timely and complete picture.
In the data-driven era, modern investors need sophisticated solutions that allow them to get actionable insights before they make their investing decisions. Since the need for such solutions is so high in demand, many business organizations have turned to non-traditional sources to gather, extract, analyze, and interpret user data.
Some of these sources include news sites, public records, satellites, mobile devices, web traffic, sensor inputs, and financial transactions. When compared to data gathered from traditional sources, alternative data provides investors with timely and unique insights that allow them to recognize the most lucrative investment opportunities.
If properly extracted, such data can help them predict events and make forecasts based on the knowledge gathered from popular financial news outlets. Alternative data is rapidly growing and expanding into new markets. According to some statistics, asset managers are prepared to invest up to $3 billion in alternative data acquisition and processing.
Alternative data can be generated by:
- Individuals – social media, product and customer reviews, comments on news sites, queries on search engines;
- Business processes – corporate data, sales data, credit card, and other financial transactions;
- Sensors – geo-location, satellites footage, POS data, CCTV, other internet-enabled devices;
Types of alternative data
There are different types of alternative data out there. Let’s take a closer look.
Web data includes information coming from the web such as click-through rates, demographics, popular web searches, web traffic, etc. This type of alternative data can be used for creating marketing and advertising campaigns and increasing the popularity of your products or website. It’s especially valuable for e-commerce and market research.
This type of data comes from analyzing social media comments and posts and includes product ads, public reactions to the news, etc. The social sentiment data comes in the form of videos, digital images, or textual posts and can be used to get ahead of brand virality and current industry/market trends.
Geo-location data refers to the data collected from mobile and other electronic devices, including Bluetooth and WiFi signals used to track their physical location. This type of alternative data is particularly useful for gathering information for making location-based decisions. Companies rely on geo-location data to understand what type of products are high in demand across different markets.
Credit card transactions
Debit and credit card transactions are an excellent source of alternative data, especially when it comes to tracking and monitoring retail revenue. Such financial data is highly informative and accurate, telling businesses all about their consumers’ financial and purchasing habits.
Electronic receipts are obtained on delivery of purchased services or products and come in response to invoices, rewards received from a rewards app, opt-in emails, and so on, and can be used for tracking retail revenues.
POS transactions are extremely valuable to data-gathering companies as they provide loads of information regarding price trends and sales volume and product popularity and consumer preferences.
The uses and benefits
Modern business organizations rely on alternative data to better understand technology trends, market conditions, their competitors, brand sentiment, enhance quantitative investing, recognize the most lucrative investment opportunities, understand their target audience, and more.
Here are top uses cases for alternative data:
- Predictive and descriptive analytics
- Competitive intelligence
- Identification and tracking of market-moving signals and events
- Financial services
- Data science, analysis, and modeling
- Historical analysis
- Risk management
Challenges you will face gathering this data
Since gathering alternative data is still a relatively new practice, there are many challenges that you will face when trying to collect such information:
- Non-traditional data sources – the biggest problem with gathering alternative data from non-traditional data sources, such as the shipping activities of a company, is a lack of expertise. Most companies don’t have data scientists who could collect data from non-traditional sources without raising a few red flags.
- The quality of data – gathering valuable and top-quality alternative data is probably the biggest challenge. With so many sources of alternative data on the web, it’s really hard to know what type of data is useful. However, this can be solved by figuring out the authenticity of alternative data, as well as its legal accessibility and source.
- Unstructured data – even if you manage to gather alternative data, you’ll still end up with loads of raw, unstructured data.
Proxies as an essential tool
Fortunately, it is quite possible to overcome the challenges of gathering alternative data by using a proper tool to obtain it. Let’s say that you’re trying to obtain alternative data from a source in Japan, but you can’t access it. The best way is to use a Japanese proxy to bypass whatever restriction your target website may use and harvest the data you need. For more detailed information on the Japanese proxy, check here.
Web scraping is an excellent way to access alternative data available over the internet. You can use a Japanese proxy to browse the most important web pages from link to link, find the information you want, and extract it for further analysis. You can also harvest alternative data by acquiring raw data, even though this requires more effort, time, and resources to clean it.
Alternative data is becoming increasingly important these days as it helps companies become more competitive and work smarter rather than harder. If you gather and use it correctly, you can expect to see your business operations grow on time.