Money.Net CEO Morgan Downey has had more than his share of success. A veteran of several leading firms including Citibank and Bank of America, Downey ran trading desks for 15 years before joining Bloomberg, where he headed the company’s commodities group and managed the development of its professional terminal. Along the way, Downey also penned Oil 101, a widely read book providing insight into the workings of the global oil market. Given Downey’s track record, he could have played it safe for the next chapter in his career. Instead, he has taken on the daunting task of creating a next generation financial workstation at a compelling price point. The FR’s Gregg Schoenberg caught up with Downey recently to learn more about his motivations and his emerging company.
The Financial Revolutionist: Welcome, Morgan. It’s great to have you. What led to your decision to take on heavyweights such as Bloomberg and Thomson Reuters?
Morgan Downey: Thank you, Gregg. I wanted to build the tool that I would want to use and it just didn’t exist. Taking on Bloomberg and Thomson Reuters was a side effect. The tools provided by the existing providers are shadows of what they could be and I wanted to do something about it.
FR: Was the bet that you could siphon away customers from the two big players or that you could expand the market?
MD: To expand the whole market, absolutely. Let’s take a typical medium-to large-size US firm as an example. They’ve got 30,000 employees and 3,000 Bloombergs. What about the other 27,000 people who need financial data? Every time they have to do research, they have to undertake the awkwardness of walking over to the corner where the Bloomberg sits, downloading the data into a spreadsheet and walking back to their desk. I want the other 27,000 employees to have the market information they need at their fingertips.
FR: And how does your pricing compare to other providers?
MD: Right now, we’re priced at $150 per month, which is just under $2,000 per year. We’re a two year old company and so pricing hasn’t settled yet — although our goal is always to be 10 times less than Bloomberg while being a much better product. We are committed to remaining under $3,000 per year for the next 24 months, and potentially much longer, even as we add more features and content. This compares to Bloomberg’s $25,000 per year cost. And whereas Bloomberg and Thomson Reuters have a limited number of users, often with shared access, our goal is to be ubiquitous on every desktop in finance.
FR: What can you share about your total subscribers and growth rate?
MD: Our growth rate is in the double digits per month with very high retention and sticky usage. But it’s important to note that people are using our product for their jobs. Some think that because of our price point, we are pricing for retail. That’s not the case. Our customers are banks, hedge funds and asset management firms that use Money.Net for mission critical purposes.
FR: We found a quote from you on Quora where you said, “Bear in mind that we are just months into rolling out this product and you will see huge advancements over the coming months and years.” Are you on track?
MD: Yes, very much so. Actually, we’re ahead of a lot of our partners in terms of integrating.
FR: Of course, both Bloomberg and Thomson Reuters have vastly more resources than you. What if Tom Secunda (Co-founder of Bloomberg) retired tomorrow? Isn’t it a risk that his replacement would see what Money.Net is building and take aim at you?
MD: No, not at all. I am a great fan of Tom Secunda. He was the creator of the technology behind the company. He’s the spark of innovation, their Steve Jobs. However, the entire structure of Bloomberg, every single part of it, is built facing the wrong way — the expensive, inefficient and slow moving past. Their customers roll their eyes at how old the technology is. Sometimes companies need to build the newer product that kills their old product. Bloomberg, in my view, is a comfortable, stagnant cash cow that will not take that risk.
FR: So you don’t think the terminal goes away after he departs?
MD: Well, it’s not going to be wiped out in the next year or two regardless. But five years from now, the terminal can’t exist, because we exist. They’re like Blackberry, whereas we’re the iPhone or Android. We can’t exist in the same world. And when people switch to Money.Net, they aren’t signing up for additional Bloombergs.
FR: Yes, but some of those users could say that there’s a data supply chain risk with Money.Net vs. Bloomberg. Couldn’t that throw a hitch into your forecast?
MD: Actually, we get almost no feedback on data supply issues or the quality of the actual product. No market provider “owns” the data. Both Bloomberg and Money.Net are data distributors. There are only two things we don’t have: one is Bloomberg chat, which I believe is a monopoly. The other is their breaking news product, but I believe that our news solution using artificial intelligence and higher speed multiple breaking news sources is better anyway — it’s the new newsroom.
FR: Ok, so walk me through the purchasing decision. Or to put it another way, why is anyone paying for Bloomberg then?
MD: Let’s take a start-up hedge fund in New York with a typical setup of ten people in a midtown office. A fund like that used to get ten Bloombergs. Now, it will get ten Money.Nets and maybe three Bloombergs.
FR: What’s the reason why it gets the three Bloombergs?
MD: It’s chat. They want Bloomberg for chat.
FR: It’s not data supply? You don’t lose to Bloomberg on data?
MD: No. In fact, this year is an inflection point. Bloomberg’s sales this year are negative for the first time (with the exception of 2008) since the early 1980’s.
You ask any of the banks. People used to say things like, ‘oh you’ll have to rip my Bloomberg out of my cold dead hands.’ Now banks are saying that their people know that Bloomberg’s and Thomson Reuters’ technology is old. Plus, much of Bloomberg’s data coverage is government linked: Department of Labor, Energy, EU data, Italian inflation data, etc. The API world has opened up all those data sets and we have them.
FR: How does your news solution compare to the others out there?
MD: News is no longer a content generation challenge. It’s a filtering challenge, a challenge of being able to surface the right information at the right time. It’s about helping customers search news really easily as opposed to some editor spoonfeeding people stories that they are supposed to see. Speed is also critical and that is why we use artificial intelligence, machine learning and deep learning as key components of our newsroom build-out.
FR: So traders don’t like spoonfed news in your view?
MD: No, that’s not what people want today. Financial professionals have a volume problem and so we built a proprietary filtering system that was created by developers and news people who are passionate about news. And we’re able to get away with not having 3,000 journalists because we have a better news feed that is high speed and low latency. But you can’t just set up the system and let it go. We use some very experienced journalists with exceptional news judgement to seed, steer and course-correct our artificial intelligence and machine learning algos to deliver a better news experience.
FR: And how do you train it?
MD: It’s like dealing with a two-year old kid. We’re constantly tweaking the system, saying ‘“yes” and “no” to news stories and good and bad sources. But in order to do this, you need people with really great news judgment, which we have.
FR: You are obviously aware of Symphony. Do you view them as a comrade or as a competitor?
MD: We are comrades. We both walk in the front door of the same large banks and hedge funds every morning and we’ve got the same customers. But from Money.Net’s perspective, whether our clients are using Symphony, Slack or Microsoft Lync is not really our concern; however, we do share a vision of what the future should look like: an open, API-driven, competitive, modern environment.
FR: Looking beyond the big players, who would you view as a next generation competitor on the horizon?
MD: Other competitors don’t have finance domain experience in their DNA. In order to build what we’ve built, you had to have sat in a trader’s chair or at an investment banker’s desk for a while. A kid that just graduated from university would find it challenging to build a Money.Net because while that kid may be smart, he or she has no idea what the trader wants to see. Sure, that kid could stick a bunch of survey questions in front of customers and say, “How do you like this?” and they’ll say, “Yeah, I like it.” But that doesn’t give you an inherent understanding of what the customer really wants. You have to know in your gut what they need, and very often what they need doesn’t exist anywhere.
FR: Okay, that’s helpful in providing a sense of your worldview, but every company has to be concerned about somebody…
MD: Our own worst enemy is ourselves. We get inbound inquiries from many customers, vendors and partners asking us to build things for them. So the one thing that could derail us would be a loss of focus.
Sure, there are a lot of single-sleeve providers doing interesting things: a charting system, a chat system, a sentiment indicator based on Twitter, etc., but the problem those providers face is that people like to log in to one thing in the morning. A single source product creates an extra login, which is a disaster in the long-term because people will not log in to three or four things.
FR: Are you trying to turn those single-sleeve competitors into partners?
MD: Yes, what we’re saying is, ‘Come on board, we’ll make you a part of our platform with a single sign-on experience.’
FR: I’m sure you follow what’s going on in fintech in general. Do you look at next generation financial products with an eye towards partnerships?
MD: Yes, we are interested. In fact, we have made the data for several digital currencies, like Bitcoin, available through our APIs.
FR: What’s your take on blockchain technology?
MD: It’s the future. Wall Street’s back-end will be powered by blockchain technology, which will wring billions of dollars of savings out of the system. It’s inevitable and it will especially benefit companies like Broadridge, which is responsible for the plumbing system behind Wall Street. No kid who just graduated from university says, ‘Yeah, I’m going to build a processing system for some back-end.’ It’s just not cool, which is why it will be so profitable.
FR: Does blockchain tech impact your business in any way?
MD: Because we don’t do trade execution, it really doesn’t impact us. We focus on creating a great front-end for human beings.
FR: But if software continues to eat financial services jobs, doesn’t that reduce your addressable market?
MD: Traders are being whittled away, that’s for certain. But the other side of the business, the sales side, is stable and will likely grow over time because banks are growing more focused on helping customers. So while the composition of employees will change, we expect our customer mix will keep pace as well. Also, our goal is to be ubiquitous and thus expand access to more people. If you are in finance in any capacity, from trading, to investment banking, to middle and back office, to corporate treasuries, my vision is for you to get all of the raw material for your job from Money.Net.
FR: Thank you, Morgan, and best of luck to you.
MD: Thank you very much as well.
This interview has been edited for content, length and clarity.
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