Business, Top Stories

No, Bloomberg Is Not “Unbundling” Its Chat Service

Financial technology and media company Bloomberg is extending its terminal chat capabilities amid what is being characterized as a fight with Silicon Valley rival Symphony. But the new chat service might not an unbundling as much as it serves the purpose to make Bloomberg technology a more integral component of Terminal user lives. The chat service is not available to the general public, just to firms that have Terminal subscriptions, a Bloomberg source told ValueWalk. The Enterprise IB initiative is an extension of a program the firm first launched in 2013. The move comes as the challenge from Symphony, characterized as a “Bloomberg killer,” is reported to have ramped up 235,000 paid subscribers. Other analysts, however, downplay the potential for Symphony to compete against the core of the Terminal’s technical reach.

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By Amin (Own work) [CC BY-SA 4.0], via Wikimedia Commons

The Terminal battle on Wall Street has been a heavyweight affair from the start involving the largest banks on one side and a premier financial news, technology and data service provider on the other side. Complicating matters, Bloomberg's largest clients are the banks.

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Bloomberg terminal subscription data source: Burton Taylor Consulting

The public flair-up appeared to start in spring of 2013. This is when reporters from Bloomberg News were accused of using administrator access to the terminals to gather information on bank employees for reporting purposes. An independent review found was not widespread and Bloomberg tightened controls on data. It was several months later that a group of Wall Street players began developing plans to launch a competing messaging application, according to the New York Times. In 2014, a group that included the nation’s largest banks and financial services companies formally launched Symphony, pulling together $66 million from 14 financial institutions.

Those efforts to establish Symphony have borne fruit for investors to various degrees, as Palo Alto-based firm has now raised over $263 million, is valued at over $1 billion and, according to a report in the Financial Times.  Just over half the total subscribers, 118,000, are “active,” compared to Bloomberg's installed based just over 324,000.  The revenue picture is quite different. Even though it has a $1 billion valuation, Symphony is estimated to generate near $56 million in annual revenue while Bloomberg is estimated to generate over $9 billion.  While Symphony defines active chat users based on one per month, sources have indicated active usage on Bloomberg's chat application is significantly higher.

The chat application is one component of a much larger  Bloomberg technology ecosystem.

Bloomberg technology and its ubiquitous terminal empire, which has added more than 5,000 subscribers since 2013, is offering its chat service to additional employees of existing Bloomberg subscribers for $10 per month.

FundFire had previously reported that in January Bloomberg launched a carve-out of its messaging tool for users without a terminal, but who work at a company with at least one terminal, according to a person with knowledge of the matter. Bloomberg emphasized to ValueWalk the chat application is not available to the general public.

"We're adding immediate value to existing Terminal users' workflow, allowing them to communicate with employees who aren't traditional Terminal users,” a Bloomberg spokesperson told ValueWalk, pointing to human resources, administrative and support employees who might benefit from chatting with other employees inside the firm. “We've been doing this since 2013, when we created functionality to allow Terminal clients to have a direct connection to trade support users to help them quickly resolve post-trade issues. And now, thanks Enterprise IB, everyone in a Terminal user's firm who needs to communicate with Bloomberg Terminal users in a compliant manner on a single platform can do so."

The chat application, which was categorized by Robin Wigglesworth of the Financial Times as “arguably one of the biggest drivers of (the terminal’s) dominance," leans upon mass acceptance to succeed. With so many forms of digital communication fighting for attention – Twitter, Facebook, Linkedin, SnapChat just to name a few – adding another chat application alongside email works when other professionals are using that application. Bloomberg’s move to extend its internal reach inside existing customers is viewed by some analysts as less a threat from Symphony as it is a method to gain additional adoption and “stickiness” inside their client's daily workflow.

It is the ability to generate tangible results that in particular makes the application particularly sticky.  Professionals selling to institutional investors were known to use the Bloomberg chat application to communicate with hard to reach executives. "If I can close one deal per year due to chat, it pays for itself," one terminal user involved in asset gathering previously told ValueWalk.

Beyond sales, traders use the terminal for its deep analytical tools as well as for extensive Bloomberg news coverage that includes a variety of sources including ValueWalk. There is a much talked about a classified section called "Posh," where expensive personal items are bought and sold, which also relies upon high adoption levels from arguably the most affluent on Wall Street to succeed.

"The unique aspect to Bloomberg is that through years of investment they have built a platform that covers many steps that are integrated, noting that the Bloomberg technology behind the terminal casts a very wide net across every step of the supply chain, Aite Group analyst Spencer Mindlin told FundFire. “That is unique and not easily replicated."

Mindlin doesn't see Symphony as a direct threat, however. There will likely be multiple chat applications in the future, he told ValueWalk, a point with which some analysts disagree. He said one reason the sell side finds Bloomberg technology indispensable for client communications is due to their customers, the buy side, integrating Bloomberg technology so deeply into their company. "Chat is a commodity function," Mindlin said. Bloomberg technology, which the company has built that integrates with the buy-sides workflow is creating a significant "barrier to entry," with the cost of a buy-side firm leaving Bloomberg's technical platform meaningfully high, he said.

While the chat battle rages on a tight-rope of complex issues, it hasn't much impacted Bloomberg's bottom line from the point the Symphony concept was first conceived.

While terminal subscriptions are off slightly in 2017 -- down in the "hundreds" according to Doug Taylor of Burton Taylor Consulting -- other divisions inside the company are flourishing. Bloomberg has delicately transformed from a media and data provider to an integrated financial technology and media firm. The company has over 5,000 engineers on staff, nearly twice the number of journalists, which is 2,700 out of a total employee base of 19,000. Bloomberg's well over $1 billion enterprise consulting business, for instance, has seen double-digit annual percentage growth for the past few years, according to a source familiar with the business. This paints a far different picture of the firm than the dire predictions that were made around the launch of Symphony.