Alternative data is non-traditional data the investors utilize to guide their investments. Traditional data such as sales figures, presentations, and financial statements generally do not provide sufficient and complete information. For that reason, investors are looking for ways to gather, analyze, and expound valuable data.
Some non-traditional sources include news sites, public records, satellites, web traffic, and mobile devices. Alternative data provides investors practical insights to show them which investment opportunities are the best. In other words, alternative data supplements what lacks in traditional data.
How to Use Alternative Data
Alternative data has become popular in the investment and finance sector. Several investment firms use it to search for new alpha sources. The term alpha refers to the measure of an active ROI (Return on Investment) and its performance based on a market index.
For example, a geospatial company monitors parking lots using satellite imagery. Then, they use the data from the imagery and sell it to provide insights on when and where people usually shop. This type of information can provide investors a picture of possible sales revenue.
Software companies also consolidate card transactions to sell to pooled investment (hedge funds). These sets of data can cost almost a million dollars. However, they can uncover insights linked to spending habits, retail trends, and fraud detection.
Another example is social media platforms, where you can scrape posts from users. You can use data from these sites to conduct sentiment analysis.
The Importance of Alternative Data
Though there are several reasons why alternative data is important, below are three of the most important reasons why:
1. Alternative data can power advertising
With online browsing, companies can track the habits of consumers in connection with various product categories. Therefore, there are new insights regarding consumers’ interaction with different and specific product categories. These can serve as a guide to advertising campaigns.
2. Alternative data can track corporate revenues
When applications follow purchase confirmation pages, it will be possible to determine gains. Moreover, it will be possible to keep track of the usage of mobile applications, including the time spent by users on those apps.
The data gathered can provide insights into the demand of different mobile apps, social media sites, mobile games, e-commerce platforms, and financial services. Therefore, it will be easy to follow trends and make data-driven decisions.
3. Alternative data can trace business risks
By keeping track of credit quality gathered from different credible sources, companies can determine whether they are at risk of financial failure.
Presently, the leading companies all over the world use alternative data to guide their financial strategies. However, several other companies are still learning to use alternative data. Nevertheless, the influence of using alternative data is growing as businesses compete and continue to search for ways to get leverage.
What are the Challenges of Gathering Alternative Data
However, gathering alternative data also has its challenges, which are as follows:
1. Outdated Information
Alternative data must be relevant and real-time. To get the most out of alternative data, it must be updated, consistent, and user-friendly. Whether your business gathers public data or offers in-depth analysis, basing insights on complex and outdated information can be risky.
Using proxies can help you collect real-time information. German proxy provides you with updated data from a network of targets, using adaptive parsing to restore parsed data into the JSON format. This will help you prioritize analysis instead of categorizing gathered intelligence.
2. Geographical Restrictions
Monitoring public sources and several websites requires a large-scale of resources and may depend on specific geographic locations. Note that sets of alternative data often cover information related to real-estate, e-commerce, and retail trends. While many websites let you access information based on your IP address, obtaining detailed information from specific locations can be challenging.
By using a German proxy, you can access information from websites regardless of your location. Premium proxies permit companies to acquire and monitor public data no matter where you are located.
3. Time Sensitivity
Unlike traditional sources of data, sets of alternative data are not directly accessible. Collecting alternative data can be a resource and time-consuming, requiring creative solutions to help harvest the data needed whenever and wherever. Note that you must go through several sources and obtain a fair amount of data to gather alternative data. All information collected must be relevant for you to take action and create wise decisions.
German proxy offers a solution that extensively permits block-free web scraping of public data, ensuring that you can easily access desired targets and effectively use alternative information.
The use of alternative data does not rule out the use of traditional ones. It may be more helpful to use both for the growth of your business or company. Though there may be challenges in collecting alternative data, you can use proxies to gather information quickly.