Microblogging search outfit Topsy Labs is to release a Twitter sentiment analysis tool later this year to investors looking for guidance on stock-price moves after demonstrating impressive market-beating results on Netflix and Apple stock.
San Francisco-based Topsy Labs is to join other firms such as WallStreetBirds and Derwent Capital in an attempt to beat the street by offering a direct pulse on consumer sentiment as expressed through the Twitter firehose of public opinion.
"Thus far, a tangible, measurable "word on the street" signal has been elusive and therefore mostly unincorporated in trading models," says the firm. "Earnings reports give retrospective information on consumer spending, but what if we could tap into consumer spending before the end of a quarter? What if we knew how people felt about a product before it launched?"
It cites the dip in Apple stock after the preview release of the iPhone 4S in October, when analysts, swayed by negative media comment, knocked five per cent off the share price on the opening bell.
Topsy's analysis, however, found more positive sentiment being expressed by potential consumers on Twitter. When the phone was released ten days later, more than 1 million devices were sold in the first 24 hours. By the end of opening weekend, Apple had sold 4 million iPhone 4S devices, driving the company's stock price skyward.
Says Topsy: "Since consumers, not analysts, are those who actually drive revenue for the iPhone, traders would have really benefited from getting this kind of insight into consumer opinion."
The predictive power of the service was also demonstrated around Netflix's decision last September to split its DVD and streaming businesses. By picking up on negative consumer signals on Twitter, Topsy correctly forecast an impending slump in the firm's market cap.
Topsy, which has unlimited access to archived and real-time tweet streams from Twitter's 100s of million users, says it will release a commercial version of its analytics application to investors later this year.