The most successful companies in vertical markets pair product innovation with go-to-market disruption. In this series we explore that marriage, how companies many have never heard of came to dominate their markets, and how they scaled with distinct tactics. These history lessons inform what we look for when investing in vertical markets at Scale Venture Partners, and hopefully provide blueprints for the next generation of vertical market winners.
Company name: Bloomberg
Founder: Michael Bloomberg, Thomas Secunda, Duncan MacMillan, Charles Zegar
Year founded: 1981
Company vertical: Financial Services
Market dominance: Financial Data, News, and Communication
What do they actually do: Bloomberg primarily sells real time financial data for traders, bankers, investors and anyone else in the capital markets through the Terminal. They might be more widely known as a news site, television channel, or just from the man himself, Michael Bloomberg, but everything they do is in an effort to sell more financial data. For ~$30k a year, you can be connected to the entire financial ecosystem with all the info you could ever ask for about securities or economic data, have a direct communication channel with every other user, and even sell your old Rolex through their classifieds section. It is the most comprehensive financial data provider available and the most ingrained piece of software in finance other than Excel. Through their custom software and colorful keyboard, the world’s financial data is never more than a few keystrokes away.
Want to know all of a company’s suppliers? SPLC <GO> will show you them. Want to see how Oracle’s credit default swaps are doing? ORCL US <EQUITY> <GO> CDSD <GO> will have what you’re looking for. Want to message Bill Ackman? MSG <GO> will open up Instant Bloomberg and then shoot him a note. And that is just a sample of the 30k or so functions the Terminal has. Just in case you know what data you want but don’t know how to get there in the Terminal, you can get 24/7 support from a person to help you get exactly what you need.
Product innovation: Bloomberg’s product innovation at the beginning was delivering vertically integrated financial data from the hardware to the final analysis. Financial markets were growing increasingly complex, trading volume was exploding, and people needed a better way to receive and analyze data from across the world. While other systems just gave you pricing information, Bloomberg let you analyze it with various modeling templates and calculators. While others just delivered a hard to use piece of software, Bloomberg dropped a box off at your desk with a color coded keyboard and a monitor to get you running quickly.
Bloomberg also had an obsession with customer support and experience that quickly made it the preferred provider. They offered white glove service to help every user get up to speed, have issues fixed the same day, and any questions answered immediately by a rep over phone or in the Terminal.
Bloomberg has always been the most comprehensive and quickest data provider available. Bloomberg has made tens, if not hundreds of thousands of data points available real time to thousands of people. The engineering required to deliver this level of bandwidth and latency in the 80s cannot be understated and this investment in infrastructure set them apart from other providers.
Scaling magic moment: Aside from delivering a vastly better product and service than anything else on the market, Bloomberg had three key features that made it the preferred choice for decades. Bloomberg News gave Terminal users data before anyone else, Instant Bloomberg gave them light network effects, and the UX created real switching costs between them and other providers.
Bloomberg News was created in 1990 to bring original news content to the Terminal. News moves markets, and when you’re selling real time pricing data, it helps if you can deliver the thing that changes that data. Bloomberg News is on the Terminal first, and when making the first move can make or save you millions of dollars, there is a real advantage to coupling the news and data in the same product. It was a significant investment to launch news coverage to sell more data, but it gave them a clearly differentiated product and a real advantage in deals where data coverage was less important.
Bloomberg also has its own chat app for every Terminal user called Instant Bloomberg that they launched in 2002. This was not just a precursor to Slack to talk to people you work with, but a way to connect every Terminal user through a compliant messaging system. Live chat is just quicker than email and having direct communication to your counterparties created a real moat for Bloomberg over other data providers. They created a community inside a financial data product and made everyone who did not have a Terminal a step behind.
Buying a Terminal subscription for the news or to talk to every other user is one thing, but the depth of the product and the workflow they have created to use it makes the product really sticky. It is a complicated product to get the most out of. Tens of thousands of functions that all have their own commands creates a high skill floor to become proficient at it. Much like using Excel without a mouse, using a Terminal every day for years makes it very hard to give up and use a cheaper provider that requires you to invest a significant amount of time and energy to relearn it.
Where are they now: Bloomberg is the largest financial data provider today with over 300k subscribers and roughly 1/3rd market share. They generate about $15Bn in revenue a year, mostly from Terminal subscriptions. The company is worth somewhere around $100Bn based on Michael Bloomberg’s estimated net worth. Many have tried to dethrone them, but even when a majority of the data they offer is publicly available, the network effects, news station, a customer base that does not like change, and many other things keep them on top.