Personal Finance: The Jonathan Davis Column - Net prophets await profits

Cyberspace is a world of rapidly changing fortunes and shifting alliances where few make money

The markets may have fallen into a state of high autumnal anxiety, but at least one upward trend in the UK investment scene shows, as yet, no sign of letting up. This is the rapid and exciting growth of users of the Internet as an investment medium.

The hype says that cyberspace will soon become a leading channel in the distribution of financial information and products. I believe that it is now beginning to happen, and a lot of the hype has proved to be justified.

Nobody has ever doubted the potential of the Internet to make an impact in the sphere of investments. It is relatively easy to see how it has the capacity to create an effective marketplace, which links investors and providers of financial services in a uniquely convenient way.

But with its distinctive counter-cultural flavour, and the inevitably unstructured nature of its development, it seemed natural to express caution about how quickly it would be embraced by the ranks of mainstream investors and financial service companies. Which other medium would a company such as Scottish Widows willingly share space with Amsterdam sex shows and Matt Drudge, the man who regularly recycles the latest scabrous rumours on the peccadilloes of Washington politicians?

However, now that the Internet has started to become a respectable plaything of the middle class, all that is changing fast. For investors, in particular, the Internet opens up such a wealth of valuable possibilities that its growth was always assured once word of its capabilities began to spread. It is no surprise that, in the US, the sophistication and breadth of Internet usage in this field is still way ahead of ours. But the gap is now starting to narrow here too.

This week, I talked to the man who now runs what is currently the largest independent UK investment site on the Internet. The site is called Interactive Investor ( The aim of the site is to bring together a wide range of information and transaction tools across the spectrum of the financial markets - everything from car and life insurance to pensions and the stock market.

Most of the leading Internet service providers - the AOLs and Compuserves of this world - are attempting to do the same thing with their dedicated "gateway" sites, as are big information companies such as the Financial Times, Reuters and Bloomberg. Just to confuse things, many of these companies also are hedging their bets by supplying packaged products to other providers.

All the big unit-trust firms and banks have their own sites and are looking for the best way to access the growing band of Internet consumers.

It is a complex and fluid market, but Interactive Investor is proving one of the most durable and successful competitors. The man who runs it is an engaging Englishman with an MBA from Harvard Business School called Alex Heath. He took on the job last year, with the task of turning what was a powerful concept - first started in 1995 by a Canadian entrepreneur - into a successful commercial business.

As the chart shows, the growth in popularity of the site has accelerated rapidly since its launch in 1995. Since the start of last year, in fact, the number of registered users has grown from about 10,000 to just less than 96,000.

The number of "hits" - a measure of how intensively used the site has been - has grown from a million a month, a year ago, to more than 15 million a month today. Given that this is only one site, albeit one of the most popular, these are remarkable figures.

They underline how enthusiastically - after the slow start - that both users and financial companies are now embracing the new medium. What Interactive Investor and others are tapping into now is something more than just business dabbling in a faddy new field. Intriguingly, the Internet is starting to prove its real worth not just as a channel of communication and information, but increasingly as a medium for sales. As Alex Heath points out, whereas initially investors used the Internet to research investment decisions, more and more are now moving on to carry out transactions as well.

In addition, about a third of the site's 100,000 registered users, according to Heath, actively monitor the value of their holdings, using Interactive Investor's portfolio management service. This is a powerful tool which automatically updates the values of each share you own from its market data feeds. To keep this in perspective, some of these portfolios appear to consist of shadow transactions, rather than real life buy and sell decisions, but the trend is clear enough.

Given that this can be done for no more than the cost of a subscription to an Internet service provider, and the related local-rate phone calls, the success of sites such as Interactive Investor is perhaps not that surprising.

What is still remarkable is how far and how rapidly usage is growing. If current market research projections are correct, then Internet access in the UK is set to double from 10 million to 20 million households by the early part of the next century. Financial services will be one of the major beneficiaries of this growth.

It is true that the Internet is still largely a field of dreams for wannabe entrepreneurs. Cyberspace is a strange place to do business - it is a world of rapidly changing fortunes and shifting competitive alliances - and very few, if any, participants have yet made money out of it. Interactive Investor is no exception, but its business is moving forward.

Advertisers like it as a medium, not only because it has a high conversion rate - those who see an advertisement are more likely to make a transaction than in many other mediums - but also because the feedback from users is easy to log and analyse.

Interactive Investor has the advantage of being a small firm with the Internet as its only business, which is competing against larger competitors who cannot decide if the Internet is a threat or an entirely new market.

Of course, any sustained slowdown in world stock markets may slow down the rate of growth in investor interest in this new medium. As the second chart shows, shares in American companies with Internet interests have already taken a pasting since the market started to wobble badly in July. But as a regular user of Interactive Investor and many other online services, my guess is that the momentum behind the growth in current demand is largely unstoppable. Once tried, it is hard to conceive of life without it.

Have you tried new the Independent Digital Edition apps?
Life and Style
ebookNow available in paperback
ebookA delicious collection of 50 meaty main courses
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs General

    Recruitment Genius: Massage Therapist / Sports Therapist / Physio / Osteopath

    £12000 - £24000 per annum: Recruitment Genius: An opportunity has arisen for o...

    Recruitment Genius: Account Manager / Sales Executive - Contract Hire

    £35000 - £60000 per annum: Recruitment Genius: This industry leader provides c...

    Recruitment Genius: Project Coordinator

    £28000 - £30000 per annum: Recruitment Genius: A Project Coordinator is requir...

    Recruitment Genius: Area Sales Manager - Midlands

    £20000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...

    Day In a Page

    John Palmer: 'Goldfinger' of British crime was murdered, say police

    Murder of the Brink’s-MAT mastermind

    'Goldfinger' of British crime's life ended in a blaze of bullets, say police
    Forget little green men - aliens will look like humans, says Cambridge University evolution expert

    Forget little green men

    Leading evolutionary biologist says aliens will look like humans
    The Real Stories of Migrant Britain: An Algerian scientist adjusts to life working in a kebab shop

    The Real Stories of Migrant Britain

    An Algerian scientist struggles to adjust to her new life working in a Scottish kebab shop
    Bodyworlds museum: Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy

    Dying dream of Doctor Death

    Dr Gunther von Hagens has battled legal threats, Parkinson's disease, and the threat of bankruptcy
    UK heatwave: Temperature reaches 39.8 degrees on Central Line - the sweatiest place in London

    39.8 degrees recorded on Tube

    There's hot (London) and too damn hot (the Underground). Simon Usborne braved the Central line to discover what its passengers suffer
    Kitchens go hi-tech: From robot chefs to recipe-shopping apps, computerised cooking is coming

    Computerised cooking is coming

    From apps that automatically make shopping lists from your recipe books to smart ovens and robot chefs, Kevin Maney rounds up innovations to make your mouth water
    Jessie Cave interview: The Harry Potter star has published a feminist collection of cartoons

    Jessie Cave's feminist cartoons

    The Harry Potter star tells Alice Jones how a one-night stand changed her life
    Football Beyond Borders: Even the most distruptive pupils score at homework club

    Education: Football Beyond Borders

    Add football to an after-school homework club, and even the naughtiest boys can score
    10 best barbecue books

    Fire up the barbie: 10 best barbecue books

    We've got Bibles to get you grilling and smoking like a true south American pro
    Wimbledon 2015: Nick Bollettieri - Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power

    Nick Bollettieri's Wimbledon Files

    Junk balls and chop and slice are only way 5ft 1in Kurumi Nara can live with Petra Kvitova’s power
    Ron Dennis exclusive: ‘This is one of the best McLaren teams ever – we are going to do it’

    ‘This is one of the best McLaren teams ever – we are going to do it’

    Ron Dennis shrugs off a poor start to the season in an exclusive interview, and says the glory days will come back
    Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

    Making of a killer

    What motivated a shy student to kill 38 holidaymakers in Tunisia?
    UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

    Just when you thought your commute couldn't get any worse...

    Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
    Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

    The Real Stories of Migrant Britain

    Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
    Cheaper energy on the way, but it's not all sunshine and rainbows

    Cheaper energy on the way, but it's not all sunshine and rainbows

    Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most