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.

Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvOnly remaining original cast-member to leave crime series
premier leagueManchester City vs Chelsea match report from the Etihad Stadium
Esteban Cambiasso makes it 3-3
premier league
Have you tried new the Independent Digital Edition apps?
Life and Style
ebooksA superb mix of recipes serving up the freshest of local produce in a delicious range of styles
Life and Style
ebooksFrom the lifespan of a slug to the distance to the Sun: answers to 500 questions from readers
Mario Balotelli celebrates his first Liverpool goal
premier leagueLiverpool striker expressed his opinion about the 5-3 thriller with Leicester - then this happened
people'I hated him during those times'
Britain's shadow chancellor Ed Balls (L) challenges reporter Rob Merrick for the ball during the Labour Party versus the media soccer match,
peopleReporter left bleeding after tackle from shadow Chancellor in annual political football match
Arts and Entertainment
Female fans want more explicit male sex in Game of Thrones, George R R Martin says
tvSpoiler warning: Star of George RR Martin's hit series says viewers have 'not seen the last' of him/her
Dame Vivienne Westwood has been raging pretty much all of her life
peopleFirst memoir extracts show she 'felt pressured' into going out with the Sex Pistols manager
Arts and Entertainment
Lauryn Hill performing at the O2 Brixton Academy last night
musicSinger was more than 90 minutes late
Lewis Hamilton in action during the Singapore Grand Prix
Formula OneNico Rosberg retires after 14 laps
Rumer was diagnosed with bipolarity, attention deficit hyperactivity disorder and post-traumatic stress disorder: 'I was convinced it was a misdiagnosis'
peopleHer debut album caused her post-traumatic stress - how will she cope as she releases her third record?
Arts and Entertainment
tvReview: 'Time Heist' sees a darker side to Peter Capaldi's Doctor
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

    Head of Marketing and Communications - London - up to £80,000

    £70000 - £80000 per annum: Ashdown Group: Group Head of Marketing and Communic...

    Nursery Nurse

    Negotiable: Randstad Education Manchester: Level 3 Nursery Nurse required for ...

    Nursery Nurse

    Negotiable: Randstad Education Manchester: L3 Nursery Nurses urgently required...

    SEN Teaching Assistant

    Negotiable: Randstad Education Manchester: We have a number of schools based S...

    Day In a Page

    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits
    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam