Journalists have written scores of articles predicting Bloomberg’s imminent or eventual demise.
None have shown much of an insight into the true workings of the company.
Reporters who cover the company tend to overweight the importance of news, largely because it’s visible and easier to understand, especially for the media.
The best analysis I’ve read explaining the core competitive advantages that the company enjoys was published last week by an anonymous Substack account called The Terminalist.
In the 8,000 word opus, the author identifies seven power laws that help Bloomberg dominate the landscape for financial data. They are: Cornered Resource, Process Power, Network Economies, Scale Economies, Switching Costs, Branding and Counter-Positioning.
The titles don’t sound promising, but trust me that the author delivers.
The report identifies underappreciated strengths – such as the original insight to charge a subscriptions instead of transaction fees because the former are bundled into expense lines which are less vulnerable to being cut.
The writer goes deep in the weeds talking about the “Ticker Plant,” which is described as an engineering marvel for the way it processes torrents of data in microseconds. It’s a crucial piece of architecture that few outsiders and probably no journalists are aware exists.
I appreciated when the writer quoted the onerous terms of service clients have to sign which are described as “instructive, intriguing and intense.”
The article also puts in perspective the trope that the terminal is expensive by comparing the compound annual growth rate of the cost of a Bloomberg with the increase in overall bank expenses.
The writer downplays the oft-repeated claim that clients buy the product solely for its instant message feature.
Bloomberg has built the advantages it enjoys slowly, steadily and consistently over forty years. They include remaining private, focusing on one product, building in-house hardware and software and avoiding distractions.
The author doesn’t let the company off the hook entirely, arguing that the single-minded focus prevented Bloomberg from getting into other “Terminal-sized businesses” such as indexing, credit ratings and risk analytics.
The author makes the case that Bloomberg can be considered the original SaaS, the original big data company and the original cloud provider.
The article argues that asking which competitor can kill Bloomberg is the wrong question.
Clients don’t want to switch. But there are many “adjacent opportunities.”
Read the newsletter to absorb all the details. It’s worth it.
Ted Merz 