Google Has Own $26.5bil Trading Floor, Predicts Market With Search Data?

There is a story told, I think in Ken Auletta's book, by Eric Schmidt from the earlier days of the company where Sergey proposes starting a hedge fund because they have so much better data than anyone else. Schmidt cautions against the notion due to perhaps significant legal implications.<p>Something that would perhaps counter this are complaints on zerohedge and elsewhere that Goldman's privacy policy on some of its data services leave open the possibility for them to use usage data for prop trading.<p>There must be people within Google wondering that if others are getting away with this, why can't they? There must also be people worried about the company's dependence on a single source of revenue...

Aren't they kicking off the trading floor to manage their cash, rather than to becoming a hedge fund/investment bank ?<p>I remember reading an article in the recent past where they have hired some ex-IB traders (Goldmans, Lehmans, etc) to run their Treasury department.<p>The new hires were due to the fact that they were changing their risk profile of their portfolio. I read they were looking for some bond traders as they're planning on moving towards corporation bonds rather than treasuries/govvies.<p>I need to look for that article.

After reading "The Black Swan" by Taleb and finally understanding some of the issues with predictability. These kind of claims just sound like astrology to me.<p>brown9-2-2 is right the latter part of the headline is pure speculation.

The latter part of this headline is nothing but speculation in the article.

As to the question of whether Google could exploit their search data to predict the stock market: <a href="http://messymatters.com/searchpred" rel="nofollow">http://messymatters.com/searchpred</a> (summary: not really)

Is Google following RedHat?<p><a href="http://saviorodrigues.wordpress.com/2009/03/09/is-red-hat-a-software-firm-or-financial-institution/" rel="nofollow">http://saviorodrigues.wordpress.com/2009/03/09/is-red-hat-a-...</a>

Hmm I remember reading somewhere before about Google Venture's acquisition of (or rather, investment in) a startup company who was working on a product that could predict future events. Maybe with this Google can predict markets as well. link: <a href="http://www.nydailynews.com/money/2010/05/04/2010-05-04_google_invests_in_company_that_tries_to_predict_the_future.html" rel="nofollow">http://www.nydailynews.com/money/2010/05/04/2010-05-04_googl...</a>

Could Google be using their search data for...<p>equals<p>easiest way to drive traffic to your site.<p>Quite frankly, data that is scraped and analyzed by the algos and quant funds is probably much more relevant, but it does not mean Google could not define a strategy based on search data; however, it is pure speculation and link bait to just throw the assertion out there willy nilly.

This is nonsense - I know people in quant funds who have tried to do things like this. All the boring stuff that Google doesn't care about, like SEC filings and Quarterly Reports, matter <i>far</i> more than aggregate attention. I'm sorry but if you're making decisions for a multi-million dollar fund, and you tell investors that your investments are based on the twitterings of the unwashed masses, you'll be sent home before you've had your lunch.<p>Even if there is value in their data (and I do imagine enough PhD's could find some reasonable strategies) - there would be such a public outcry that it wouldn't be worth it from a PR perspective.

In terms of them predicting markets with search data lots of commentators are saying no way, but I strongly disagree.<p>Google can predict flu-like illnesses within 92% accuracy of CDC data which is dervied from labratory testing.<p>Furthermore trading stocks seems to me to be a behavior that would be easy to predict through Google's "intent-based" algorithms used for serving advertising.<p>EG - For instance knowing how many searches there are a day for "is AAPL overpriced" vs. "is AAPL underpriced" you'd have data that would begin to correlate to market value - with enough data points you could make some pretty darn educated guesses about what a given stock would do.<p>Toss in a hundred PHDs, a few dozen traders from the greediest depths of wallstreet and the question shouldn't be CAN they do it, but WHEN will they do it.<p>Reference:<p><a href="http://pagingdrgupta.blogs.cnn.com/2010/05/18/how-accurate-is-google-flu-trends/" rel="nofollow">http://pagingdrgupta.blogs.cnn.com/2010/05/18/how-accurate-i...</a>

The search data is probably less useful than all the other data they have regarding how much money individuals and corporations will pay for various words. Or all the private email they process for "other purposes relating to offering you Gmail".