BUSINESSWEEK ONLINE : NOVEMBER 20, 2000 ISSUE
BUSINESS WEEK E.BIZ -- NET WORTH

ONLINE EXTRA: For Full-Service Brokers, Multex.com Is "Not the Enemy"
The personal-finance site has won over the big houses by sending potential clients their way and refusing to do business with discount brokerages

Small investors can find thousands of research reports on individual stocks at MultexInvestor.com. They can e-mail questions to Wall Street analysts, read message boards, and tap daily stock tips. One thing visitors to MultexInvestor.com won't find, however, are advertisements for discount brokerage firms.

A staple at most personal-finance sites, discount brokers aren't welcome at MultexInvestor.com. That's because the site's parent company, New York City-based Multex.com, has built its business around full-service brokerage houses, and Multex.com has no interest in helping out their competition. "We would not be in business without the full-service brokers," says Andy Reid, vice-president for strategic development at Multex.com. "We're a middleman for them."

As Multex.com sees it, buying and selling stocks is a commodity. Where brokerage firms can differentiate themselves is through distinctive research on stocks and through the personal touch of a broker giving investment advice. But already the line between discount houses and full-service houses has become blurred. Merrill Lynch and Donaldson, Lufkin & Jenrette have launched high-profile Web ventures based on lower-cost trades. Discount pioneer Charles Schwab & Co. has merged with the traditional brick-and-mortar bank U.S. Trust Corp. Even online broker E*Trade Group Inc. has begun opening retail branch offices.

Multex.com is following a path similar to another successful -- and profitable -- Web company, Homestore.com. Rather than compete against traditional real estate brokers by trying to sell homes online, Homestore.com acts as an online marketing arm for the National Association of Realtors. You can see a house you like on Homestore.com's Realtor.com site, but you have to buy it through the broker that has the listing.

DOT-COM SURVIVOR. Similarly, on MultexInvestor.com, if you type in the ticker symbol of a stock you're interested in researching, about half the reports that pop up will be for sale directly, for between $10 and $150 per report. But to access reports from some firms, such as Merrill Lynch, Salomon Smith Barney, and J.P. Morgan, you'll need to click through to that firm's site. There, after leaving information such as your home address and the size of your investment portfolio, you'll be able to read as much research as you like for a period of one to two months, depending on the firm. Multex.com's Reid says these prime sponsors are turning between 1% and 2% of their online visitors into full-time customers of the brokerage firm. "That's a heck of a lot better than cold-calling," Reid says.

"A lot of big brokerage firms initially thought Multex.com was the enemy," says Laurence Tosi, a business-development executive at Merrill Lynch. "I told everyone that they are not the enemy -- they are a technology company that helps us serve our customers better."

The great risk in Multex.com's business model is that someone else will come along and get the same research from the same sources. But here again, the big brokerage houses have been Multex.com's friends. "We looked into selling research ourselves and spoke to some of the brokerage houses, but they weren't interested in giving their information away to everybody," says Larry Kramer, chief executive of personal-finance site MarketWatch.com Inc. Now, when visitors to MarketWatch.com want research reports on specific stocks from brokerage firms, they get referred to Multex.com.

That's why it looks like Multex.com will be a dot-com survivor.

By Christopher Palmeri

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ONLINE EXTRA: For Full-Service Brokers, Multex.com Is "Not the Enemy"



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