The Smart Money? It May Be On StockTwits

Stockbroker-turned-entrepreneur Howard Lindzon is leading what may be one of the most promising consumer startups to emerge in the last few years: StockTwits, a microblogging service with a voracious user base and huge ambitions to become the “Facebook of finance”– if it’s not acquired by a Schwab or Bloomberg along the way.

The 15-person company, launched early last year, has already managed a rare hat trick. After establishing 100,000 Twitter followers, it has, in the last six months, convinced 40,000 of them to download its own real-time desktop portal, where they impart stock-picking tips and trends, as well as read news in what’s quickly becoming a close-knit — and closed — financial community. (Users need a Twitter account to register for the service, but they don’t need to “tweet” their stock picks outside of StockTwits.)

Next week, the company is quietly debuting a Web-version of the service, at which point users won’t even need a Twitter account if they’d prefer to use Gmail or Facebook Connect or simply have a StockTwits account. “It’s not the product to end all products,” says Lindzon, though he adds that a “combination of bandwidth advancements, good design, and luck” have gotten it pretty far along.

Users will see more soon. For starters, the company is also launching its own messaging platform. (Lindzon says that StockTwits audience of mostly traders “still use AIM, for God’s sake.”) And StockTwits is expanding on a recent addition to its platform: StockTwits TV, a low-budget affair that today involves sending cameras to its top investors, who then film themselves talking entertainingly about what trades they are making and why.

Right now, about 1,000 users play along or invest alongside them during each live “episode,” totalling about four hours of programming each day. But Lindzon has a 24-hour investing channel in mind, and he says it will be available in another few months. (The idea would sound zanier if Lindzon hadn’t also founded Wallstrip, a popular business satire video podcast that was founded in 2006 and acquired by CBS a year later for $5 million.)

So how does StockTwits make money? It doesn’t — yet, though as you might imagine, StockTwit’s users are an advertiser’s dream. Largely day traders and money managers between the ages of 25 and 35, they collectively tweet 8,000 messages each day, spend an average of 30 minutes at a time with the application and, in a growing number of cases, leave StockTwits open on their desktops all day. (It’s very akin to the desktop application Tweetdeck, in which Lindzon is an angel investor, though StockTwits built its platform from scratch.)

Indeed, though beginning investors are discovering the site, “60 percent [of our users] are hard-core professional traders just [using StockTwits] for fun,” says Lindzon. “They’re so good at what they do but they work in a quiet room and this has become an event; they are making buddies.”

Yet Lindzon isn’t counting on advertisements to carry the day. While StockTwits makes money off ad inventory that’s sold against the posts of financial blogs that appear on StockTwit’s platform, going forward the company plans to make the bulk of its revenue off premium data products. Lindzon isn’t disclosing more details publicly just yet, but he says that users can expect to pay from $9.99 up to $99 per year for the features, which are scheduled to launch in the next 30 to 60 days.

Further down the road, if all goes as planned, Lindzon envisions a day when StockTwits users will be able to buy and sell stocks through the service. “There’s so much regulation in the U.S. that it would be difficult,” says Lindzon, “but StockTwits is a natural lead-gen engine. It’s in our roadmap.”

StockTwits has so far raised $4.6 million, including from Foundry Group, True Ventures, investor Roger Ehrenberg (who seeded the company with Lindzon), and the incubator Betaworks.

Earlier peHUB Coverage of StockTwits