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FT Alphaville interviewed Roger Ehrenberg, who writes the Information Arbitrage blog when he’s not busy with his duties as president and COO of Monitor 110 (that’s One One Zero, which is binary for six - as in six degrees of separation.)

Monitor110 will help “institutional investors turn Internet information into alpha generation”. FT Alphaville translation: “we’ll help you extract lucrative, investable information from the Internet.” Ehrenberg’s company has received financing from, among others, Draper Fisher Jurvetson, the venture capital firm that backed Skype before it was sold to Ebay for $4.1bn last year.

In a past life, Ehrenberg was CEO at DB Advisors, the $6 billion trading business of Deutsche Bank AG , prior to which he was an MD at Citibank, with responsibilities across the bank’s global derivatives, capital markets, M&A and capital structuring divisions.

FT Alphaville (FT) Roger, enquiring minds want to know — how come you haven’t set up your own hedge fund?

Roger Ehrenberg (RE) The fact is, I spent two years running this very complex hedge fund platform (at Deutsche Bank), and I learnt a tremendous amount, and enjoyed it a great deal. And I did think about running a hedge fund after I left DB, but really decided that I needed a change, and I was really trying to find something that was new, yet that also leveraged my historic skills.

FT So you’ve gone for the next best thing — Monitor 110?

RE You know, with Monitor 110, and even in my own private investment activity, I deal with many of the same folks that I dealt with as a Wall Street executive. Whether it’s hedge fund managers, people on the buy side and sell side, those are also the potential customers and the paid users of Monitor 110.

FT Where did you get the idea for 110?

RE My partner Jeff [Stewart] was the one that had the original idea, that was really a result of speaking to potential customers and asking them, “what are the kinds of tools would you find useful? What would make your lives easier?” We spoke to executives at large corporations, different investor relations departments. A lot of the feedback we got was that finding valuable information on the Internet was very, very difficult, and that clients would pay to have a tool that helped them do that.

FT So you’re trying to be the Bloomberg of the Internet?

RE We’re not talking about replacing, we’re talking about complementing, because Bloomberg, Reuters, Thomson, do a fine job with market data and what we call Tier One news, which is the stuff of the FT and the Wall Street Journal, and the largest global publications and the wire services. But that information, at this point, has become very commoditised. It’s also very easy, just as a technical matter, to search that kind of data.

The internet is obviously a rapidly growing and an exponentially larger data set, but along with that is the difficulty in navigation, because you don’t have editors neatly extracting entities and labelling things and articles, and you also don’t necessarily know the reputation of the creator of the content.

What we’re doing is just massively extending the universe from which institutional investors can discover ideas and information, either for trading or for research.

FT You said it’s really easy to find information from the traditional sources - is that part of the reason why people find your proposition so attractive? Because of the idea of everybody’s in the market, and it’s getting harder and harder to find that one thing that nobody knows about yet?

RE There’s no question that early discovery is a key piece of the puzzle. And it’s not only early discovery though, it’s discovery at all, because there are topics that nobody but a handful of obscure blogs are talking about. Not only can we pull those sources in, but we do advanced filtering - we’ve tickerised this unstructured universe. That’s really the key. So it’s the intersection of institutional investor focus and domain expertise, where we use companies and investment teams as the algorithms that are used to filter this enormous data firehouse that’s streaming through in real time, together with very sophisticated algorithms and technology, using advanced linguistic processing to analyse that data on the fly, and to deliver it to the users in a portal that’s very intuitive for those that have used the Bloomberg, Reuters and Thomson’s.

FT As you say, you’ve got the star blogs, and then you’ve got chatter. Now, in the beginning, it’s going to be hard to assign a reputational value to the blogs that are chatter. Won’t it take a while of, ok, this blog has talked about this for a while, and it’s not a scam or a pump-and-dump scheme? Is it a learning process?

RE The answer is, yes. One of the reasons that Monitor110 is so uniquely positioned to do what we do, it’s our intersection of people and technology. We have an activity that’s specifically devoted to source expansion, and we may well discover a new blog and say, you know what, even though this is a young blog, it’s actually written by a former executive of Sun Microsystems, so because of this person’s domain expertise, we are going to assign this blog a high reputation, even though it’s a very new blog. So there are these special lists that we’ve created, that have an impact on the weighting in our reputation algorithms. If a blog is put on that list, then that will rapidly jump its reputation score in the system.

FT How often do you update your lists? Because we have seen that, even in the top blogs, they stop, they shut down, sometimes the domain is taken over, or there’s a new writer and the quality changes.

RE And that’s one of the reasons why you need the intersection of machines and people. You’re 100 per cent right. We have an entire activity that’s devoted to that very issue, the issue of data quality. And the other thing that I think is important to note is, even though we leverage the power of persistent search technology and advanced linguistic processing, we think of ourselves much more in the Reuters, Bloomberg mould, of this portal with tickers and news and the ability to rapidly search and discover. It’s just we are doing that on this much, much, much larger and much more complex data set.

FT What the FT, and Reuters and Bloomberg will say as well, is we have a history. We’re Established. People know they can trust us. Plus you guys are talking about the Internet here. How do you respond?

RE I think what we’re saying is it’s augmenting mainstream media. Mainstream media historically has been an industry that does its research and pushes out content. It’s a one way relationship, whereas the internet is a conversation, it’s a dialogue. So somebody can push something, and if the person isn’t perceived as reputable, or the information isn’t perceived as valuable, no one will read it and no one will look at it, and it will just wither. Conversely, if that individual, that site, is viewed as having valuable information, and it is viewed as being reputable, then it will get lots and lots and lots of attention, and you will start to see this cluster of activity around that node, if you will, and that will then spawn other nodes who cite that blog, and enhance the conversation, add additional content, and it becomes this ongoing dialogue. There’s little of the spin you find in mainstream media - the PR types.

FT So, on top of all the screens your average investor is already looking at, he’s going to need a 110 box if he wants to make any money at all?

RE I think it’ll certainly enhance your chances. From a research perspective, it will help fill out your mosaic. From a trading perspective, it can help give you early insight.

FT Is that your sales pitch?

RE It’s very, very straightforward. We really believe that, to be successful in this next wave of investing, that understanding and extracting value from the internet is the next wave, just like Reuters led a wave with undersea cables in the late 19^th century, just the way that Bloomberg leveraged client server technology to deliver an analytics package, email and very granular market data to traders. We believe that the Internet is calling out for a solution to help access information in an easy, leverageable way from this incredibly complex data set. And that’s where we see ourselves.

FT How much is this going to cost?

RE It is at a premium to Bloomberg. It is a subscription based model, so it’s a per user, per year model.

FT So initially, there’s going to be the one guy in the corner with a subscription?

RE I would say, over time, there will be broader adoption. Early on, firms will take a few seats, and they will test it out, and then it becomes embedded in their investment process. Our belief is that, if you have tier one news, you have to have the internet data, and that it’s not easy for one of the big three players to deliver what we are, because of the messiness of the data, and the fact that they’ve really built their brands and their reputations on unimpeachable sources. And the fact is, you cannot get that guarantee from the internet, no matter how sophisticated your technology is and how much money you throw at the problem.

FT So you’re providing that guarantee, you’re willing to take the risk?

RE We can afford to take the risk because we don’t have a multi-billion dollar brand that’s been built up over 25 years or 125 years. So we’re saying, look, it’s not perfect. It’s impossible for there to be perfection, but we are going to deliver something to you in a way that you couldn’t do for yourself, or in any other way for a long, long time, and the value you’ll extract from it will far exceed any false positives you get. There’s no guarantees in the internet, and that’s one of the reasons why so many people have shied away from it, but yet at the same time, acknowledging its value. We haven’t come out with this, Stacie-Marie, but I’ll give you a little window in, we actually did a survey of 160 of the top institutional investors on the planet, and the responses we got were very, very interesting, and basically what we heard is that 85 per cent of those surveyed acknowledged that internet data is extremely valuable. 50 per cent said not only is internet data valuable, but they feel it helps give them a competitive advantage over their peer funds, and yet 40 per cent said it’s just too complex and time consuming to get valuable data from the internet. So we found that to be extremely interesting.

FT I’m looking at a 110 screen. I’ve got a query. Pearson. Am I going to get just what you’ve already filtered? How much do I have to do? Is it like the Reuters screen, where I put something in and everything comes back to me categorised? Or is it going to be more like the internet, where I can tweak my options a little bit more?

RE The answer is both. The answer is that we are in the process of tickerising the major exchanges, so we are creating custom algorithms for every publicly traded and major private company on the major exchanges, and eventually we’ll do that globally.

FT That’s quite a task.

RE Believe me, it’s eminently do-able. Not that it’s not a lot of work, but it’s do-able.

FT So, let’s say I wanted to know what the blogosphere were saying about Pearson…

RE Just like Reuters, you’d put in PSN.L and bang. Pearson would be in the system. You’d say, add to watch list, and Pearson would show up on your watch list. So then from that point forward, you would be able to track, in real time, all the information coming through from the internet that matches Pearson. The information would have the reputation and relevance scores attached to it. It gets better. If you wanted to, and say, you know what? I actually want to create a custom query. I want to create a persistent query, so that when any new information comes up, I want to be notified, which could be, I want a query that’s specifically focused on Pearson and private equity and Financial Times and buyout. And it doesn’t even need to be keywords. What you could do is, you could find an article that presumably talks about the private equity firms being interested in buying the FT from Pearson, and say, conceptually, this is what I want to find, that when anything comes up that conceptually meets this threshold, I want to be notified.

FT You’ve got fuzzy logic in 110?

RE Yes. We do. So you can save a concept search, and then when anything matches conceptually, you’re notified. We’ve already got the pre-loaded, publicly traded companies. We haven’t done it all yet, but we’re starting with the major US exchanges and the London exchanges will be next. And also, if clients request, we will create lists, we will put companies in in advance of having moved to that exchange. But the user also has the ability to create their own custom queries.

FT And in how many languages does 110 work?

RE We’re pulling in from basically any language you can think of. Right now the system is English, but we have translation on our road map. Actually, we’ve found some extremely interesting data from the Chinese bulletin boards, so Mandarin is incredibly important.

FT On to other things. Do you read any newspapers, or do you consume all of your news online?

RE I read the Journal, I read the FT and then I read Barron’s, all in print form.

FT And if you could only read five blogs every day…

RE You’ve got to be kidding me. That is a brutal, brutal question, because it’s almost impossible to answer, because it really depends on what I’m looking at, and there are way more than five of them. If I’m looking at investment games, and I want to look at somebody who’s smart and writes on a broad array of topics, I like the Big Picture, and Trader Mike, who’s great. But then, if I’m looking for things more like venture capital, technology oriented, I’ll read Fred Wilson, A VC in New York and Guy Kawasaki. He’s terrific. But again, those four don’t do justice to the breadth of blogs that I read and the quality of the bloggers. I’ve given you four. I probably read 200.