Over the past month I published a few articles (I, II, III, IV) that gave readers an inside look at how we do things at Seeking Alpha. I enjoyed the process, and many readers had more questions or pointed out areas they felt we lacked transparency. One reader suggested I do an Ask Eli column, which led to this article. I like the idea of a question-and-answer format; often we don't know what people don't know until they ask. Feel free to send me questions for future Ask Eli articles by direct messaging me on Seeking Alpha, or by emailing me (firstname.lastname@example.org).
To kick things off, I will focus today on questions users have about Seeking Alpha's contributor network.
Do you pay your contributors? If so, how much?
We pay contributors who publish articles that are exclusive to Seeking Alpha. The base payment is $10/CPM (1,000 page-views). For high-quality analysis of stocks that otherwise lack good research, we have two additional payment tiers: i) Small-Cap Insight - we pay a minimum of $150 per article for high-quality small-cap research, as selected by our editors. ii) Top Ideas - for top small-cap ideas with exceptionally attractive risk/reward profiles (1-10 per day) we pay $500.
We launched article payments in early 2011 with the per-page-view model. Contributors were happy, but said the focus on page-views led them to publish analysis on very popular stocks and topics. Since unusual investment opportunities ("alpha") are often found in lesser-followed stocks, this wasn't necessarily a good thing. Unlike traditional media businesses, in equity research there is often an inverse correlation between broad appeal and value.
This led us to change our payment model and channel a large percentage of author payments to quality rather than popularity. Having said that, I still think too much of the decision about what constitutes quality rests in editors' hands. In a true marketplace, consumers determine the value of an item, not an expert panel. Because of this, I am intrigued by ways in which SA can more closely mimic the characteristics of a marketplace, in which those who provide the greatest net value are most successful. I welcome your suggestions.
Are all contributors paid?
No. Some contributors decline payment for a variety of reasons; they can direct their payments to a charity of their choice. Others prefer to syndicate their research through a variety of channels, and decline payment in order that their articles not be exclusive.
How much do you pay contributors per month?
Contributor payments are the lion's share of our editorial costs. In a typical month, we pay $270,000 to contributors - $150,000 in page-view payments, and $120,000 in minimum-guaranteed article-quality payments.
How many contributors do you have?
Since inception (late 2004), we've published articles by 8,807 contributors. Of those, 2,454 have been active over the past 180 days. In a typical month, we add 150 new contributors.
Are cash payments the main incentive for contributors?
For many it's not the key consideration. Most of our contributors are investment professionals or full-time investors who have significant skin in the game. After speaking to many investor-contributors, my understanding of their reasons for sharing their research with other investors are, in order:
- Build momentum around a thesis: a typical thesis identifies a mispricing in a stock. Once an investor has taken his position, he wants other investors to recognize the stock is under/overpriced and join him.
- Business opportunity: investors crave capital intro; analysts and business school grads are looking for their next job.
- Networking: Publishing on SA helps authors discover, through article comments and direct messages, other investors who own the same stock, industry insiders, and even company management.
- Stress test their idea: If they've missed something, other smart readers will call that to their attention quickly.
How do you vet new contributors?
Our vetting process is simple:
- A potential contributor submits an article for review.
- Our editorial team reviews the article to determine whether it's appropriate for our audience. We score submissions (internally) on three characteristics: a) Convincing: What's the author's thesis? Does he do a good job of convincing the reader? b) Actionable: Is the article material to investors in an obvious way? c) Well-presented: readers want content that is clear, focused, and easily understandable.
- If the article is publishable, we confirm that we have the contributor's real name, address, contact information, and banking information (see more here about our due-diligence process).
- Once a contributor's article is published, we watch article comments and disputes for any warning signs that we may have gotten #2 wrong. We're not perfect. If at any time we feel a contributor's analysis no longer meets our standard, we decommission him.
Do you ask contributors for proof of education or employment?
No. Aside from insisting we know contributors' real identity, and that their analysis is high-quality, we don't require specific background, education, or job titles. Many contributors provide this information in their profiles, but it's not mandatory.
How do you know every article you publish is good?
We know many of them are good because readers tell us so, and because Seeking Alpha articles impact stock prices materially and consistently to a degree unparalleled by other equity research. We also know that SA articles and comments predict future stock prices and earnings surprises to an extent not found anywhere else (see more here). Occasionally we publish a dud, and learn what we need to learn from that to improve our processes in the future. But we also believe that there is no such thing as absolute good, and that on balance we do best by opening our platform to a diversity of opinions and allowing readers to assimilate multiple viewpoints and ultimately make a more informed decision.
How do I become a contributor?
Click here to get started.
Please send in your questions for future articles. I'll also be watching the comments on this article and responding to questions, suggestions, etc. I hope you found this informative.