Back in June of 1999, while the dot com IPOs were coming fast and furious, I participated in a fantasy stock market game on Yahoo! Being 16 and having no real knowledge of the stock market, I sunk all my virtual money into Broadcom and the Mail.com IPO. Much to my surprise and delight, by the end of the month I was ranked in the top 100. Now that I know a little bit more about the market (not much more, mind you), and now that tech companies -- the only kind I know anything about -- are doing well again, I've often thought it would be fun to try my hand at a virtual stock market game, but unfortunately, Yahoo! long ago discontinued theirs.
Happily, in our email tips box this week came word of two new startups, The UpDown and Big Smarty, have launched fantasy stock trading games that let users compete for real cash prizes. Both take very different approaches and have vastly different aims.
At The UpDown, users are given $1 million in play money to invest in the real stock market however they wish. Each trade costs $100 to make (virtual money) and anyone who outperforms the S&P 500 Index gets paid (real money). Each month the site dishes out cash to any member who has outperformed the S&P in the given month, and over the past 12 months (or since they joined). The UpDown also pays members weekly for submitting the best stock analyses. Analyses are rated by members, but it's unclear if community ratings are a determining factor in who gets paid.
Interface-wise, The UpDown is very slick and basically modeled after a real-world trading application.
The money comes from real investments the site makes based on the aggregate market data from the site. In that regard, the site is very similar to Marketocracy, which launched in 2000 and uses the data from over 65,000 model portfolios (filled with play money) to manage their very real, Masters 100 fund. The fund has consistently outperformed the S&P 500 and has gained a 3-star rating from Morningstar. So the idea is plausible. By adding the competition component, which could motivate users to be more serious about investing their play money, The UpDown could have better results than Marketocracy.
The UpDown is backed by Swiss serial entrepreneur Joachim Schoss, who sold his most recent company in 2004 for $221 million. The site was founded by three Harvard students and is headquartered in Cambridge, MA.
BigSmarty Wallstreet is fantasy stock market that gives out up to $50,000 per month in a variety of tournaments. For example, the $200k Race gives a $1,000 cash prize to the first player to double their portfolio from $100,000 to $200,000 in play month, while the WallStret BINGO game involves picking 25 stocks that will gain between 1% and 5% each month, each week, a lucky winner gets a $200 cash prize.
"Our goal is to become the ESPN of Wall Street, where we can discover the superstars of stock trading," said Douglas Burdick, CEO of of the Chattanooga, TN-based company. "We've combined the fame and fortune aspects of Fantasy Football, American Idol, MySpace and The World Poker Tour and wrapped them all into a world-wide competition."
Phew! That's a mouthful. But for stock market novices or those with only a cursory interest in investing, BigSmarty's alternative approach might work. Those who are more comfortable with tradition investing tools, however, might find BigSmarty's games gimmicky. I'm not sure where the company's business model lies (I guess advertising? The data gleaned from most of these games is a lot less likely to be as helpful as the trading data The UpDown and Marketocracy collect), but they seem to have some cash to throw around for now. BigSmarty recently announced a $50,000 "World Series of Wall Street" tournament that will run next January and February -- top prize is $15,000.
The site is operated by the Wallstreet Investor Network, which sells a stock trading training course.