Usability drives stocks appeal

 By Clare Mitchell Crow

Canadian usability consultancy Teehan+Lax selected 10 companies which offer great user experiences and invested $5000 in the shares of each of them. After a year, the portfolio, dubbed the UX Fund, is up 39.3%. That compares favourably to Nasdaq growth of 29.1% and NYSE growth of 15% in the same period.

The criteria for fund membership were that companies showed care in designing their products and website, had a history of innovation, inspired loyalty in the customer base, and that doing business with them was a positive experience.

Four of the ten stocks lost money, though: JetBlue Airways lost 29.36%, which Teehan+Lax attribute to a stormy Valentine’s Day when the firm cancelled 250 flights and delayed passengers by up to eight hours; Netflix lost 4.82% and Teehan+Lax wanted to sell the stock almost immediately when they realised the company had stopped innovating; Target (down 2.09%) and Progressive Insurance (down 23.27%) had mediocre years, with Progressive facing a particularly tough market.

The greatest winner was Research in Motion, which gained 207.97% in a year in which the company introduced a number of new handsets including the BlackBerry Pearl. Apple grew by 131.81% in a year that saw the launch of new iPods, iMacs, the Leopard OS and the iPhone. Google showed growth of 47%, outperforming arch rival Yahoo (15.61%), which was also in the portfolio. Nike grew by 38.65%.

You could argue that any ten hand-selected stocks were bound to outperform the stock market average, and that Google and Apple were safe bets for any portfolio. Research in Motion was a gamble that paid off massively, though, and the fund did exclude Amazon, which would have made it extremely conservative.

It is debatable whether the fund has proven a general point on the profitability of usability (at least, as seen by investors). Teehan+Lax conclude that their strongest performers (Apple and Research in Motion) were those that best embodied their values and also that usability isn’t everything, as JetBlue and Progressive found when faced with harsh weather and adverse market conditions. However you view the experiment, Teehan+Lax should be credited for putting money on the line to show that usability drives stock market growth. The gamble clearly paid off.