Distribution Matters

The Oceans of Investing

While you read a lot about news publishers complicated relationships with Facebook and Google, the investing space has long been dependent on two oceans for referral traffic — Twitter and Yahoo! Finance. Yahoo! Finance was the original aggregator that fed the referral traffic which built every online company from Marketwatch to SeekingAlpha. The challenger to Yahoo! Finance is not another website but a social network: Twitter, which has more impressions in a week for the top 30 equities than Yahoo! Finance does in a month. With TicToc, Bloomberg is harnessing the Twitter audience to build a counter weight to Yahoo! Finance. We like to think about Yahoo! Finance and Twitter as the Atlantic and Pacific oceans, feeding the tributaries of Bloomberg, Marketwatch, The Street, WSJ, Motley Fool, Forbes and so many more who depend on their mighty engines to flow.

TicToc Dough

It’s clear that externally sourced traffic is only going to increase as more engines feed more content to more places. Bloomberg, for example, gets most of their traffic off network, meaning that most traffic comes from other content providers and social media platforms, as seen from the charts below. A large portion of this can be attributed to their massive Twitter presence as TicToc. With close to 400K followers, 2.2 million average daily views and 1.4 million average daily viewers, this handle drives large amounts of users to their platform and largely increases their brand awareness. It also shows the burgeoning power and importance of Twitter in the finance world.

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Source: SimilarWeb, 09/25/2018

Screen Shot 2018-09-28 at 10.39.56 AM.pngSource: SimilarWeb, 09/25/2018

#Cha-Ching

In fact, the Cashtag, Twitter’s trackable and clickable stock tracker, has propelled the platform’s popularity as a financial news tool. As we saw recently, a CEO can wipe out billions of $ off their company’s market cap with just a tweet. While on the other hand, analysts are now using the platform to speculate about the “next big thing”. Plus, with 330 million active monthly users, Twitter’s reach far exceeds Yahoo! Finance and just about everybody else.

We conducted an analysis of the engagement that’s generated from top equity cashtags, as well as other major market movers from the S&P 100, over 32 randomly selected days and found that average impressions/day accumulate to almost 8MM and reach almost 5MM users.

Screen Shot 2018-09-27 at 3.16.44 PM.pngSource: Keyhole

That’s more than Yahoo! Finance, which gets 70MM visitors per month. Yahoo! Finance’s traffic mainly comes from people going directly to the site or via the mobile app, as well as those who come from links to the site within Google Search results.

No Longer Siloed

With the bulk of web traffic today coming from outside platforms, social or otherwise, the landscape for financial news consumption is shifting. Essentially, we have a hugely fragmented ecosystem where people go to get their finance news and it’s even more fragmented in how they got there. One thing’s for sure, it’s only going to get more disparate as platforms and the digital ecosystem evolve.  

Land of the Free (Trade)

What happens to competition when everything is free, when there’s no obvious financial differentiator? How do you get customers to choose you over the other guys?

With the recent bomb dropped by JPMorgan that they’d be offering free trades to everyone via their new You Invest Trade Service, brokerages are on high alert and looking  to understand how this will affect them and the market. Certainly JPMorgan is the first incumbent—but not the last—to make a serious move in this space, and while fintechs like RobinHood built their platforms on free trades, they have less overhead and less offering to contend with. In other words, the incumbent fall out is likely much more significant. But the potential is also astronomical for those who do it right.

How Will You Stand Out?

Since it appears that trading is becoming a commodity with a race to lower pricing until it’s ultimately free, the competition is going to have to create other factors in order to differentiate themselves going forward. As we’ve posted about in the past, these could include user experience and ease of use and delighting customers via good design. As well as attracting new customers. (More on that in a bit.) But there is so much more FIs can do. In fact, no financial company has leveraged the full platform like Expedia has in the travel category or Amazon in the consumer shopping space. This industry is stuck in the mid/late 90’s, whereas consumer spending platforms have evolved and changed with or even ahead of the time. Finance needs to up their game.

Here’s how we see things evolving:

Pricing is No Longer a 2-Year Study

Gone are the days where pricing used to be modelled out with firms conducting tons of research and testing before changing their fee structure. Today, FIs need to be more nimble and push out pricing changes to be immediately responsive to market changes and influences. Being able to pivot or better yet, being first out of the gate, could make or break a new pricing strategy. And leave everyone else scrambling.

Market Cap Erosion

With their announcement, JPMorgan shaved $9B off the market cap of everyone else. With the trading fee revenue stream eliminated, it impacts all companies as it relates to their valuation and market cap. So if brokerages remove trading fees, where will that “lost” revenue come from? Several incumbents have said they too could go to $0 trading, particularly in a rising interest rate environment, but why do it if you don’t have to?

RIP Legacy Systems

For most established banks and credit card companies, account conversion on legacy systems still takes place offline. This is not only slow but costly. JPMorgan has invested tens of millions to change this on-boarding process, therefore creating a solid ecosystem of digital products. JPMorgan’s ability to cross sell between Asset Management and Banking is key to their success. The Chase Mobile acts as a digital branch for customers, allowing users to make deposits, payments, keep tabs on their account, and will soon add You Invest to this digital suite. All this capability in one place sounds very familiar…

Will We See “Prime Trading”?

Stash and Acorns have proven out that customers are open to subscription based financial services, a model that Amazon Prime has pioneered in retail. And, by moving away from the fee-based model to a consumer-friendly ecosystem model, JPMorgan believes that creating a digital ecosystem will help the bank better align with clients’ interests.

“We’re very focused on delivering more service. All our analysis shows that those customers who do more than one thing with Chase will stay with us longer,” [emphasis added] says Jed Laskowitz, CEO of the bank’s You Invest service.

For example, You Invest will offer free portfolio-building tools and access to the bank’s stock research allowing customers to construct a portfolio composed of cheap ETFs and stocks. This sets up Morgan to create its own passive investment vehicles, essentially getting that fee back albeit in a way that serves the consumer and the bank. So, by offering free trades, JPMorgan could actually grow the business as customers use other services.

Remains of the Day

Time will tell what no fee means for incumbents, or if JPMorgan resorts back to a more traditional fee structure. In the meantime, one thing is for sure, and that’s that nothing is for sure. FIs are going to have to look to other industries to see how they can model a more robust and streamlined offering, tap into untapped customers and still find a way to grow their bottom line.