Stock Trades The Latest Use Of The 'Free, With Ads' Business Model

from the discount-discount-broker dept

The world of finance has so far been incredibly resistant to the changes being brought about by the web. Sure, all of the banks and brokers have web interfaces for their customers, but at its core, it's still a very tightly controlled industry -- no doubt aided by the fact that finance is one of the most highly regulated industries. Now one of the initial investors in Skype is backing a new online broker that promises to do away with equity commissions. The company figures that a trade costs about $2 to execute, but that most brokers, even discount ones, have to charge much higher than that in order to recoup their heavy marketing budget. Just as Skype took off based on word of mouth, if this company can do the same, it will have a significant cost advantage over its competitors. And as for how it will recoup its incremental trade expenses, the company plans to sell advertising on the site. But while the prospect of free trading sounds nice, it likely won't be enough to lure customers away from the established players. When you're dealing with thousands of dollars, a $10 commission isn't such a big deal; instead investors care about execution, analytical tools, solid security and more. The real revolution in finance will be when someone really figures out how to bring Skype's peer-to-peer model and applies it to trading, cutting out the need for the established exchanges. But considering how regulated this area is, that's unlikely to happen soon.

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  • identicon
    Anonymous Coward, 21 Sep 2006 @ 10:23am

    inactivity fees

    I'm not an active trader. I make a few trades a year. Other online brokerages live off of commisions, so they ding me with huge inactivity fees for not making a trade every three months. Maybe this one would appreciate us less-active traders.

    But, then again, I'm probably less likely to see many of their ads too. So maybe they'd ding me for not visiting their site regularly.

    reply to this | link to this | view in chronology ]

    • identicon
      Anonymous Coward, 21 Sep 2006 @ 11:10am

      Re: inactivity fees

      Sharebuilder isn't too shabby if you only trade every now and then. I've used them for a long time and never once paid an inactivity fees, even when deployed and away from a computer!

      However, I always wonder that if a stock broker is so good... why is he still working and not rich?

      reply to this | link to this | view in chronology ]

      • identicon
        Anonymous Coward, 21 Sep 2006 @ 11:25am

        Re: still working and not rich?

        Because he's:
        A) paying alimony to 4 ex-wives
        B) snorting a few grand a day up his nose
        C) paying for a bunch of crap he can't afford

        The same reason all those Hollywood a**holes run out of money, after making enough for 3 generations of any normal family to live off of.

        reply to this | link to this | view in chronology ]

        • identicon
          erinol0, 21 Sep 2006 @ 12:29pm

          still working and not rich?

          although I realize that you're being facetious, to be fair everyone lives within there means. When you have more, you tend to spend more. I remember when the $150/wk I made at McD's in high school was a lot.

          As far as the article goes, what type of advertising would they get? Imagine what you could charge if you could pump a stock on the same page where someone is buying stocks.

          reply to this | link to this | view in chronology ]

      • identicon
        Rick, 21 Sep 2006 @ 12:57pm

        Re: Re: inactivity fees

        I have to agree on Sharebuilder. At $4 a trade and no inactivity fees, they provide a good value for your money.

        I recently found out how to transfer other brokerage holdings to Sharebuilder and I am happily letting the other brokers what they can do with their extra fees....

        reply to this | link to this | view in chronology ]

  • identicon
    Jordan, 21 Sep 2006 @ 2:43pm

    I think there is a very large market for people who want to get into the stock market, but only have a limited amount of funds, and don't want to see that get destroyed by excess charges.

    I'm a college student with disney stock from my childhood (shitty stock to have btw), and I haven't gotten into investing because i don't want to have to deal with these sort of institutions or a broker. If they get the business model right, they could go far.

    reply to this | link to this | view in chronology ]

  • identicon
    Alex, 21 Sep 2006 @ 6:10pm

    Haha you haven't got the slightest clue about fian

    The real revolution in finance will be when someone really figures out how to bring Skype's peer-to-peer model and applies it to trading, cutting out the need for the established exchanges. But considering how regulated this area is, that's unlikely to happen soon.

    Haha what are you talking about? Being a 4th year honors student studying Finance and Economics, I can tell you right now that if ANYONE tries to implement a p2p/skype model on financial markets you probably wont have any food on your table tomorrow or any clothes on your back. The financial markets need a mediary, its not eMule.

    Also, financial regulations are a vital part of the industry for a reason. The financial industry is the intemediary to all monetary transactions in our economy. It is MUCH more important than any other industry in the world, and for this reason is heavily regulated (but much, much less now that it was in the 80's and early 90's).

    Usually you guys are spot on with your posts and analysis. What happened this time?

    reply to this | link to this | view in chronology ]

    • identicon
      Sweet, 23 Sep 2006 @ 2:52am

      Re: Haha you haven't got the slightest clue about

      I wouldn't be so sure that a P2P/Skype model is impossible, remember that the network IS is a mediary and it could very well be tat someone figures out a way to do this.

      But most probably it wont be a 4th year honors student financing and economics, but someone who are not caught inside the box.

      reply to this | link to this | view in chronology ]

  • identicon
    Anonymous Coward, 21 Sep 2006 @ 9:29pm

    Wow,n00bs

    I've been using Scottrade, $7 a trade, and I don't believe there's any activity fee but then again with my 5-10 trades a week average, occasionally as many as 5-10 a day, I wouldnt know.

    I dont think I understand the p2p reference.. I sell a share, and where do you think it goes? To limbo land? No, someone else in actuality just bought my share at that moment for the market price (or market price within the confines of a limit order).

    I've been wanting to dabble in options trading, but been too lazy to set up with OptionsXpress. There's essentially no excuse with some of these excellent online brokers to not direct ones own investments, just laziness. I can go conservative safe routes that eat up ten minutes a month, or get aggressive and spend 8-12 hour days researching and trading. Just a couple weeks ago spent a good chunk of Sunday analyzing GOOG and knew it had to be getting held back (I suspected options). Sure nuff, options got close to expiration, and it rallied like it hasn't rallied in quite a while.

    It isn't hard, and nobody needs a company like this in order to invest. Commissions, and taxes, take care of themselves. (Unless you're a fool and pay some traditional brokerage $50 to execute a trade over the phone 'cause you just heard someone say something good on 'Power Lunch')

    reply to this | link to this | view in chronology ]


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