Robinhood is bringing investing under the social finance umbrella.
The company behind the popular trading app is launching a web platform to help to deliver the second part of its mission to make stock trading accessible to everyday people: help them make more informed decisions. It’s adding tools, features and information on other users’ activity that makes the experience feel more like a social network.
Robinhood, which launched in 2013, says it has crossed 3 million users as of Wednesday and more than $100 billion in transaction volume with about 100 employees, according to co-CEO Baiju Bhatt. By comparison, the 42-year-old TD Ameritrade has 11 million funded accounts and more than 10,000 employees as of this September; E-Trade, 35 years old, reported 3.5 million accounts by the end of last year with some 3,600 employees. Robinhood users have saved more than $1 billion in commission fees (typically $7 per transaction) using the fee-free app, Bhatt said.
Robinhood will show users on each stock detail page how many other people own shares of that same company, the average price paid by other users for those shares, the distribution of all the different prices people have paid for shares in that company in the past year. The point is to start giving people more reference prices, Bhatt explained. Humans fundamentally aren’t very good at thinking of numbers in terms of absolute value and it can be hard for early or first-time investors to understand that Apple shares, for example, have reached the $160 mark.
“They’d say, ‘Sure? I don’t know if that’s high or low.’ We’re starting to think about reference prices people will immediately be familiar with and be able to dissect,” Bhatt said.
Robinhood wants to juxtapose data generated by its own users with opinion from Wall Street analysts so users can see what “experts” are saying about a particular stock. So it’s going to begin pulling those reviews and opinions from Morningstar into a new Analyst Reviews section.
“It’s a riff on theme of comparison shopping,” Bhatt said. “Really well-worn routes for buying stuff online is doing e-commerce. You can see the expert rating on a stock — [which could say that] 77 percent say ‘buy’ based on 10 analyst reviews from Morningstar — and the number of people that own it.”
It will also show other stocks purchased by people that bought shares of a particular company and display a For You section that will suggest stocks to investors by using their buying and browsing data, as well as “playlists,” as Bhatt likes to call them (for now; others in the company call them collections, engineers just call them tags): collections of stocks based on common themes, like Virtual Reality Companies, 2017 IPOs or 100 Most Popular.
“From a discovery standpoint the playlists are pretty similar to music. There are tens of thousands of stocks; there are tens of thousands of songs or albums you wanna listen to and there’s always this problem where you can’t quite think of the one that you want but it’s kind of on the tip of your tongue and you just need to do some bookmarking to remember it. It’s the really large inventory problem.”
Beyond buying and selling, the mobile app currently lets users browse different stocks, track the price movement and features a news feed, which will also be incorporated to the web platform. The website will launch in early 2018. Later in the year the company plans to bring the same features to the mobile app.
Bhatt said the company has no plans to introduce advertising to its platforms. With each user averaging 10 to 15 sessions each day, Robinhood has greater engagement than all of its direct competitors added up, he said, touting “the best organic growth of any financial product since Venmo.”
Robinhood’s premium product, Robinhood Gold, starts at $10 a month and allows users to trade after hours. It also has a well-performing referral program in which users get a free stock for each new user they refer, who also gets a free stock upon joining.
Bhatt said he and co-CEO Vlad Tenev have always been curious to get people connected with each other Robnihood because most people have found their way to investing through social conversations.
“The stock market is inherently social,” he said. “From the days of open outcry in the pit it’s always been about humans interacting and transacting. What we’ve got in our product right now is the beginning of a much longer product focused on social.”
Venmo has shown legacy financial firms the value of making financial transactions between friends and peers as easy as having a conversation with them. Through an agreement with PayPal, Facebook is also trying to make payments activity a natural extension of the conversation its users are already having in an app where they already spend most of their time. SoFi has been trying to prove people, millennials specifically, want to do business with financial companies based on community and the likemindedness of people with similar financial goals and plans.
Offline, there are at least three behaviors or conversations taking place that the founders want to amplify on the screen, Bhatt explained. First, most young people have at least one person friend or family figure who’s a generation older that they talk to about stocks and finance; second, many young people have an informal social network among colleagues or friends where they’re kind of competitive about their investing conversations; and there’s usually someone in people’s social networks that isn’t a close friend but probably could be based on continued conversations around investing.
Opting to connect with Facebook friends and you can post to all of them is probably not effective, Bhatt asserted. Neither is a broadcast-based system where users publish their trades to followers.
“That kind of product is going to be one that has very high engagement with a certain kind of active user that wants to show off that they know what they’re doing and is not going to be interesting at all for other people,” Bhatt said. “Trying to thread the needle between these different conversations that are actually happening is where my head is right now.”