The Brokerage Account Social Network

A generational melt up in the stock market may be the catalyst behind a new social media platform.

Robinhood first made waves when they launched as the only commission-free brokerage firm in 2013. Today the firm has 10 million users, of whom are frequently mocked and discredited. The investors that utilize Robinhood are typically young and inexperienced which produces a cohort of users that interact with the market in a radically different way than the prior generation of retail investors. This presents opportunity.

Capturing this opportunity rests on absorbing the lessons found within the famed essay ‘Status-as-a-Service‘. Currently Robinhood is just like any other brokerage firm, users treat it like an app of pure utility. Broadly speaking an app of pure utility is a foreign concept to Robinhood’s Millennial and Gen Z userbase. Investing (trading) isn’t something that this cohort wants to do in isolation; the pursuit of Social Capital is embedded in their DNA. Every screenshot of a user’s portfolio performance on r/wallstreetbets or twitter is proof that Robinhood users want an even more engrossing experience.

Just like how Robinhood was the first to offer commission-free trades, Robinhood will be the first brokerage firm to launch a social media platform.

The social media arm of Robinhood would provide users the Social Capital they so badly covet. To do so Robinhood can create an opt-in program where user data is aggregated and individual performance is competitively ranked.

This extension of their core offering doesn’t need to be complex to have an impact. Look at the success of VSCO. The photography app allows users to create a simple landing page with a collection of photos they seemingly deem unworthy of being Instgram’d. VSCO piggybacks on established social media platforms as users place URL links to their VSCO within their other social media profiles. The Robinhood social media experience can mirror this simplicity. User’s who opt into having their performance competitively ranked will be provided with a simple landing page that connects their Robinhood account to their real identity.

At first glance this simple landing page may just seem like a tacky way to boast but it actually provides users with a lot of newfound utility. Today users endure the friction of sharing screenshots across social media since these screenshots function as a form of proof of work. By enabling this revolutionary level of transparency Robinhood is effectively doing their part to eliminate fraudsters who may post manipulated screenshots of their performance. Apart from disarming fraudsters they are also arming successful investors with a powerful mechanism to legitimize themselves.

A confrontation like this would be avoided if they were able to view each other’s portfolio performance on Robinhood

The Robinhood landing page would be more than just a quasi audited report of portfolio performance, it will become a place to learn more about the individuals behind the performance numbers. When identity and performance are linked incentives change. By creating the retail version of the 13-F Robinhood will help shift the sentiment of the userbase away from YOLO trades. Over a long enough time frame, with the proper filters, the Robinhood leaderboard will be populated by rational and clever investors. Admittedly, the unveiling of this new feature may spur a wave of YOLO trades as users initially compete for the top ranking but the leaderboard should evolve to showcase responsible investing.

The social media arm of Robinhood can compete head on with incumbent social media giants by meshing this new identity layer with their existing grip on a user’s personal finances. As Robinhood’s userbase matures they will seek out educational content to learn more about the stock market. This may come in the form of subscribing to Substacks or to a service like Seeking Alpha. Once these resources are found users are confronted with the friction of making an account and inputting payment information. If Robinhood creates a secure login SDK specifically tailored for financial media content they can create a new revenue source while giving their user’s a valuable tool.

This is an interesting thought since Robinhood doesn’t necessarily need to go through the hassle of obtaining a user’s credit card information. Robinhood can facilitate payment to content providers simply by drawing down from cash held within a users account. Even if the cash balance is $0 they can give users a ‘free loan’ by paying their monthly subscription fee on their behalf. Robinhood collects on this debt when users raise cash either through the closing of a position, earning dividends, or adding additional funds. The cost of capital is low enough and turnover within Robinhood accounts is high enough to make this a valuable venture for the firm.

Increasing the value proposition of Robinhood is an existential challenge to the firm.

While the social media arm of Robinhood aims to increase both utility and Social Capital to the end user it also helps alleviate what should be the main concern for the firm; churn. Today Robinhood represents step 1 of a novice’s investing journey. As these users catch the investing bug they will discover all the shortcomings of the Robinhood brokerage firm. Service outages, limited investment vehicles, poor customer service, and limited pre-market trading just to name a few. Preventing users from churning to competing brokerage firms can be accomplished by Robinhood through the creation of a social media arm. This buys the firm time while they improve their core offerings as a brokerage firm.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s