Contact: Mike Massey, Director of Community Development
Location: Boca Raton, Florida
Industry: Finance, B2C
Annual revenue: Confidential
Number of employees: 50
When it launched in late 2005, online broker TradeKing wanted a fresh voice that would attract online investors and help it compete successfully against larger Internet-based brokers. The company decided to create an online community that would connect likeminded traders seeking to share information and trading strategies.
The community members now make up about 5% of TradeKing's relationships—but they account for nearly 10% of the company's revenues. And that percentage is likely to grow: A July 2007 survey conducted by TradeKing found that 36% of options traders and 24% of equity traders report reading blogs either daily or weekly.
TradeKing has also been voted top discount broker for the second consecutive year by SmartMoney magazine, which specifically mentioned the broker's social-networking capabilities. The SmartMoney distinction is now being used on most of TradeKing's marketing materials to attract new customers.
During the Internet boom of the late '90s, there were as many as 100 online brokers; by 2000, a wave of consolidation saw most of those brokers acquired by larger firms, such as eTrade and TD Ameritrade. When TradeKing's founders launched the company in 2005, they knew that their trading fees were among the lowest available, yet they figured that wouldn't be enough to attract a large clientele.
"People are passionate about their money," said Mike Massey, director of community development. "So what better way to attract them than to create an online community where they could talk about their investments, share strategies, and learn investing techniques from other investors?"
Working with The Port Network, a technology company that helps build online communities, TradeKing created a community that invited members to discuss their investments. "People network about their money all the time," Massey said. "It was a natural extension to bring that online."
The community launched with a blog platform and an RSS feed. The CEO of TradeKing began his own blog, and was "the first and as far as we know the only financial services CEO blogging," according to Massey. CEO Donato Montanaro still blogs several times a week.
The director of education for the company also pens a blog about options-trading strategies. Another company blogger writes daily about the market, sometimes highlighting different community members.
Shortly after the launch, Massey and his team added the capability for people to create their own profiles to explain who they are and how they like to invest. The profiles include check-boxes that allow members to designate the types of investing they are interested in, as well as specific stocks they follow. This tactic, reminiscent of Facebook groups, helps engage TradeKing investors and keep them loyal to the broker.
"If you look at a profile and see that someone is interested in technical analysis, you can click on that and find other people in the TradeKing community who are interested in that type of trading," Massey explained. If someone shares that they hold Apple stock, a member can also click on the stock symbol and find other people who list Apple as one of their favorite stocks.
Massey's strategies for making the community site a success include the following:
#1. Allow for organic growth
When the community was launched, it was not given much visibility on the homepage—just a link. As the community grew and proved itself successful, Massey made it more visible on the homepage. First, he added a large graphic in the center of the page that linked to the community; then he added a link to the TradeKing blog; and, finally, he added a feature that allowed investors to sign up directly from the homepage.
"Organic growth is really what community building is about," Massey said. "People don't go out there and advertise social networks."
#2. Stay hands off
For a community to be successful, management must allow the community to drive itself.
Every blog post and comment by staff members is approved by an internal compliance person, and every blog and comment posted by community members is reviewed by a TradeKing staff, but after it has been posted. "If someone's guaranteeing investment results, that post will be pulled," said Massey.
Otherwise, the community is left alone. "We monitor very closely but only take action if we deem it is absolutely necessary."
#3. Identify a level of participation
Investors who create a profile within the community are given a "badge" to place on their profile page. The page designates whether a member is a TradeKing account holder, a TradeKing community member, or a TradeKing employee.
#4. "Certified trades" feature
The "certified trades" feature was the first of its kind in the industry when it launched in August 2006. In their accounts, TradeKing clients can display trades they are making, showing at what price they bought or sold and when the trade was made. It is a regulated feature; TradeKing knows that if a member says he executed a certain trade, the trade was actually executed.
Through the "certified trades" feature, members can follow what trades other members are engaging in and how much money they are making. "What can be more compelling than looking at what someone's actually trading?" asked Massey.
And if a member blogs about a certain investment or strategy and opts to display their trades, others can see that they are backing up their statements with actions, not simply posting unsubstantiated ideas or rumors.
TradeKing's community now boasts 3,000 users. Growth has soared over the last six months as Massey's team began to bring the information to the homepage. "Every time we've made [the community] more prominent on the homepage, we see a bump in community participation," Massey noted
Community members comprise about 5% of TradeKing's clients, but they are more valuable than the average TradeKing investor, accounting for almost 10% of the company's revenues. This percentage is likely to grow: A July survey conducted by TradeKing found that 36% of options traders and 24% of equity traders report reading blogs either daily or weekly.
The community program has also been cited as part of the reason for TradeKing's being voted top discount broker for the second consecutive year by SmartMoney magazine.
- Creating a community helps "stickiness." TradeKing knew that there were plenty of competing discount online brokers, but creating an online community both differentiated it and provided added value. Its community was more likely to interact with each other on TradeKing, creating stickiness by keeping users on the site—a valuable trait.
- Despite the anonymity of the Internet, users still value privacy. "Sometimes people only want to share information with those they trust or know," Massey said. "If someone on TradeKing doesn't want to share their profile with the rest of the trading community, they can do that," he said. But that feature isn't available on certified trades; in retrospect, Massey said he thinks that may have been a mistake. "I wish we had done that with our certified trade [feature]. I think we would have seen bigger adoption."
Continue reading "Case Study: How an Online Trader Uses Social Networking to Increase Revenue, Earn Loyalty From Clients" ... Read the full article
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