Robinhood: Virality + Gamification + FOMO + Simplicity = Billion Dollar IPO

Fintech has emerged as a rapidly expanding industry and improved accessibility has been one of the significant contributors to its success. 

Fintech companies have adapted their products according to the preferences of the millennial demographic, using simplicity, user-friendliness, and transparency as their guiding principles. A company that has been successful at exploiting this dynamic is Robinhood. 

Robinhood is leading the modernization of investments because it offers everyone an equal opportunity to participate in the financial markets. 

Two Stanford graduates, Baiju Bhatt and Vladimir Tenev, founded the company. 

Following their experiences in the world of investments, they decided to bring their talents together in Menlo Park, California, to build Robinhood. With its name drawn from a fairytale, Robinhood's mission was to provide access to financial markets to anyone, not just the wealthy. 

Since Robinhood's launch in 2013, it became evident that consumers who found value in their products most frequently belonged to the millennial generation. Robinhood users during 2015 were over 80% millennials, aging an average of 26 years old.

As a result, the founders confirmed their belief that young people are not opposed to participating in financial markets; rather, their wealth prevents them from accessing investment channels.

Robinhood began as a platform for trading stocks and ETFs. The Robinhood platform offered this feature without charging users a commission fee. 

In response to growing subscriber numbers, the company was able to raise significant amounts of venture capital.

As opposed to charging an investment service fee, Robinhood derived revenue from payments for order flow. Through the rebates it receives from market makers and trading venues, Robinhood can collect a revenue stream.

Compared to the old system of collecting brokerage fees, this business model was truly revolutionary. To expand the company's consumer base and generate new revenue streams, the company began to refine its existing offering and expand the platform's capabilities.

Robinhood Gold was launched in 2016 as a subscription model. The company initially charged a $10 monthly fee for this subscription, which would allow its users to upgrade to the complete Robinhood platform at an affordable cost. 

Gold subscribers have access to professional research reports, can trade on margin, and deposit instantly from their trading accounts. Now, Robinhood Gold is available at a much lower monthly price of $5 per month. 

In addition, Robinhood's cash management service allows users to have uninvested funds from their brokerage account managed by the company, offering a higher yield than most banks. FDIC insurance is also available for accounts with managed funds up to $1.25 million. 

The latest product offering from Robinhood is the incorporation of cryptocurrency into the trading platform. 

Recent years have seen a boom in the cryptocurrency market. In other words, this provided an opportunity to gain access to a new financial market that most traditional brokerage houses have largely ignored. As a result, Robinhood was presented with a valuable new opportunity by this key demographic. 

The new Robinhood platform includes a few features that are designed to ease existing uncertainties regarding cryptocurrency exchange. For users to be protected from drastic price changes, Robinhood restricts purchases to 1% and sales to 5%. This prevents orders from being executed if the cryptocurrency price radically changes over or below 5%. 

Taking this step is likely to make the firm one of the most attractive investments for young investors. The company has demonstrated its ability to think like a consumer and act in a way that meets its users' evolving needs.

Despite this, Robinhood witnessed a service outage on March 2, 2020, one of the most intense trading days in the history of U.S. financial markets. The outage, unfortunately, lasted the entire trading day, causing massive damage to its users. 

Several prominent media outlets pointed to the outage as the downfall of a previous fintech giant. However, this outrage faded quickly, and the covid pandemic did not result in the long-term damage predicted. 

By 2020, the firm has proved to maintain a market share above 50% for new brokerage accounts, which is more than all incumbent legacy brokerage firms combined. More than 3 million Robinhood accounts were opened in the first half of 2020 alone. 

In any new industry, success comes with a great deal of responsibility. Accordingly, Robinhood bears the weight of ethical duties applicable not only to a new fintech but to any firm. 

For example, the company is obligated to its users to maintain a solid and consistent information system for storing this data, and the growth of cryptocurrencies makes this responsibility even more important. 

In 2020, Robinhood had to deal with an ethical issue involving the untimely suicide of a 20-year-old man who had opened an account with the firm during the Covid pandemic. In a tragic turn of events, the young man committed suicide after believing he had lost over $700,000 by trading in the platform. 

However, investigations revealed that the user had not suffered losses of that size; but instead, the Robinhood account app had not yet included the stock's option positions. As a result, the young man ended his life due to a misunderstanding caused by the delay in seeing the correct account balance on the application. 

There is controversy concerning whether Robinhood is at fault in this situation. One side has argued that there should be significant safeguards in place to protect the users against rash market behavior. 

As an alternative, one can say that the user assumes the risk associated with these choices. Because of this, Robinhood should not hold itself responsible for the behavior of its younger customers.

Robinhood may become copied by legacy brokerage firms, but like other fintech companies, it is likely to remain a favorite among young financial consumers. Unless additional incentives are provided, Robinhood's existing user base is unlikely to switch to a legacy brokerage firm. 

1. FOMO: Before they even had a viable product, Robinhood allowed users to sign up for an invitation-only, private beta.

They pushed a massive PR campaign around the private Beta, which was picked up by major news outlets, cementing hundreds of thousands of customers, before they even had a working product.

If you need help getting your word out, you can try something Newswire or Prezly

2. Gamification: Robinhood created a referral-based onboarding process that offered rewards and prizes for joining a private beta.

After users signed up for the private beta, they were put on a waiting list. Once on the waiting list, they got viral sharing options that allowed them to increase their place in line by sharing a unique link, or by sharing the early beta access on social media in order to move up their place in line.

This led to exponential growth, numbering in the millions before the product even went live.

If you want to do this for your own product, you can use something like prefinery.com (if you rather not waste time coding it yourself).

3. Simplicity: The number one problem companies have is that they overcomplicate the sign-up process.

Robinhood removed anything superfluous and made the CTA as straightforward as possible.

The copy read “Robinhood $0 commission stock trading. Stop paying up to $10 per trade.”

The single option.

Robinhood has always been focused on making things as simple as possible for their users, so it only makes sense they made the onboarding fall in line with that prerogative.

So take notes fam.

Virality + Gamification + Fomo + Simplicity = Billion Dollar IPO