Robinhood reported $180 million in revenue in the second quarter this year, which represents double the revenue from the first quarter of $91 million. Many people have suspected Robinhood’s popularity would start to wane following its numerous outage woes and bad press. Yet, the opposite is happening. Why?
Robinhood’s Q2 2020 Revenue
Just last week, we reported on eToro getting ahead of Robinhood by establishing a beachhead in the UK. Likewise, it would be easy for one to conclude that Robinhood would annoy many people with its technical unpreparedness to absorb millions of active traders. Then, there was the matter of a trade-related suicide which spurred Robinhood to tweak its user experience and indefinitely postpone its expansion into the UK.
Some would view these missteps as signs of contraction, but the environment in which Robinhood operates is not quite normal. It is a “new normal”, in which teenagers are committing suicides at an increased rate, due to social deprivation caused by lockdowns. The age of the lockdown also creates a particularly fertile ground for immersion into extra-curriculum activities, such as trading, as it replaces sports betting.
However, above all else, Robinhood is a brand that spread like wildfire among the millennials. Robinhood’s zero-commission trading has become incredibly popular among millennials.
Robinhood set a trend that all others have to follow, such as eToro, Webull, Fidelity, Revolut, and others. eToro has only recently taken steps to encroach on the American market by offering stock trading in the US. The momentum that Robinhood enjoys is further propelled by the increased investor trust via their relentless funding infusions that reached $600 million in July.
How Does a Free App Double Its Revenue?
You can read our previous article to find all the income sources Robinhood draws from. In short, brokerages are more than happy to provide Robinhood the right to execute their trades, considering Robinhood’s massive user base exceeding 13 million. On top of that, Robinhood’s premium subscription account, dubbed “Gold”, is suitable for professional traders who deal with more advanced financial products such as options.
Options are far more lucrative than stock trading, so long as you possess the know-how to avoid the risky pitfalls of options trading. Accordingly, of the $180 million revenue, Robinhood gained $111 million from options alone.
Lastly, the corona-induced market volatility and new social mores increase user participation across the board. As a result, Etrade’s revenue rose from $85 million to $120 million. Likewise, TD Ameritrade’s revenue surged from $220 million to $340 million in the same period Robinhood doubled its own revenue.
Are you a paid subscriber to Robinhood’s more advanced features, or a day trade dabbler? When you overcome stock trading intimidation, it may be time to read up on our options guide to level up.