November 27, 2022


Stock development

How Robinhood Declined Paid Marketing and Customer Acquisition Costs

  • Robinhood has relied on term-of-mouth advertising and its referral software to increase its person foundation.
  • The organization has managed to improve its person foundation even as its normal customer acquisition expense has gone down.
  • The Robinhood Referral Application has demonstrated to be a essential internet marketing driver for the company.
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Robinhood has taken an unconventional route in terms of not only how it lets individuals trade, but also how businesses generally are likely to marketplace by themselves in advance of likely community.

While firms like Peloton and Uber amped up their compensated internet marketing spends on their way to going community, the popular retail investing app’s digital and compensated marketing and advertising bills really declined 14% 12 months-in excess of-12 months from $90.3 million in 2019 to $77.7 million in 2020, according to its S-1 filed filed very last 7 days. 

The organization has as a substitute relied on phrase-of-mouth marketing and advertising to develop its user base, pumping the greater part of its advertising pounds into its referral method top up to submitting to go general public. 

The Robinhood Referral Plan awards both equally present consumers and the new consumers they refer with a inventory reward. This has verified to be a trustworthy vehicle for Robinhood to grow its shopper base for the reason that it generally has decrease direct expense rates in comparison to other internet marketing strategies, the corporation famous in the submitting. 

A vast majority (80%) of new people today that joined Robinhood in the 3 months ending on March 31, 2021 joined both organically or as a result of its referral application, according to its S-1 filing.

Even further, the company also reported it decreased its income payback period, or the time it will take for new buyers to turn out to be worthwhile, with the overall revenues they produce equaling or exceeding the advertising and marketing bills incurred to acquire them. 

In accordance to its filing, Robinhood’s average revenue payback period of time improved from 12 months in 2019 to less than 5 months in the fiscal calendar year 2020. It attributed this to more economical promoting, which includes switching up the conditions of its referral plan to award shares to men and women when they connected their lender accounts, as opposed to offering them the shares when their accounts have been authorized.

The enterprise also stated that it designed its paid out consumer acquisition channels extra successful, without the need of supplying more details, minimizing the ordinary price tag to receive a new consumer a lot more than 60% from $53 in fiscal 2019 to $20 in fiscal 2020. 

That’s not to say that the firm has pulled back on its advertising expend. 

To be positive, Robinhood’s general advertising and marketing invest greater, with the firm paying out $185.7 million in 2020, up 49% from $124.6 million in 2019 and $32.3 million in the a few months ending on March 31, 2021, up 46% as opposed to the calendar year prior. 

Total, Robinhood has also benefited from the pandemic, with analysts declaring that lockdowns and federal government stimulus checks have assisted it appeal to legions of new end users around the last year. That surge has continued with the frenzied trading all around so-referred to as meme shares in 2021, even as it faces regulatory threat and its brand name equity was threatened in January amid the quick squeeze in GameStop.