eToro, which has raised $31.5 million in venture capital, encourages digital native novices to try their luck at stock trading by allowing them to see how popular investors in the space trade and then copy them. The site claims to be the world’s largest social investment network, with almost three million users across 190 countries. The number of active users jumped from 107,980 in September 2012 to 191,273 in September 2013, representing 77% year-on-year growth. The site's number of mobile users jumped 178% in the last year.
The majority of eToro users are under 35. We created a platform and suddenly an entire generation isn't connected with traditional brokerages anymore. Our users are willing to share information online and make actionable investments in real time.
This has led to new approaches to investment: people have the ability to see and follow what everybody else is doing. It is much quicker to learn from everybody else, to learn by observing and copying other investors.
The combination of a new layer of information — social investment info together with user experience — is more relevant for the Facebook generation. Our users are not basing trades only on financial analysis, but also on brand love. They are buying tech stocks because they love Apple products, Facebook and LinkedIn. This is a big part of disrupting financial services: the move from only economic rationalism to investing in companies with great products.
On the social web, with the digital native generation, it is not about financial results only but whether I love the product or do I connect to their brands. Digital natives want products with the same values and the DNA they have. Apple has our DNA, Facebook has our DNA, but a bank’s DNA is a very, very different DNA. We don’t need advisors in suits with gray hair to tell us what to do. If the real people using the products of companies were the owners of the shares, they would drive the markets. Today in most countries a handful of big financial institutions hold the majority of the funds — they represent everybody. People tell them, ‘take my money and do what you want,’ but all these institutions care about are financial results. There is a lack of emotion and connectivity.
The financial markets are still the driving force of the global economy. But what if the financial markets looked like the Web does? The point is this generation gap will disrupt the markets. It is just a question of how big this wave is going to be and which surf boards will be used to ride it.
Yoni Assia is CEO of eToro, a social stock trading site.