Every start-up dreams of the day when traffic to its website will jump from thousands to millions. But, as the old proverb says, be careful what you wish for because it just might come true. Embracing social media technology can force a tech start-up to scale overnight, as eToro discovered in the summer of 2011, when it first launched its social stock-trading product.
A big focus at LeWeb, an annual Internet conference in Paris, is on how big brands are embracing social media. Start-ups need to do the same and have challenges of their own. The story of how eToro, which has raised $31.5 million in venture capital, coped with a huge surge in traffic and tripling the number of its employees in a compressed time period, provides insights that could prove useful to other European and Israeli companies that go social and have to scale fast.
“Social is forcing start-ups to scale at a much earlier stage,” says Ronen Assia, who co-founded eToro in 2007 with his brother Yoni and David Ring. “It used to be that companies could decide on the pace of scaling and control it but now with social media functionality you can suddenly get hundreds of thousands or more of new users overnight and if your site can’t accommodate them without crashing they will move on.”
At launch, eToro, which splits its operations between London and Tel Aviv, had a chat feature, but most users chose to guard their anonymity and keep their trades secret. By 2011 the site — which never gave investment advice — was handling around 50,000 trades a day. Then eToro decided to make a bold move. It introduced OpenBook, a social trading platform that allows users to follow and copy other traders in real time. eToro enables digital native novices to try stock trading by allowing them to see what others are investing in and then copy them. eToro pays the traders who allow themselves to be followed up to $7,500 per month to encourage them to share information. The theory — which is now being backed up by research at MIT’s Media Lab — is that sharing info in social networking communities can significantly boost stock trading returns.
“When we launched we did not know if 90% of our users would want to do social trades or less than a tenth of one percent,” says founder and chief product officer Ronen Assia, who was interviewed for this article. It turned out to be the former. Social stock trading proved to be a hit with millennials and within 18 months eToro went from processing 50,000 transactions a day to north of a million. “All of the growth was attributed to the ‘copy trader’ feature,” says Assia.
The platform had an immediate appeal for digital natives, who would never visit their parents’ stockbroker but were open to learning from their peers. Before the social trading platform was introduced eToro offered broker-like functionality with some social features layered on top. Trades had to be done manually — users clicked a button to buy or sell. But once the social platform was introduced users could click “copy” and then all of the trades made by the person being copied would automatically be mimicked. “This really stretched our system to the limit,” says Assia. “We spent lots of sleepless nights at the office adding more servers, more network lines and of course, hiring new people.”
Recruiting good people is a real challenge, says Assia. “I am here seven years and 30% of my time every week is dedicated to interviewing job candidates. When you launch a company you think about all the things you have to do — write a business plan, raise money, but you never take into account how difficult it is to find good people.” eToro’s head count was around 80 people when it launched OpenBook in the summer of 2011. Today some 240 people work for the company.
One of the things eToro learned is that when you launch a cutting-edge product on the Web you have to stay alert to changes in the marketplace. “Before, we would do a major new release every two or three months,” says Assia. “But after OpenBook launched we had to learn how to do new releases very frequently — once every week or at least once every two weeks. You have to constantly change the features. Removing is even more important than adding. The whole company had to do that much more efficiently. It is very different than developing a trading system — especially now with the introduction of mobile.
eToro began as a desktop application, then moved onto the Web and then onto mobile. “So, unlike a company that starts with mobile or is mobile only we had to take big products with lots of functionality and features built in and be very focused about how to minimize and turn the mobile product into something that is very eToro-ian,” says Assia. “It meant putting lots of product managers into a room and having quite heated discussions about which features get included in the minimum viable product and which ones get thrown out. There is lots of stuff on the desktop that is not available on the mobile. We had to look at it from the perspective of, ‘what is the experience that the user will look for when they want to log in from a mobile device? What is the essence of what they need and want?’”
eToro appears to have gotten the formula right. It now has more than three million traders in more than 200 countries and its users have performed just shy of 100 million trades since January of 2012. Growth in mobile usage has shot up over 30% since the beginning of the year. Eleven percent of eToro’s active user base trades via mobile devices. And there is no doubt that the use of mobile devices will increase as users demand anytime, anywhere access to all services, including stock trading, keeping Assia and his engineering team busy with new scaling challenges for some time to come.