If you haven’t checked out Zecco by now, I really recommend that you do, especially if you’re an online trader or investor. Online trading has reached a new milestone with Zecco, by allowing online investors to trade for free. Some research into the Zecco through the Zecco Community Forums has provided me with answers as to how Zecco plans on generating income to sustain the business.
First off, not all trades are free through Zecco, only market orders and limit orders are for free. But other services cost a minimal amount. For instance options trading is priced at $3.50 plus $0.60 per contract. Browsing the Zecco Forums led me to learn the following:
- Looking at E*Trade’s 10-K filings, one notices that 49% of the revenues that E*Trade generates is from interest.
- Companies like E*Trade spend on average $5 on advertising for every trade that is conducted.
This all makes sense when one realizes that Zecco requires a minimum account balance of $2,500 and that they do not plan on advertising their service. Zecco seems to be hoping that the minimum $2,500 account balance will help them generate enough revenues through interest. Furthermore, rather than spending big money on advertising, Zecco plans on having their community forums and blogs, generate enough viral marketing to attract new customers. With the average Zecco page having three Google AdSense advertisements on it, it is quite evident as to how Zecco plans on generating a big chunk of their revenues in order to help cover clearing fees that result from the free trades.
Many people talk about Zecco being the Google of online trading. Whether or not Zecco is the Google of online trading, it wouldn’t come as a shock to me if sometime in the future we learn of Google and Zecco signing off on a deal where Google will guarantee a certain amount of advertising dollars to be generated through the Zecco website. Something similar to the Google and MySpace deal that we saw two months back.
For those who are interested here are some more Zecco links: a comparison of Zecco and other online brokers, the Zecco team, and the Zecco backers.
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