Etrade Essay, Research Paper
Provider of online investing services. It has established a popular, branded destination Web site for self-directed investors. It offers automated order placement and execution, along with a suite of products that can be personalized. (Dow Jones Interactive)
As of September 30, 1999, Etrade had 1,551,000 active brokerage accounts, up 185% for the year, with assets held in customer brokerage accounts in excess of $28.4 billion, up 154% from last year. We began offering online investing services through the Internet in February 1996, and it has been our most rapidly growing channel, with transactions over the Internet and through online service providers representing more than 90% of our fourth quarter 1999 transaction volume.
Strategies used to gain new accounts
The extremely strong gains in new brokerage accounts, transactions and assets represent the success of our strategy to become the branded, global leader and recognized authority in electronic personal financial services. This strategy involves: .
*leveraging the powerful brand of E*TRADE to increase new customer accounts and assets held in customer accounts by offering a unique and compelling online experience;
*providing the broadest range of high value-added tools, products and services;
*enabling "anytime, anywhere, anyway" access, worldwide, to actionable information;
*integrating a broad-based digital financial media strategy with existing product and service offerings
(10 K report)
expanding global coverage by launching new sites in four additional countries (France, Sweden, the UK, and Japan) to complement our existing coverage in Australia, New Zealand and Canada; the acquisition of TIR in August 1999; and in January 2000, the acquisition of Telebanc. TIR is active in equity, fixed income, currency and derivatives markets in over 35 countries, and holds seats on multiple stock exchanges around the world. Telebanc is the parent of Telebank, an Internet-based, federally chartered savings bank, offering a wide range of Federal Deposit Insurance Corporation ("FDIC")-insured and other banking products and services.
We pursue strategic relationships to increase our access to online consumers, to build brand name recognition and to expand the products and services we can provide to our online customers.
We have developed alliances with key channels in the online media to increase account development and expand distribution. These channels include proprietary online services, Internet service providers and popular destination Web sites, such as search engines or financial content providers. These channels attract significant numbers of users, and our relationships provide access to expanded market opportunities. Sets forth below are descriptions of certain of our key alliances:
America Online. In July 1998, we entered into a two year agreement with AOL, the nation’s largest provider of Internet service and content. We are one of four brokers represented in AOL Personal Finance. The agreement was expanded in fiscal 1999 to include the very successful "Get 6 Free Months of AOL" offer and an even broader presence on AOL.
United Airlines. We have entered into a co-marketing agreement with United Airlines, to offer United Mileage Plus Miles to United members who open accounts, refer new customers or increase assets with us
Yahoo!. We have entered into numerous agreements with Yahoo! for various marketing and promotional programs designed to build the E*TRADE brand and generate new accounts.
Microsoft. We have entered into numerous agreements with Microsoft, to be broadly presented on Microsoft Money Central and the Microsoft Brokerage Center. Additionally, we are the exclusive sponsor of Microsoft Money 2000, recently ranked as the #1 Personal Financial Management Software by PC Magazine and CNET.
Hilton HHonors. We have entered into a co-marketing agreement with Hilton HHonors, to offer HHonors Bonus points to Hilton HHonors members who open accounts with us.
Buy.com. We have entered into a co-marketing agreement with buy.com, one of the nation’s leading Internet Superstores, to offer $100 gift certificates to buy.com customers who open new accounts with us. buy.com distributes this offer via the buy.com Web site and via e-mails to buy.com customers.
. EarthLink. We have entered into a co-marketing agreement with EarthLink.com, one of the nation’s leading Internet service providers, to offer six free months of EarthLink-Sprint Internet access for customers who open new accounts with us.
. Motley Fool. We have entered into an agreement with Motley Fool, a personal finance portal, for various marketing and promotional programs designed to build the brand and generate new accounts.
ZDNet. We have entered into an agreement with ZDNet, a personal finance portal, for various marketing and promotional programs designed to build the brand and generate new accounts.
Strategic Relationship w/ content providers
Content, such as news, quotes, charts and fundamental data, helps provide investors with the information necessary to make investment decisions. We believe that these information services facilitate new ideas and increase transaction volume. Our partnerships with leading content providers fulfill customers’ information needs and help drive transaction volume. Set forth below are descriptions of certain of our key content providers:
CBS MarketWatch. We have licensed news headlines and full-text stories from CBS MarketWatch. The news content is available in the news section of the quotes and research tab.
Bridge Information Systems. Beginning in November 1998, our customers executing their 75th trade per calendar quarter were given free access to The Pulse, an advanced market analysis tool by Bridge. The Pulse features streaming real-time portfolios, market/stock analytics and charts, and streaming Level 2 Nasdaq quotes.
Market Guide. We have a license agreement with Market Guide to display their fundamental company reports on our Web site. The reports, which cover all U.S. publicly traded companies, consist of company snapshots, performance statistics, key ratios, financials and an analysis of the hottest sectors/industries/stocks.
Standard & Poor’s. We have a license agreement with Standard & Poor’s to display their analyst stock reports, which cover approximately 1,100 companies. In addition, the agreement covers six S&P managed portfolios, a real time feed of all S&P upgrades/downgrades and seven weekly editorials.
Vickers. We have a license agreement with Vickers to display 13 months of insider trading activity (Form 4 and Form 144) for all U.S. publicly traded companies.
LionShares. We have a license agreement with LionShares to display detailed information on all the institutions that own a particular U.S. public company. In addition, the agreement also allows us to display detailed information on major institutional investors’ particular holdings.
ClearStation. With the acquisition of ClearStation Inc. ("ClearStation") in April 1999, we now offer ClearStation’s technical graphs, interactive graph tool, and the A-List on our Web site.
CNBC. We have a license agreement with CNBC to display their real time audio content on our MarketFlash page.
TheStreet.com. We have a license agreement with The Street.com to display their real time editorial news on our Web site.
Ask Jeeves. We have a license agreement with Ask Jeeves to implement their question and answer search engine application on E*STATION.
The market for financial services over the Internet is new, rapidly evolving and intensely competitive. We expect competition to continue and intensify in the future. We face direct competition from financial institutions, brokerage firms, banks, mutual fund companies, and other organizations. These competitors include, among others:
Bank of America
Charles Schwab & Co., Inc.
Datek Online Holdings Corporation;
Fidelity Brokerage Services, Inc.
Fenner & Smith Incorporated
National Discount Brokers
Salomon Smith Barney, Inc.
TD Waterhouse Securities, Inc.
Wells Fargo & Company
Many of our competitors have longer operating histories and significantly greater financial, technical, marketing and other resources than we do. In addition, many of our competitors offer a wider range of services and financial products than we do, and thus may be able to respond more quickly to new or changing opportunities, technologies and customer requirements. Many of our competitors also have greater name recognition and larger customer bases that could be leveraged, thereby gaining market share from us. Such competitors may conduct more extensive promotional activities and offer better terms and lower prices to customers than we do, possibly even sparking a price war in the online financial services industry. Moreover, certain competitors have established cooperative relationships among themselves or with third parties to enhance their services and products. For example, Charles Schwab’s One-Source mutual fund service and similar services may discourage potential customers from using our brokerage services. Accordingly, it is possible that new competitors or alliances among existing competitors may significantly reduce our market share.
General financial success within the financial services industry over the past several years has strengthened existing competitors. We believe that such success will continue to attract new competitors, such as software development companies, insurance companies and others, as such companies expand their product lines. Commercial banks and other financial institutions have become more competitive with our brokerage operations by offering their customers certain corporate and individual financial services traditionally provided by securities firms. The current trend toward consolidation in the commercial banking industry could further increase competition in all aspects of our business. Commercial banks generally are expanding their securities and financial services activities. While we cannot predict the type and extent of competitive services that commercial banks and other financial institutions ultimately may offer, we may be adversely affected by such competition. To the extent our competitors are able to attract and retain customers, our business or ability to grow could be adversely affected. In many instances, we are competing with such organizations for the same customers. In addition, competition among financial services firms exists for experienced technical and other personnel.
Compare the company to some competitors.
Compare to Ameritrade Inc and Charles Schwab & Co., Inc. and Merrill Lynch
$ millions 97 98 99
EGRP157.6 285 662.3
AMTD95.6 164.1 315.3
SCH2845.2 3388.1 4713.2
MER31731 35853 34879
Quarterly return ?99