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ยท Posted on
February 21, 2024

Robinhood is realising giving away free stuff isn't a great business model and uhh... which one of us gonna tell 'em?

The OG online brokerage for retail investors is struggling, that's for sure.

What's the key learning?

  • Robinhood uses a 'freemium' model, where customers are offered free products or services with the option to upgrade.
  • This type of model can be risky.

๐Ÿ‘‰ Background: Robinhood is the OG online brokerage for US retail investors. The company went public last year, but since then... it hasn't been smooth sailing.

๐Ÿ‘‰ What happened: The company's just revealed for the 3 months to March 31, its revenue was down 43% from a year ago. And, its losses were at around US$392 million.

๐Ÿ‘‰ What else: Robinhood's whole premise is that it makes trading affordable, which has helped it acquire customers. But this model might be posing some issues for its bottom line.

๐Ÿ”” What's the key learning?

๐Ÿ’ก The freemium model is a specific type of business model where products are offered for free, with the plan to upsell to non-free (aka premium).

๐Ÿ’ก While not charging for a traditionally paid-for service does help accrue customers, it can be a bit of a risky way of making money. That's because when companies have free apps, they're burning cash to support non-paying customers.

๐Ÿ’ก Robinhood found that out the hard way, and is now having to lay-off 9% of its workforce and see its revenue plunge.

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