There was a time when online brokerage was one of the largest internet industries. The “housewives on the stock market” phenomenon gave a boost to the brokerage industry, and to the broader process of monetisation of internet projects. It has been more than a decade since there has been any real innovation in online brokerage, and compared to newer services, brokerage sites have become needlessly complex and inconvenient.

Tradernet.com has been around since the beginning of the millennium, and for most of its existence it was just another broker, servicing Russian clients on the MICEX and RTS stock exchanges. However, over the past two years the service has made radical changes.

Innovation and the technological arms race were more than a matter of merely following trends or trying to hitch a ride on viral marketing, they were often driven by internal development – the desire to make buying shares as user-friendly as sending an email.

In addition to simplification, increasing trust in trading was also a strong motivator. The Revenue per User (RPU) on Tradernet is already around $50/month, which makes recruitment costs as high as $500 per client acceptable. This type of service is already well entrenched in some Western markets. Many social investing sites create their own investment management products that link brokerage accounts to the data generated by the top portfolios on each site. Access to investment data and infrastructure management services is what Tradernet is actually selling. The portfolio managers are trading for their own accounts, and never actually hold anyone else’s money.

Giving the client control
The following should be kept in mind regarding the monetisation of business: With the profusion of simulated portfolios and the growing transparency of all mechanisms, very few are going to care much about the fees. Portfolio performance is what matters. The commission is gradually becoming higher (in aggregate, integrally) than the usual level (in centralised services).

It is noteworthy that recruitment costs will subsequently fall due to viral and social tools (promotable invites, interexchangable internal currency, etc.) and, above all, due to a much more logical positioning of services for the bulk of potential users. Unlike “buy MSFT, sell MSFT”, the slogan “a serious social network with serious investment potential” is both attractive and understandably worthy of consideration. Anyone can join, and voyeurs (users who watch others’ performance but do not share their own) are also welcome. This makes the service appealing to a wider range of people, and allows those who do not want to share their personal financial data on the internet to enter with no commitment. Naturally, applications have been developed and released for the main mobile platforms (iOS and Android), making it possible to increase site popularity much faster.

In an economically charged service, a client base of 10,000 people (which is approximately what the company has today) makes it possible for a social-oriented service to bring real benefits. A strong growth trend will not force a change in the established development paradigm, and does not create any serious scalability risks. In particular, only minimal staff expansion is needed.

At present only fifty people work at the company. Social viral mechanisms are expected to continue to reduce the ratio of employees to clients. For now, of course, this is taking place due to savings on labour resources in distribution, sales and marketing. The next step (already in progress) is a more important ideological shift in the management paradigm – in many ways clients will advise themselves, meaning that staff in the exchange segment can also be placed on more cost efficient and modest footing.

The 21st-century renaissance
The user base is the key determinant of the value of the site and the company. Activity and content get more interesting every day. Critical mass has already been reached, even at such a relatively low threshold. In a serious social network an exchange of actual cash intensive transactions takes place. We are talking about serious communications, about serious “heavyweight” posts if you will. Not nearly as many participants are needed to ensure real activity compared to ordinary networks, which are filled with relatively lightweight content. It takes hundreds of photos and stories to make things interesting, whereas a dozen examples of profitable transactions is sufficient to fill out an entire trading day.

It bears repeating that an orientation on socio-economic interaction will blaze the company’s trail for the more distant future. The most important milestones in the development of civilisation are accompanied by revolutions in the energy, information and economic spheres. Printing sealed the fate of medieval obscurantism, a lack of firewood sped the decline of the Roman Empire, nuclear energy set the tone for the politics of an entire era, and now social networks are creating change.

Money and financial instruments stand alone in this respect. Financial instruments, as a means of leveling opportunities for economic exchange, have been evolving quickly over the past few decades, and are now clearly poised on the verge of a revolution. The all-but-completed transition to internet payment systems, the appearance of network mutual benefit societies to the detriment of banks, and the various manifestations of a systemic crisis, are all links in the same chain of accelerating events.

A new kind of data
What will happen to money itself in the future? Can the banking system as we know it survive? What will happen to the oligopoly of currencies? Tradernet’s “decentralise this, decentralise that” approach makes it possible to achieve sufficient development in these turbulent times. Therefore, Tradernet is both ideologically and technically ready for the tectonic shifts in industry (the company has a very expensive data centre, and the system operates on several independent hubs).

Tradernet does not simply service its clients (whose assets to date equal more than $100m). It is nurturing and cultivating a new class of user. This service gives the best traders the opportunity to prove themselves in real time, using real money, and everyone else gets a front-row seat to see just how they do it. No matter how good a trader may be, if he trades without this kind of social contact he will probably continue trading “inside the box”, severely limiting his potential.

Tradernet is developing a new type of client motivation, a new impetus. The average client account is already more than $10,000, despite the fact that no one client accounts for more than 0.1 percent of the business. In other words, there is a retail aspect (the attendant stability) and a method to cultivate a truly loyal client. The idea is not only to leverage the “wisdom of crowds”, but to provide a transparent platform that allows the best investors to rise to the top in terms of visibility. Trust and transparency are the building blocks of Tradernet’s DNA.