There are a lot of ways in which a person can make money in the current world. You have different types of jobs or things that you can do to earn money in this day and age. But this was not always the case. A couple of decades ago there were not as many career options that you have today. The rise of technology played a major role in giving birth to various kinds of jobs. Not only jobs but it also made businesses easy. It has made trading easier than ever before. In the earlier days trading meant a different thing but today it only refers to the stock exchange. You can invest in stocks sitting at your home. People don’t need to be working with stock exchange brokers to buy or sell stocks. All you need to do is have a mobile phone and internet connection. Because of this trading has become accessible to everyone.
Today more and more people are interested in trading. They are realizing that they have to invest money in order for it to grow. People learned that long term investments are definitely going to benefit them in the future. That’s why many millennials are investing in stocks. There are various applications through which you can invest in stocks. These applications not only allow people to buy or sell stocks but some of these apps also provide people with guidance on how to buy or sell them. They help people in making the right choices to make sure that the outcome is in their favor. Over the past few years, there have been a lot of applications that entered the market. But there are some applications that have been offering these services for a long time.
One such application is eToro. People who do social trading definitely know about this application. However, no one knows what its business model is or how it makes money. This article is completely about that. But before learning about the business model of eToro let’s know a little bit more about the company.
Page Contents
What is eToro?
As mentioned earlier eToro is a social trading application. It is an Israeli social trading and brokerage company. This is one of the first social trading companies. But eToro was not the name of the company when it started its operations. It was founded in the year 2007 by David Ring, Ronen Assia, and Yoni Assia. By now you must have assumed that Ronen Assia and Yoni Assia are brothers if so then you are absolutely right. The company was initially known as RetailFX. It was in 2010 when the company released the social investing platform eToro. Along with investing the platform also had the copy trading feature. What made this trading platform unique is its ability to allow investors to automatically check out, follow, and copy the top traders that were present in the network. In the later part of 2010, the company released the Android app.
This was great news as it allowed investors to buy or sell stocks through their mobile phones. The company has managed to raise almost $60 million between the years 2007 to 2014 in five rounds of funding. In 2014 alone it raised $27 million in funds from Chinese and Russian investors. These findings really helped the company to improve its business. In 2017 eToro joined hands with CoinDash to develop social trading that is blockchain-based. The company launched a cryptocurrency wallet for its Android and iOS users in 2018. By using this feature you could trade 10 cryptocurrencies. In the same year, it also launched GoodDollar. This is a non-profit community project that intended to reduce wealth inequality. In 2019 it acquired Firmo which was a Danish blockchain company. By 2020 more than 13 million people have been using the application. The current valuation of the company is $800 million.
Business model of eToro
eToro is one of the leading social trading platforms in the world. It has been around for nearly a decade. eToro is a market maker. It buys and sells shares. There are only a few things that it does. Let’s look at them.
Great platform for trading
As mentioned earlier eToro is one of the oldest and largest social trading platforms in the world. It has been offering its services to millions of people across the world for many years. Over the years the company has introduced many features to help the users. Not only that but it has incorporated new technology to make the user experience better. Apart from that, it is a mobile application. You know how easy it is to use a mobile application. Thus, it made trading accessible to everyone. Not only that but it also allows you to follow the top traders on the platform. You can just look at their trading stages to buy or sell stocks. This means that you are more likely to succeed in every trade you make. It has taken all the steps to ensure that its users are more likely to succeed.
Free to use application
The best part about using eToro is that it is completely free. You don’t have to pay any kind of money for using the application. There are no monthly fees for using it. This is a great thing as it makes it even more accessible. But if you think that it doesn’t charge money at all then you are wrong. It charges commissions for other things.
How does eToro make money?
Now that you have known the key aspects of its business model, let’s look at the ways in which it makes money. It has more than one way of making money.
Commissions on each trade/spread
eToro charges a small commission when each trader males a trade. When it is offering the copy trading option it connects all the users. If a popular trader makes a trade then they are charged a commission. This commission is applied to every trader who replicates the actions of the top traders at that time.
Inactivity fees
As mentioned earlier eToro doesn’t have any monthly or yearly fee. However, it does charge an inactivity fee if your account is inactive for too long. But this is nothing to worry about as the duration of this inactivity period is too long. Your account has to be inactive for more than a year to get charged. If so you have to pay $10.
Withdraw fee
Yes, eToro charges a withdrawal fee. On every eToro withdrawal made by the users, they have to pay a certain amount. You have to pay $5 every time you withdraw money from your eToro account.
Conclusion
This is the business model of eToro. It is currently one of the leading social trading platforms in the world. By the looks of it the popularity of eToro is only going to increase. You can know more about other interesting business models on Zeen. Click here to know about the business model of Hubspot.
