Tag Archives: Apps

Is Robinhood Screwing You On Your Trades?

An interesting detail surfaced in this week’s Congressional hearing on GameStop shares and Robinhood, the platform where they’re often frenetically traded:

In his statement, Themis Trading Partner Sal Arnuk went right for that last issue, calling attention to the fact that payment for order flow (PFOF) causes a disconnect between a broker and his customer — especially in the case of Robinhood.

“They recently changed their PFOF method from one giving them a set payment per share to one giving them a percentage of the spread instead,” he said. “Think about this: A Robinhood trader wants the spread in the stocks he/she is trading to be as narrow as possible. The HFT [high frequency trading] market maker buying those orders benefit most when that spread is as wide as possible. And now Robinhood benefits most when the spread is as wide as possible as well! This is an amazing misalignment of interests.”

Arnuk took a dim view of Robinhood’s motivations:

“This tells you Robinhood knows full well the value of its herded and gamified product base; they knew to educate their users just enough to incentivize trading and maximize their own revenue as a result of it.”

Let’s back up a bit. A spread is the difference between the price you can buy a share at and the price you can sell it at. Let’s say you can buy GameStop at $190 a share and sell it at $189 a share. The company that executes the trade gets that dollar for their trouble.

You want that spread as low as possible so you can make more money. If Robinhood is paid a percentage of the spread, their incentive is to get that spread as high as possible. Nice for them, not so nice for you.

I don’t think Robinhood has publicized this change, and it seems sneaky and not in the best interest of investors. I’d like to see them come out and explain why this is good for investors. But I’m not sure they can do that.

For more on GameStop, check out these posts:

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Photo: Robinhood Co-CEO Vladimir Tenev “TechCrunch Disrupt NY 2016 – Day 2” by TechCrunch is licensed under CC BY 2.0

Behind Clubhouse’s Meteoric Rise: User Obsession and Timing

Everyone at once seems to be talking about Clubhouse, the 11 month old social media app that has attracted the likes of Elon Musk, along with a $1 billion valuation. I found myself wondering, why is this app so popular?

The basic architecture seems pretty simple: Zoom without the video, plus the ability to see which discussions are happening now. But this seemingly simple product has grown from zero to 10 million users at warp speed.

The timing of the launch, along with the user obsession of Clubhouse’s founders, seems to have driven this incredible growth.

Clubhouse launched in April 2020, just weeks after the lockdowns began. What better time to debut an app that connects people? And Clubhouse connected us in a live, personal, and serendipitous way. Unlike Twitter or Instagram, you never knew who would show up. These chance interactions were precisely what we were missing while stuck in our houses.

…Hoover said he believed the ephemerality makes the app special. “It better reflects how we communicate in the real world and encourages a more authentic conversation,” he said.

More from Wired:

Clubhouse arrived at a perfect moment. It delivered spontaneous conversations and chance meetings to people stuck at home.

Clubhouse’s founders have also eagerly sought feedback from day one:

Every Sunday, thousands of Clubhousers attend a town hall with the app’s two cofounders, Paul Davison and Rohan Seth.

This strikes me as brilliant and perhaps comes from their history of having built social products before, some of which didn’t make it.

Since I use Android rather than iOS, I actually haven’t tried Clubhouse yet, but I look forward to checking out their forthcoming Android app.

What do you like or dislike about Clubhouse? Let us know in the comments below!

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How to Build a Network, from Bumble Founder Whitney Wolfe Herd

The dating app Bumble recently went public, making founder and CEO Whitney Wolfe Herd a billionaire at the ripe old age of 31. I heard an interview with Herd a while back, and her genius at marketing really struck me.

She had just created Bumble…now, how can she get anyone to sign up?

…we ran as fast as we could to the fraternity row, and went into the frat houses and said a different pitch, and said, “Hey guys, I bet you have no other way to access hundreds of sorority girls right now. Download the app, because they’re all waiting for you! They’ve all just downloaded this app and they’re all waiting for you to like them.

This is incredible marketing genius, even if it involves a little white lie. Hurry boys, and you can have all the ladies to yourself! (What man will say no to that?) Quickly girls, the most desirable boys are waiting for you! With 2 meetings, she solved the problem of how to get enough people on the app to make it a real network.

This interview is truly a master class in marketing and worth a listen in its entirety. The quote above is from about the 10:10 mark.

I only wish I had been in on that IPO!

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Photo: “File:TechCrunch Disrupt San Francisco 2018 – day 2 (30647055838).jpg” by TechCrunch is licensed under CC BY 2.0