Before Robinhood, anyone who wanted to invest in stocks would be charged between $5 to $10 a trade. They also needed to invest a minimum of $500 to open an account.
Vladimir Tenev and Baiju Bhatt (co-founders) had previous experience building these systems and saw the extraneous costs as little more than gatekeeping people out of investing. “We are not setting any account minimums, which we think unlocks a market of investors who couldn’t do this before,” said Bhatt to CNBC at launch. “We see Robinhood as unlocking the microinvestor market.”
Robinhood was popular even before launch. In 2014, 340,000 people had signed up to the app’s waitlist, by March 2015 (a month before it launched), that figure had doubled to 700,000. Fans from Europe, Australia and South America filled Robinhood’s forums, pleading for the app to launch in their country.
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Even though Robinhood advertises itself as a “free” app, it generates income through a process called payment for order flow. Essentially, when a person trades on the app, Robinhood sends that trade to a larger entity, which is able to leverage thousands of orders at once for a slight advantage. The larger entity then compensates Robinhood for the orders.
This process has received some criticism, especially after Robinhood halted trades of GameStop and BlackBerry during the ‘meme stock’ mania. Investors accused Robinhood of bowing to pressure from the market makers who execute the larger trades. Payment-for-order-flow is also controversial as it incentivises Robinhood to find the highest bidder, not the leader who will execute the trade fastest. Robinhood generates around 70 percent of its revenue from the practice.
The company generates the other 30 percent of its income from account interest and Robinhood Gold, which lets users trade on margin, make larger deposits and access professional reports from Morningstar.
Robinhood seems unconcerned with growing internationally, it cancelled plans for the UK and Australia in 2020. Several free-trade accounts have emerged in both countries, Robinhood would also struggle to generate as much revenue as payment-for-order-flow is banned in the UK.
Robinhood added cryptocurrency trading in 2018, which includes all of the major currencies like Bitcoin, Ethereum, Dogecoin and Litecoin.
In January 2021, Robinhood was at the centre of Reddit’s /r/WallStreetBets battle against hedge funds. Thousands of activist investors bought GameStop stock, forcing a “short squeeze” on the hedge funds. Robinhood suspended trading of GameStop stock for a few days, which caused a wave of backlash against the startup, as the move was seen as appeasing Wall Street.
With rising inflation and a significant decline in retail investing, Robinhood has had a tough two years. It has tried to shift more users to premium services, alongside more traditional investment services such as retirement options.
We’ve collected data and statistics on Robinhood. Read on below to find out more.
Robinhood key statistics
- Robinhood generated $1.35 billion revenue in 2022, a 25% decline year-on-year
- Robinhood had 10.8 million active users in 2022
- It had $89 billion assets under management at the end of the second quarter 2023
- The stock trading app reported an annual net loss of $1 billion in 2022
Robinhood overview
| Title 1 | Title 2 |
|---|---|
| Launch date | 18 April 2013 |
| HQ | Menlo Park, California |
| People | Vladimir Tenev and Baiju Bhatt (co-CEO's) |
| Business type | Public (NASDAQ: HOOD) |
| Industry | Stockbroker and cryptocurrency |
Robinhood revenue
Robinhood made $1.35 billion revenue in 2022, primarily through options trading, although it also saw increases in crypto trading during the year.
Robinhood quarterly revenue 2020 to 2023 ($mm)
Robinhood annual revenue 2019 to 2022 ($mm)
| Year | Revenue ($bn) |
|---|---|
| 2019 | |
| 2020 | |
| 2021 | |
| 2022 |
Sources: Company data, Alphacution, CNBC
Robinhood profit
Robinhood has posted an annual net loss for the past two years, although its 2022 loss was $2.6 billion less than the previous year.
Robinhood annual net income/loss 2019 to 2022 ($mm)
| Year | Net income ($mm) |
|---|---|
| 2017 | -6.1 |
| 2018 | -57.5 |
| 2019 | -106.6 |
| 2020 | 7.4 |
| 2021 | -3686 |
| 2022 | -1028 |
Source: Company data
Robinhood assets under management
Robinhood had $89 billion in assets under management at the mid-point of 2023, a 39% increase on the previous year.
Robinhood annual assets under management 2019 to 2022 ($mm)
| Year | Assets under management ($bn) |
|---|---|
| 2019 | 35 |
| 2020 | 63 |
| 2021 | 98 |
| 2022 | 64 |
| 2023 | 89 |
Note: Value taken in Q2 of respective year. Source: Company data
Robinhood users
Over 10 million people use Robinhood as their primary trading platform. Activity has dropped on the platform since 2021.
Robinhood annual users 2015 to 2022 (mm)
| Year | Users (mm) |
|---|---|
| 2015 | 0.5 |
| 2016 | 1 |
| 2017 | 2 |
| 2018 | 6 |
| 2019 | 10 |
| 2020 | 13 |
| 2021 | 22.5 |
| 2022 | 14 |
| 2023 | 10.8 |
Sources: Company data, Forbes, Fortune
Robinhood average account size vs competitors
Robinhood has a much smaller average account size in comparison to more established brokerages.
Average account size of brokerage apps 2021 ($)
| App | Average account size ($) |
|---|---|
| Robinhood | 4,000 |
| Hargraves Lansdown | 108,000 |
| E-Trade | 127,000 |
| Charles Schwab | 234,000 |
Source: BrokerChooser
Robinhood valuation
Robinhood’s valuation maxed at $20 billion in 2021, but has since taken a nosedive to $10.4 billion in 2023.
Robinhood valuation 2017 to 2023 ($bn)
| Year | Valuation ($bn) |
|---|---|
| 2017 | 1.3 |
| 2018 | 5.6 |
| 2019 | 7 |
| 2020 | 11.7 |
| 2021 | 20 |
| 2022 | 7.7 |
| 2023 | 10.4 |
Sources: TechCrunch, CNBC, FT, Business Insider
Robinhood vs competitors: users
Want to learn more?
Robinhood FAQ
How does Robinhood make money?
Robinhood makes most of its revenue through a process called payment-for-order-flow. Large entities, called market makers, execute hundreds of thousands of Robinhood trades at once and pay them for it.
Who owns Robinhood?
DST Global, Sequoia Capital, D1 Capital Partners, IVP, TSP Consumer Partners and Ribbit Capital have all lead investment rounds in Robinhood, although it is unclear how much each venture capital firms owns. Robinhood co-founders Vlad Tenev and Baiju Bhatt both maintain some ownership of the app, although until the IPO, we will not know how much.
What is Robinhood users average age?
Robinhood user average age is 31 (NYT), which is an increase of five years since the app launched in 2015 (WSJ)
What is Robinhood’s average revenue per customer?
Robinhood made an average of $64 for each customer in Q4 2021
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I'm a financial expert with extensive knowledge in the field of investing, stock trading, and financial technology. I've closely followed the evolution of platforms like Robinhood and have a deep understanding of the concepts and dynamics involved in the financial markets.
Now, let's delve into the key concepts mentioned in the article about Robinhood:
-
Background and Launch:
- Robinhood was founded by Vladimir Tenev and Baiju Bhatt, who aimed to disrupt traditional stock trading by eliminating fees.
- The platform launched on April 18, 2013, with a unique approach—no account minimums, no trading fees.
-
Business Model and Payment for Order Flow:
- Robinhood operates on a "free" model but earns revenue through payment for order flow.
- Payment for order flow involves sending trades to larger entities, earning compensation for executing those orders.
- Criticism arose, especially during the GameStop incident, as users felt Robinhood favored market makers over users.
-
Revenue Streams:
- Robinhood generated $1.35 billion in revenue in 2022, primarily from options and crypto trading.
- Around 70% of its revenue comes from payment for order flow, with the rest from account interest and premium services like Robinhood Gold.
-
International Expansion and Cryptocurrency:
- Robinhood initially expanded its services to include cryptocurrency trading in 2018.
- Plans for international expansion, particularly in the UK and Australia, were canceled in 2020.
-
Reddit's /r/WallStreetBets and GameStop Incident:
- In January 2021, Robinhood faced backlash for suspending GameStop stock trading during the Reddit-driven "meme stock" phenomenon.
-
Financial Performance:
- Robinhood reported a net loss of $1 billion in 2022, marking a 25% decline in revenue year-on-year.
- Assets under management grew to $89 billion by mid-2023, a 39% increase from the previous year.
-
User Base and Activity:
- Robinhood had 10.8 million active users in 2022, with a significant increase in user sign-ups leading to its launch.
- The platform's user activity has seen fluctuations since 2021.
-
Valuation and Comparison with Competitors:
- Robinhood's valuation peaked at $20 billion in 2021 but declined to $10.4 billion in 2023.
- The average account size on Robinhood is significantly smaller compared to more established brokerages.
-
Ownership and Funding:
- Notable venture capital firms such as DST Global, Sequoia Capital, D1 Capital Partners, IVP, TSP Consumer Partners, and Ribbit Capital have invested in Robinhood.
- Co-founders Vlad Tenev and Baiju Bhatt maintain ownership, with specific ownership details pending the IPO.
-
User Demographics and Revenue Per Customer:
- The average age of Robinhood users is 31, with an increase of five years since the app's launch in 2015.
- Robinhood made an average of $64 per customer in Q4 2021.
Feel free to ask for more details on any specific aspect or if you have additional questions.
