Online brokers plan ad blitz
By Greg Farrell, USA TODAY
NEW YORK -- Only a monk confined to a room without electricity will be
able to escape advertising for online brokerages this fall.
The major players, led by Charles
Schwab, E-Trade and Ameritrade,
are expected to spend $1 billion in
the next year to sign up new
customers. That's more than the
annual spending by McDonald's
and Burger King combined.
The ad blitz comes as the growth
rate in online trading seems to have peaked:
Although the number of online accounts grew from 5.3 million to 9.7
million last year, according to U.S. Bancorp Piper Jaffray, growth
from July to September is well off that pace.
Growth in the trading volume has also topped off this quarter, after
doubling from 224,000 trades per day in June of '98 to 547,000 this
past June.
Before online trading took off, there were about 6 million accounts with
off-line discount brokers. Companies like E-Trade and Ameritrade have
been most successful at luring those accounts online. The next phase of
growth -- converting full-service accounts or people who don't trade at all
into online traders -- will take much more persuading.
"The pool of self-directed security traders is not bottomless," says John
Payne, a consultant at Cerulli Associates.
The new target audience: the 14 million wired households with income
above $70,000 that don't do any online trading.
Further complicating the picture: The arrival of off-line giant Merrill Lynch
in the online arena later this year is guaranteed to drive up the cost of getting
customers next year.
"It's cheaper to acquire a customer now than it will be a year from now or
even six months from now," says Robert Bethge, chief marketing officer at
Datek Online Holdings.
To that end, Ameritrade launches new spots this week. One stars "Stuart,"
the hyperkinetic 20-something from an earlier Ameritrade ad who has
become something of a cult hero in the industry.
Right now, companies like Ameritrade and E-Trade are spending about $200
to acquire each new customer. Although the lifetime value of those
customer relationships varies, experts usually assign a $1,000 value to an
average customer.
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