Why EGRP Will Win
Awesome execution, leadership and vision for the future,
letter to shareholders from Christos M. Cotsakos in 1999 annual report.
We rattled the very foundations of Wall Street. We reinvented the industry and created a new one. We put choice back into the hands of individuals. I'm sure you've been paying attention. In case you weren't, let me tell you?we had a great year.
? We've recruited and developed best of breed talent.
? We delivered an awards-winning customer experience.
? We created a 21ST century blue chip brand and world-class technology.
? We developed a multi-country community for the self-directed investor that's going global.
? We advanced strongly toward our goal of becoming the trusted, global leader and recognized authority for Digital Financial Media (DFM) and one-to-one Customer Relationship Management (CRM).
Did you think we were just an online broker? If you did, you missed the point. This business isn't just about trading?it's about a lifestyle change. It's about personal financial freedom and growth. It's about putting power and choice back into the hands of individuals.
Today's individual has a greater degree of power and control over their finances than at any other time in history?thanks to the Internet revolution. People are moving online to transact, to conduct a growing array of financial activities, and to get the information and support they need to maximize those activities. It's an attitude and lifestyle shift that's occurring faster than almost anyone expected. The 21ST century is about the empowerment of the individual, and E*TRADE© has been both a champion and an innovator for the benefit of tomorrow's consumer today.
Everyday, we deliver a premier, customer-focused online investor experience. And that's not just my opinion. This year alone, we were cited by Gomez Advisors, Lafferty Information and Research Group, PC Magazine and Smart Computing as having the most user-friendly Web site in the industry. People find what they want at E*TRADE©: choice,
value, convenience and ease of use. From stocks, bonds, mutual funds, options and initial public offerings, to a broad range of content, community, messaging, tools and analytics, we offer products and services that are democratizing personal financial services, while leveling the playing field on a global scale.
LET'S DO THE NUMBERS.
Here's the executive summary of the top and bottom line:
? $621.4 MILLION IN REVENUES for fiscal 1999, up 85 percent from
the $335.8 million reported a year ago.
? $54.4 MILLION "OPPORTUNITY LOSS"?last year, after seven
straight quarters of profits, we declared a moratorium on profitability to
invest in technology, service quality and to build the brand and
customer experience to drive future growth. As we expected, we
reported a net loss for the year. The moratorium, as planned, has
allowed us to build one of the strongest brands in online financial
services and fuel new product diversification.
? 76 PERCENT GROWTH IN EARNINGS BEFORE MARKETING?and
as we continue to invest in our phenomenal brand, the strength of our
core business continues to accelerate. Pre-tax income before
marketing was $210 million in 1999, rising 76 percent over 1998 as
our investment in the blue-chip E*TRADE© brand already began
paying off, fueling the growth of our business.
? ONE MILLION?the net number of new active accounts we've added
in less than a year. At the launch of Destination E*TRADE(TM) last
September, I said we'd do it in 18 months. It took us 11. In fiscal year
1999, we grew our customer account base by 185 percent from the
previous year.
? $52 MILLION IN DEPOSITS EVERY BUSINESS DAY? up from an
average of $20 million in the prior year. We now have a total of $28
billion in customer assets, up 154 percent from a year ago.
? 50 PERCENT INCREASE in share of market as measured by online
trades per day?from 10 percent of the market to 15 percent during the
fiscal year.
? 4TH TOP E-COMMERCE BRAND, according to the Opinion Research
Corporation Internet Brand Study. E*TRADE© follows only
Amazon.com, eBay and Priceline.com in the study.
? 4.69 MILLION UNIQUE VISITORS to our site in the last quarter
alone, making E*TRADE© the most visited online investing site,
according to Media Metrix. Each of those visitors spent an average of
51 minutes per month on our site, 37 percent higher than our next
closest competitor, making our site the "stickiest" in our competitive
space.
? 60 PERCENT OF TOTAL REVENUE from domestic retail
transactions in our fourth fiscal quarter?a decrease from 90 percent
three years ago and a measure of the success of our diversification
and expansion of products and services. We're making E*TRADE© the
consumer's financial command center.
? $1 BILLION in mutual fund assets held in customer accounts. We
added 700 funds to our Mutual Fund Center, including four E*TRADE©
proprietary funds, bringing the total funds offered online to more than
5,000.
IT'S THE BRAND.
In the rush to the gold fields of the Internet, brand awareness and
brand distinction become more important than ever. We know it?and
we're committed to doing it better than anyone else in the industry.
The customer experience. Account base growth. Customer assets.
Share of market. Site stickiness. Internet reach. By any standard of
measurement we continue to separate E*TRADE© from our
competitors and from heritage financial services companies in the
online space and in the hearts and minds of consumers.
E*TRADE© is striving to build one of the most trusted blue chip
consumer brand franchises of the next century. Our brand has soul,
passion, and credibility. It resonates with individual investors because
it reflects their own values and distinctive voice. According to NFO
Market Research, E*TRADE's top of mind brand awareness among
consumers is 33 percent, greater than our next seven competitors
combined.
We've invested more than $250 million over the past year in
establishing E*TRADE© as "The #1 place to invest online." Our new
"It's time for E*TRADE© " advertising campaign has helped attract
over one million net new active accounts during the year and has
increased the efficiency of our marketing dollars at the same time.
Cost per new account was $198 in the fourth fiscal quarter, down from
$424 in the same period a year ago and 53 percent more efficient. Our
brand momentum has raised the bar for our competitors who are
scrambling to play catch up.
We're keeping the pressure on. And we're doing it through customer
focus, innovation, speed and execution.
? We've continued to build the E*TRADE© brand through our
aggressive advertising campaign to capture the mind share?and wallet
share?of individual investors in the U.S. and global communities.
? We further strengthened our customer experience by enhancing the
Destination E*TRADE(TM) site, making it faster, easier to navigate,
and more relevant and useful to individual investors.
? We significantly expanded our customer service capabilities,
including the addition of 24 x 7 x 366 live agent customer service
support.
? We launched the E*TRADE© Bond Center and Power E*TRADE(TM),
representing important steps in our strategy of building customized
products and services that meet customers' real needs.
? We provided state-of-the-art information and technology tools that
the most active investors require to trade quickly and efficiently.
Power E*TRADE(TM) features streaming Nasdaq Level II quotes, an
enhanced Trading Desk, and preferred IPO allocations. Our efficient
all-electronic business model allows us to offer these active investors
trades for as low as $4.95.
? We've removed barriers of time and access that have traditionally
limited opportunities for individuals to pursue their financial goals. This
summer we formed an alliance with Instinet, the leader in after-hours
trading liquidity, to provide our customers online After-Hours- Trading
in both listed and Nasdaq equities.
? We continued our international expansion by launching E*TRADE©
sites in four countries?France, Japan, Sweden, and the United
Kingdom (We were already serving international customers through
branded Web sites in Australia, New Zealand and Canada).
? We completed three major acquisitions?ClearStation(TM), TIR
Holdings(TM), and Confluent?to accelerate our growth in several
strategic business areas, and we expanded our global reach through a
number of strategic alliances and partnerships. We will continue to
pursue an aggressive acquisition strategy over the coming year and to
build key alliances and partnerships that fuel our growth.
IT'S ALSO THE TECHNOLOGY.
Some see us as a world-class financial services company supported
by technology. Others see us as a technology company that delivers
world-class financial services and, increasingly, media content. We're
both. And we've maintained our position on the cutting edge of
technology by further enhancing the speed, reliability, and scalability
of our Stateless Architecture(TM). We currently have a patent pending
for this proprietary architecture?which we think is the industry's most
advanced technology and customer infrastructure.
But we caught a little heat last year, too. I'm talking about service
interruptions. We had them. Other major Internet companies?including
our direct competitors?also had them. We took the brunt of the
criticism, because we're the gold standard to which everyone else is
being compared. We accept the challenge of constantly being under a
microscope, and believe we've got the talent, the technology and the
team to stay out in front. Our technology will continue to evolve and
improve, and we're continuing to extend our multi-tiered, fault-tolerant
architecture. We've also opened a state-of-the-art Technology Center
of Excellence in Alpharetta, Georgia, providing increased system
redundancy, a significant boost in processing power and expanded
customer service capabilities.
HERE'S THE PLAN FOR FY2000
You can't just sign up customers, you've got to keep them. And the
way to keep them is to keep them not just happy, but delighted.
Expanded customer loyalty will be our primary focus as we refine our
marketing program to connect with distinct customer segments. We've
already developed personalized, one-to-one communications through
direct-mail and e-mail campaigns. We're now expanding our Customer
Relationship Management (CRM) capabilities and Customer
Information Services (CIS) initiatives to give us real-time decision
capabilities. We believe that no one else in the industry is even
attempting to build such an in-depth relational data warehouse.
NEW REVENUE STREAMS DRIVE BALANCED GROWTH.
The old business model was "do one thing and do it well." No wonder
it's an old business model. Do one thing well today and next week
there'll be ten Internet startups trying to do it better. The new model is
to capitalize on all your strengths and resources?and to do it all faster
and better than anyone else. It works. And it's driving our asset
aggregation and revenue diversification strategy:
? Our pending merger with Telebanc signals our planned entry into the
banking arena. With more than $2 billion in customer deposits and
nearly 100,000 total accounts, Telebanc is currently four times larger
than all other pure-play Internet banks combined.
? We've changed the rules of engagement on the investment banking
front?long the exclusive domain of big institutions and wealthy
individuals. We're helping create a new breed of customer?what we call
the "instividual": individual investors who capitalize on the access,
information, and support E*TRADE© provides to help them invest like
professionals. This year we offered our customers access to shares in
more than 85 public offerings. E*TRADE© has access to shares in
each IPO managed by E*OFFERING©, the next-generation online
investment bank, in which we were the lead investor last year.
? We're becoming an industry leader in providing comprehensive stock
plan management services to leading corporations through our
E*TRADE Business Solutions Group(TM) (BSG). Nearly 90 percent of
companies manage their own stock plans today, and BSG dominates
this market with over 60 percent market share. BSG serves more than
3,000 corporate customers, including companies such as Microsoft,
Boeing, Dell, Intel, Oracle, and Coca-Cola.
? We set up a Strategic Venture Fund that invests in technology and
internet companies, and which is already up 1300 percent since we
launched it earlier this year.
"E*TRADE© SIMPLY DOES NOT REST ON ITS LAURELS."
?Gomez Advisors, Fall 1999 Internet Broker Scorecard
A FUTURE OF SERVING CUSTOMERS ANYTIME, ANYWHERE, FROM
ANY DEVICE.
Can you plan for the future? Nobody could have planned for the future
we call "today." But you can plan to be ready for whatever the future
brings. That's why E*TRADE© is implementing a global electronic
strategy to democratize financial services:
? We were one of the first to recognize the importance of Electronic
Communications Networks (ECNs) and, along with Goldman Sachs,
were the initial investors in Archipelago, an ECN for Nasdaq stocks.
Other industry leaders have since purchased stakes in Archipelago,
validating our early investment. Through Archipelago we'll offer
expanded access and investment opportunities to our retail and
institutional customers in a global, networked market.
? We're taking the revolution to a new level with Digital Financial Media
(DFM), a new strategic model that's creating the world's first global
electronic financial network. Through this network E*TRADE© will
reach out and connect with individual investors in ways that fully
integrate with their lifestyles and personal interests. We plan to deliver
interactive multimedia content and commerce to consumers over a
variety of broadband communications channels and electronic
platforms ? from PCs and cellular phones to digital TV and wireless
personal digital assistants.
? During the year, we acquired ClearStation(TM) and integrated their
leading-edge financial media. We also acquired Confluent and its Abrio
calendar engine. We plan to use Abrio to create an online calendar
product that will give our customers another unique way to take control
of their financial lives.
? In the year ahead, we'll continue to pursue our global strategy of
giving investors the information, tools and access they need to invest
in international markets, from any place, at any time through any
device. Our aim is to let investors trade stocks on any exchange from
their own domestic location in whatever currency they choose.
E*TRADE's acquisition of TIR Holdings(TM)?an international leader
in global multi-currency securities execution and settlement services
and a top provider of independent research with more than 600
institutional clients worldwide? will help us accelerate the creation of
the first global cross-border trading network for online investors.
Those who say it can't be done just don't know E*TRADE©. We've
come far and come fast because of our Associates?their ideas,
passion, relentless dedication, and awesome execution fuel our growth
and success. We also owe special thanks to our customers, partners,
affiliated organizations, and shareowners who believed in us from the
beginning.
Bodacious! The revolution continues.
Christos M. Cotsakos
Chairman, CEO, and Shareowner of
E*TRADE Group, Inc. |
