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Non-Tech : E*Trade (NYSE:ET) -- Ignore unavailable to you. Want to Upgrade?

To: Robert Giambrone who wrote (3035)	6/12/1998 10:10:00 PM
From: Robert Giambrone	Read Replies (2) \| Respond to of 13953

Online Trading: ETrade Touts New Site but Plenty of Questions Remain By Amy Olmstead Staff Reporter 6/12/98 4:00 PM ET SACRAMENTO, Calif. -- ETrade Group (EGRP:Nasdaq), in a bold bid to distinguish itself from its competitors, is unveiling a new site based on the increasingly popular "portal" concept. The new ETrade -- known as Destination ETrade in testing -- goes a step beyond online trading and support. It is designed to attract Web surfers looking for investment news and tools, and then expose them to ads while converting them into online traders and selling subscriptions and financial products. Palo Alto, Calif.-based ETrade showed the product to institutional investors Wednesday and analysts and reporters Thursday at its technology center here. It is incrementally being rolled out to ETrade customers and will replace the current site on July 15. ETrade hopes the new site will spur account and transaction growth and diversify revenue. ETrades needs a boost. The online broker has seen its transaction growth drop recently, hitting 1.5% in the March quarter from the December period, even though accounts grew 24%. Since transactions have made up 72% of revenue so far in fiscal 1998, crawling trading growth is a worrisome short-term trend, especially this early in the migration to online trading and in the midst of a bull market. And ETrade's market share fell to 12% in the first quarter from 14% in the fourth, according to Minneapolis-based Piper Jaffray. In the long term, the dependence on one revenue source -- especially in a bear market -- makes a trading-dependent model even less attractive. ETrade aims to make its new site one that investors will bookmark as their financial services portal, something that Yahoo!'s (YHOO:Nasdaq) financial site and Quicken.com already claim. ETrade's new site stacks up well in comparison. It is clean-looking, well-constructed and boasts more robust content than ETrade's current site. There are chats and other interactive elements. Investors can customize it for their portfolios and methods of evaluating stocks. Trading is integrated, often just one click away. "The preponderance of the middle kingdom wants value, personalization, customization and trading integration," says Christos Cotsakos, ETrade's CEO. But investors have shown little enthusiasm so far. On Wednesday and Thursday the stock fell almost 6%. Friday afternoon it was off 1 13/16 at 20 1/4. The goal is to get transactions down to about half of revenue and use accounts to generate revenue in a variety of ways. The move builds on a strategy ETrade has already started. It has an alliance with mortgage provider E-Loan as well as a variety of online content providers like Sportsline USA (SPLN:Nasdaq). The key is to lure surfers in with free information and tools, then turn them into members, members into account holders and then leverage that connection to the site by selling other financial services such as mortgages and financial software. Those products give ETrade revenue from licensing fees, click-throughs and cuts of the transactions. They also could help keep account holders. In addition, ETrade will sell subscriptions to "value-added" content, a big hope for future revenue. The first subscription offer is Professional Edge. For $24.95 a month, a subscriber gets real-time research from BancAmerica Robertson Stephens, video feeds from conferences via CNBC and Dow Jones, a shot at Robbie-lead IPOs and advanced stock screening. Analysts were impressed, even if the site still is evolving. "They have the time to roll things out because they're so far out in front," says Stephen Franco, who follows online brokers at Piper Jaffray, which hasn't performed underwriting for ETrade. But the portal concept raises plenty of questions, says analyst Michael Chung at New York's Williams Capital, which hasn't performed underwriting for ETrade. They include how ETrade will drive surfers to the site, especially since it has lost momentum by cutting back its successful advertising campaign. (It plans to boost advertising with a new campaign after the launch of its new site.) Consumers accustomed to getting different services from specific types of providers may shun all-in-one shopping. And while there are many features designed to keep users, the site can be overwhelming and takes a while to explore. Analysts say the site can't be fully evaluated in the September quarter. Summer is a slow time for the markets. Customers will have free access to Professional Edge for one month, delaying judgement of its success as a revenue source. But analysts will watch site traffic and the conversion rates from surfer to account holder. Competitor Ameritrade (AMTD:Nasdaq) plans to launch a broad financial services site as well but industry leader Charles Schwab (SCH:NYSE) frowns on the portal route. "One of the things that attracts customers to Schwab is that they aren't just left to hang in a technical environment," says Craig Prickett, Schwab's director of electronic brokerage marketing. Schwab's current combination of the Web offerings and branch support will keep online transactions and account numbers growing by reaching new customers in the mainstream and getting current customers to trade online more, Prickett says. In terms of revenue, Schwab is already diversified -- commissions made up about half of revenue in the first quarter of 1998. Schwab's strategy involves increasing the guidance and assistance it gives investors, as well as adding products directly related to investing such as automatic payment services into funds. But Cotsakos says Schwab can keep the handholding gig -- the market's big enough that ETrade can just focus on customers who want to do it themselves. And with much of Schwab's online trading growth coming from former off-line customers, overall average commissions per trade for the company are coming down, showing that despite its size it doesn't have all the answers. For E*Trade, though, the question now is whether it has a site that will expand its growth beyond the pool of dedicated online traders.