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Web brokers may expand
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July 31, 1998: 3:44 p.m. ET
Softbank's E*Trade investment spurs speculation over financial portals
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NEW YORK (CNNfn) - Search engines such as Yahoo! popularized the phrase Internet portal. Now, some say Internet brokers will make financial information the next big thing.
E*Trade launched the speculation after recently announcing Japan's Softbank Corp. had decided to invest $400 million in the Web broker.
At the time, the company said it might use the funds to make content-related acquisitions in an effort to increase traffic from Web surfers interested in investing and other financial topics.
"It's really a war chest to have the ability to use either stock or cash for strategic acquisitions. It enables us to look at consolidation possibilities in the brokerage business but also at companies that complement our business," E*Trade Chief Financial Officer Len Purkis told Reuters in a recent interview.
John Robb, a principal at Gomez Advisors, a Boston area firm that tracks Internet brokers, wrote in a recent report that all-encompassing sites focusing on a specific topic will be the next big event in Internet navigation.
Robb, who is calling these special-interest sites destinations, said they will be the places where people will go to buy, sell, trade and exchange goods and services.
"Expect destination sites to emerge from the more successful and technically muscular e-commerce sites in brokerage, banking, retail and travel," he wrote.
Executives at many of the leading Internet brokerage sites said they have been studying ways to broaden and improve their sites even before Softbank's investment in E*Trade heightened speculation about brokers' plans.
"Watching what's happening with Yahoo!, Excite and E*Trade (EGRP) has us all considering what we need to do with our sites," said Martha Deevy, senior vice president of electronic brokerage for Charles Schwab Corp..
Still, Deevy said any efforts taken to increase content will be done to better serve existing customers and attract new ones, not simply to drive up traffic to the company's Web site.
From the beginning, Schwab (SCH) has viewed its site as being a place for existing customers to get information and make trades. Unlike many Web brokers, Schwab doesn't accept advertising.
Deevy concedes it's often difficult to predict long-range trends in an Internet-related business. However, for the time being, she said Schwab's Internet strategy will be based on giving existing customers what they want.
"Will we ever evolve into a true financial portal... where a consumer can executive any kind of financial transaction? That's probably a bit of a push.
"We want to make sure our customers have access to those services, but we think a lot of the other portals may be in a better position to provide that," she said.
The fact that Schwab currently doesn't depend on its site to generate revenue means there's no hurry to re-shape it, Deevy said.
"Our economic model is based on asset and account acquisition and trades. I will build out our public site to support that model," she said.
Like Schwab, officials at Ameritrade Inc. (AMTD) said they closely listen to customer feedback before making any major changes to their site.
"We're going to first focus on providing the fastest execution with the most functional site we can offer. That will include news, the ability to get real-time quotes and solid price chart histories on equities and mutual funds," said Ameritrade President Mike Anderson.
Like many Web brokerages, Ameritrade licenses content from Data Broadcasting Corp. and other providers. Anderson said Ameritrade might add research reports from leading investment banks if customer demand is high enough.
"Sophisticated, active investors know where to go for the information in the format they like. I'm probably not going to be able to provide that for all of them. Those that have specific things they look for will go to other sites," Anderson said.
At least for now, Anderson said trade price is the most important thing for the average investor.
"Having gone from 90,000 to 260,000 customers in nine months tells me a lot of people have responded to our price point of $8 and that [customers] think our site gives them a lot of things they need and gives them control over their account," he said.
Like Schwab, Ameritrade also doesn't accept advertising on its Web site. However, it's always possible the company will reverse that policy if it will benefit customers, Anderson said.
However, Anderson said besides price, competitive pressures will be what guides most decisions in the industry.
"The way I look at it is how much more can I add and still stay at $8. Others will also offer more and stay at the same price. As they do, I think they'll become somewhat vulnerable. Although five years ago, everyone said none of this could be done," he said.
-- by staff writer Cyrus Afzali
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