Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.
Earlier this week, the popular free stock trading service Robinhood suffered downtime over a two-day period. The company, a well-funded unicorn taking on incumbents in its industry, failed to operate properly when the public markets were surging on Monday (bad) and falling on Tuesday (very bad).
Complaints flooded investing forums and social media. Images of Robinhood account screens featuring huge losses from the periods of downtime (or missed upside) weren’t hard to find. For Robinhood, it wasn’t its first misstep, but it was perhaps its worst. Mishandling the rollout of a high-yield savings function? Embarrassing, but hardly a serious wound. Some options oddness? Eh, not the worst.
Going down during surging volatility? Much worse. The company is already in the market with apologies and some give-aways to try to stem the negative news cycle. But what’s notable so far is that, while you might expect to see rival apps and services to Robinhood boom in the wake of its downtime, it instead appears that only select competitors to the popular company are seeing a jump in downloads this week. And given the insane market movements, it’s hard to pin some of their gains on Robinhood instead of, say, what stocks are themselves doing.
I’d expected by today to have some data in hand that painted a starker picture for Robinhood, given that the company’s recent missteps triggered a lot of negative press and user reaction. Let’s peek at what numbers can tell us, and try to figure out if there’s a lesson for consumer fintech and finservies companies while we’re at it.
All hail app store rankings
Everyone loves a good leaderboard. HitsDailyDouble has great data every Friday on the domestic music industry, for example. Music charts are just short-run leaderboards. The stock market is essentially a leaderboard as well, with its most dramatic drivers generating coverage and, depending on results, scorn or praise. You can even get nerdier — which I recommend — and track your favorite artists’ releases on various iTunes tracking services (here’s one) online to see how their latest work is performing in various countries and genres in nearly real time. It’s great!
But one of the best sets of data in the market is app store data from iOS and Android. I tend to lean on App Annie for this, but I’m sure there are competitors out there you can choose. Regardless, aggregated app market performance data can tell you a lot. It can, to pick a popular and regular use, tell you what hardware has sold well during the holiday period. If, following Christmas and other late-year holidays, a software package that works with a particular piece of hardware skyrockets, you can infer solid sales of the physical good.
You can apply the same principle to apps that don’t have real-world analogs. Stock trading apps, for example. During this week’s Robinhood fiasco I was curious if the downtime over the period would tank Robinhood’s app ranking or spike those of its competitors. The answer it turns out is, at best, kinda. Some results, via App Annie:
- On Tuesday E-Trade improved on Android to its best result in at least 90 days, rising to rank 54 in the American finance app category. On iOS, E-Trade continued a gain in rank it started the preceding week, but did not display gains that we might associate with flight from Robinhood.
- Cash App, Square’s product that allows for the purchase of partial-shares (attracting small-dollar investors, a likely key portion of the Robinhood userbase) was effectively flat on iOS and Android this week.
- It looks like M1 Finance saw an uptick on both iOS and Android, but not outside of its historical rank range. (TechCrunch recently covered M1 reaching $1 billion AUM.)
- SoFi’s trading app download ranks look historically normal as well.
- Finally, TD Ameritrade, which did see some gains in rank, surging to three-month highs on both Android and iOS. However, on Android, where its domestic rank gains are impressive, its run up the charts began before the Robinhood downtime. And while its iOS gains are impressive, they also began a bit before the Robinhood mess. You could very easily argue that Robinhood helped its continued gains, but that’s a partial explanation at best.
Robinhood itself was inside historical download norms this week, per data reviewed by TechCrunch.
So what can we see so far? Not too much. The downtime could lead to a slowdown in new Robinhood accounts over time, harming its value to investors; it could also lead the removal of some funds from existing customers something that’s invisible in our app ranking data. You get the idea. Not to mention that the company has a userbase to placate which is going to be expensive. And that’s if it doesn’t get sued. But in terms of external signals based on our proxy for user behavior? It doesn’t look as bad as we might have expected.
Perhaps consumer fintech and finservices startups are a bit more durable than we thought. Perhaps the consumer lock-in effect that banks and old-guard trading firms have depended on to keep customers (who really wants to change banks?) aboard has been bequeathed to the new generation. That’s a good bit of news for investors that have poured money into the category recently.