Let's look at the figures: eToro reported significant user growth—but net income took a blow.
It added 3.1 million users in Q1, which is not only up 214% compared with Q1 2020 but also more than half the 5 million users it added during all of 2020. But increasing its marketing spend to expand its global footprint caused adjusted EBITDA to drop 57% to $30 million, and net income fell 91% to $5 million year-over-year.
Looking ahead: Retail investor demand and US expansion will drive more quarters of bumper user acquisition.
eToro’s platform, which is available in more than 140 countries, is well placed to capitalize on retail investors’ rising share of trading volume, which hit 25% globally in Jan 2021—up from 10% in 2019, per Capgemini World Wealth Report 2021—and shows no signs of slowing down. It’s also adapting quickly to new demand: In May, eToro added the headline-grabbing Dogecoin to its existing list of cryptos, which should provide a further user acquisition boost for Q2.
eToro is also expanding its stock trading service to the US in H2 this year. This could further cut into net income in the short term as the company spends funds to launch new operations but will most likely bring in more users: Making money by investing is one of the top financial priorities for US adults.
The bigger picture: Expect similar user growth figures from other trading platforms in the US.
Coinbase went public this year, and Robinhood plans to as well—like eToro, they can rely on the increased retail investing in both stocks and cryptos to boost user acquisitions this year: Coinbase added more than 10 million users globally in Q1, and Robinhood scored 6 million more crypto traders in the first two months of the year.
Going forward, the US remains a very large addressable market for these fintechs to grow: Before the 2008 financial crisis, as many as 65% of US consumers owned stocks. But as of April 2020, that share was still floundering at 55%.