Recently, I was at a Web 2.0 conference. I asked many companies a simple question: "So how do you charge for your service?"
In most cases, the answer was: "It's free."
Well, as I dug in some more, I realized the business model for these companies is usually an advertising play.
And that's the case with a New Age brokerage firm, Zecco. If you want to trade stocks on the site, you will pay no commissions (the company's name is a mesh of "zero commission online"). Instead, you must deal with Google ads.
That sounds like a pretty good deal. Hey, how many of you actually look at ads?
So, how good a deal is this for Zecco?
It's a tough call. In the brokerage business, the cost of acquiring a customer – and keeping a customer – is not cheap. But, if a firm offers free trading, this can be a great way to get lots of customers.
Although, there are likely other revenue models, such as making money from cash balances, margin loans and so on. This is a big reason that brokerage firms have been charging rock-bottom rates over the years.
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