Data is power in the digital age. Harnessing data to reach existing and potential clients based on their preferences is a no brainer. But what happens when an industry doesn’t have direct insights into its consumers? For ETF issuers, this challenge is all too familiar, especially when trying to reach an ever-growing retail audience.
Look around! Everyday, we see retail consumers targeted to buy, download, click and swipe to obtain everything from electric griddles to nail polish. Clearly, the E-commerce industry has cracked the code on how to penetrate the purchasing psyche of everyday buyers. In this piece, we focus on the uncomparable success of E-commerce monoliths and what ETF issuers can glean from their marketing practices. After all, ETFs are E-commerce products too and need to be treated as such.
No, we’re not talking about an E-commerce ETF…
Explosive, Intelligent Growth
In order to understand HOW E-commerce has become so explosive, let’s go back to the beginning..
- In October 1994, AT&T launched the first ad banner on HotWired.com.
- In July 1995, Amazon sold its first book online, “Fluid Concepts & Creative Analogies: Computer Models of the Fundamental Mechanisms of Thought” by Douglas Holfstadter.
- In September 1995, Mark Fraser was the top bidder in eBay’s first auction of a broken laser pointer.
History has proven that in terms of growth and scalability, businesses with an online presence are more successful. Since the first products launched online, the trajectory of E-commerce has been exponential— and the buying and selling of goods and services on the Internet has generated a global E-commerce industry that is expected to surpass $5 trillion this year and $7 trillion by 2025.¹ E-commerce is here to stay.
Alongside digital retailers, online brokers made their way onto the world wide web, igniting an e-trading revolution and forever changing the business models of traditional brokerage firms. What worked for E-commerce also worked for brokerages— using the internet as an accessible platform to aggregate data for investors and to make trades easier than ever (with the click of a mouse). E*Trade was the first mainstream online service provider to break through to retail investors, offering services to America Online (AOL) subscribers in 1993. Digital brokerages were a big hit on Main Street and E*Trade was the fastest-growing private company in the US, surpassing $11 million in revenue after its first year of online trading.²
Parallel to the launch of E-commerce and online brokerages in the mid 1990s, the first ETFs were introduced on U.S. and Canadian exchanges. Although they represented a small percentage of AUM, their popularity took flight, averaging 132% growth between 1995 through 2001, when the Nasdaq-100 Index Tracking Stock (Original Ticker: QQQ) dominated 4% of all daily trading volumes on the Nasdaq.³ This surge in popularity can arguably be attributed to the proliferation of digital investing platforms and online discussion forums ranging in topics from personal finance to leveraged options trading. Flash forward to today, we see that ETF inflows rose to $717 billion in 2021, and are on track to surpass this figure in 2022.
Today, UX (user experience) design enables the mindless scrolling of phone apps, allowing us to order six cases of laundry detergent while never needing to take our eyes off the TV. To say it has grown exponentially since the 90s is an understatement. The implementation of new technologies in the last two decades, such as AI and automation, have enhanced the user experience in extraordinary ways:
- Customizable search bars to quickly filter, reorder and sort product offerings with only a few clicks.
- Immersive, 360-degree videos to help consumers visualize products by rendering 3D images that can be superimposed over themselves or in their own homes.
- Interactive customer service chat bots that can quickly answer rudimentary questions or involve a human agent waiting by to assist you.
- Intelligent shopping carts that can send email marketing messages to customers that have added items to their shopping cart but have not yet checked out.
Similarly, digital brokerages have also migrated from the computer to the smartphone through iconic apps that minimize clicks, swipes and scrolls and maximize the investing experience. Interactive charts and data feeds are available in the palm of your hand and your personal, sensitive information is secure, too.
The sleek design, customization, and ease of E-commerce platforms and online brokerages did not become the industry-norm by happenstance. Developer innovation, feedback, and more importantly, data collection, made a huge impact on the user experience.
The success of E-commerce is built on the industry’s ability to collect and track high-quality data on browsers, buyers, and “save for later” dreamers. E-commerce powerhouses such as Amazon, Wal-Mart, eBay, Etsy and Shopify collect large amounts of data on their users, identifying the pages and products that they view, and the collection process, analyzing user data to increase the accuracy of search results, ads and experience.
Similarly abundant, but less utilized, is the data of investors who click, buy, post, comment, subscribe and download content online. Like successful E-commerce platforms, online brokerages and ETF issuers should track their marketing activities, enabling a birds eye view to identify what’s moving the needle, where it is working and finally, who it is working for.
The Asymmetric Data Issue
For ETF issuers, the transaction is handled on an exchange and not directly with the ETF buyer, leaving issuers blind to the data on existing and potential shareholders. From a marketing and outreach perspective, this lack of transparency into customer data creates a black hole in terms of tracking customer insight.
Whereas E-commerce outlets and their distributors can utilize intelligent shopping carts on their platforms, ‘un-purchased’ shares of ETFs are virtually impossible to track. It’s not often feasible or cost-effective for brokerages to pass along data to ETF issuers, placing them at a considerable disadvantage. Limited interaction with their audiences then forces ETF issuers to find a workaround outside the ‘shopping cart’ or sales receipt to source data and refine their target reach.
Luckily, there are other ways to gain demographic insight about investors purchasing stocks. One of the biggest avenues is social media, which allows users/consumers to easily share products they are buying or interested in buying online. The same goes for ETF investors, as sites like Reddit, Twitter and Stocktwits provide investor insight, sentiment, and reach for certain funds or strategies. To combat this lack of data,, ETF issuers should leverage best practices directly from the E-commerce playbook to boost sales and trading volume. Striving for ubiquity in digital marketing with laser-targeted campaigns are the means by which ETF issuers can gain insight into their existing and potential clients.
Marketing Strategies from the E-commerce Playbook
- Own your media platforms from Day 1, allowing issuers to authentically control the narrative on how the brand is presented, building real value
- Create promotional, targeted ads or sponsored social media posts
- Produce educational content to spark a natural trust that can translate into a sale
- Boost email newsletter signups with exclusive content to entice more subscribers
- Analyze mailing lists and social media followers to gauge who is reading, engaging and viewing your content online
- Add real-time support with live chat functions to ensure investor needs are met
- Hire community managers and moderators for online discussions to drive personal interaction with your products and services
- Find micro- (10K-50K followers) or nano-influencers (1K-10K followers) to raise awareness for certain products and reach more loyal audiences
- Embrace new social media platforms and alternative financial media to boost business, (see our primer on that topic here)
The Future is Now: The Metaverse
Today, ETF issuers remain without access to client’s data due to broker ownership of the sales process. However, the future may present a promising solution.
E-commerce titans are embracing the future and transitioning to high-quality ‘omnichannel experiences’ where digital buyers can research, browse and purchase seamlessly. By then, we can expect even more granular data reports.
So what’s next? There is currently a race to establish a foothold in the foundations of the metaverse. The opportunities presented by the mainstreamification of the metaverse and Web3 are unlimited, including the development of a new, high-tech shopping experience. The metaverse will revolutionize the ways in which brands can replicate and sell real-world items. Even soon, we may see MetaShares funds available at the next ETF conference… in the metaverse!
Digital brokerages also face an interesting inflection point. Advances in AI and machine learning have introduced a new breed of portfolio managers: roboadvisors. These intelligent solutions are just the first step to revolutionizing the digital investment landscape. The metaverse may forever change how people manage their money, how investors interact and buy shares, and where they learn about new products or funds.
This promising future for ETF issuers increases the need for a well-defined, clear-cut and trackable marketing strategy to reach as many existing and potential investors as possible. For marketers looking to stay ahead of the curve, they should keep a close eye on innovative and nimble strategies employed in the E-commerce sector. Lessons from the E-commerce playbook are a surefire way for ETF issuers to widen their reach and embrace the future.