Why Robinhood’s UI won’t save the brand from the GME damage
Over the past few days, Robinhood has done massive damage to its brand, right upon the heels of its own IPO. While everyone is preparing class-action lawsuits, writing Twitter theses, and massively migrating their money to other platforms, I’d like to briefly summarize the brand control and poor attempts at damage control we’ve seen from them.
If you’re looking to know more about the debate on what is and is legal, and who is or was morally wrong, there are several think pieces all over Twitter. The marketing lesson here is the massive hit to Robinhood’s brand.
Robinhood, an investing platform targeting millennials, has built its brand around, well, the story of Robinhood, they rob from the rich and give to the poor. Even going as far as to include the bandit’s feather as its logo. Since the app’s debut in 2013, its marketing has been somewhat successful in crafting this image, focused on the purpose of democratizing the financial system, giving the people the opportunity to make fee-free investments.
Robinhood’s brand hinges on making trading accessible, with an average age of 33 for its users, the ability to trade with little money, no fees, and the ability to purchase partial shares of high-value stocks like Tesla, their target demographic skews a lot younger than more traditional brokers. Other than the skeptics that don’t trust anything with big finance, Robinhood’s target consumer has been open to starting their stock investment journey with the simple app as they are able to buy and sell stocks without a financial broker or commissions.
Its UI is fairly easy to use, with an intuitive interface, fairly easy to understand graphics, and detailed, plain-language explanations of stock market terminology. Robinhood communicates notifications and informational messages using emojis (the true language of all post-80s adults) “gamifying” the platform (a dirty word for the company). Oh, and they have a podcast, Robinhood snacks, known for its quick hot takes on stocks in a humorous manner. It’s no wonder newbie investors flock to the app. With Robinhood’s free stock giveaway with every referral, old-fashioned, social proofing seems to work well for them. Even during the 2020 pandemic, Robinhood seemed to thrive, bringing more than 3 million millennial investors on board within the first four months of 2020. Their success so stable, they’ve planned an IPO for 2021.
Now, here’s where they screwed up.
You guessed it. The GME short squeeze. In an attempt to buck the system, the r/WallStreetBets Reddit thread has, quite successfully, empowered retail investors to buy and hold GME stock, raising the price-per-share from less than a Chipotle meal to triple digits in a matter of hours. The problem: to the own dismay of hedge fund investors expecting to win big on the failing of the once-beloved company. To “protect users” as Robinhood claims, they restricted the trading of stock for GME, AMC, SNDL BB and other tickers deemed to be up next for the successful strategy. Starting January 28th, Robinhood only allowed users holding this stock to sell options, not continue to buy.
Some users claim they went as far as to alter search results in the search bar, removing GME and other stock tickers to keep users from locating the stock on the platform. Other users claim they were forcefully made to sell shares at a lower value, according to Robinhood’s user agreement, for their own good.
So much for user experience.
For Robinhood’s users, these actions are a violation of free trade and appear to be a cover for institutional investors standing to lose billions from the fiasco, even though this same tactic is often used by these same institutions to exploit the market. Outraged, users took to social media to vent their frustrations with the mismatch of the brand’s philosophy and its behavior.
Adding further fuel to the fire, Robinhood sent out an email explaining their behavior in more detail. Starting with a personal, “Hi [Insert first name]” and opening with an empathetic first line. The email reads like an apology letter from a shitty lover: saying nothing we didn’t already know and offering no real solutions. The email goes on to explicitly address some of the theories mentioned by users on public forums:
To Robinhood’s credit, no pun intended, they did announce the allowance of limited buy options starting January 29th, but the weak stance was too little too late.
The credibility of the brand is shot as its actions reflect a completed 180 to the core values of the brand. Users are participating in a mass exodus encouraging each other to ditch the platform for other brokers that either didn’t halt trading or didn’t go the same extremes as Robinhood.
Three of the six commitments Robinhood has listed on their website have been violated.
Dedicated Support: Some users are stating that once they received the notification from Robinhood’s messaging that their trades would be forcibly traded, the cancel button was disabled.
Transparency: This one is pretty evident as Robinhood has offered no justification for their actions other than to say it’s for the users' own good. Okay, Dad.
Quality execution: Users can not freely trade stock, specifically at the speed and price they wish as stated in their value proposition. While users who have multiple brokerage accounts have been able to navigate around this, the majority of Robinhood's young investors likely do not have these and have been unable to freely trade.
The damage is done. While some truly new investors will undoubtedly stick with the app due to its core appeal: an easy way to trade stocks on a simple UI, some of the more experienced investors who got their start on Robinhood will take this opportunity to graduate to a platform they feel is less complicit in the perceived corruption of what was once a platform for the people.
And if nothing else, they’ll undoubtedly need to reevaluate their $11.7 billion valued IPO. One thing is for sure Robinhood’s business model is built on the backs of retail investors, the “poor” they’re being accused of robbing.
