Morten Lund, the guy who was the earliest backers of Skype is at it again. He has financed Zecco, a start-up that will allow consumers to trade stocks for zero commissions, versus $10 to $20 that many online brokers charge today. Other investors in the company include former Dutch Coca Cola CEO Pier Baarsma and Soren Kenner former chairman of McCann Erickson MRM Europe
CEO Jeroen Veth, a 37 year old entrepreneur and former Merrill Lynch Vice President is heading up the company and contends that most of the old school online brokers spend too heavily on marketing and thus have to charge higher prices. Lund and crew believe that the actual trade costs about $2 and if they can lower the cost of marketing to near zero, they can offer zero commission trading. They will make money with what else – advertising.
Our model is different. We run a lean operation, use the latest technology and rely entirely on word of mouth, guerilla marketing, viral campaigns and public relations to get the message out. As a result we can look at the $2 per trade as the cost of doing business – and still turn a tidy profit
Zecco, in company’s own words is at “the intersection where online brokerage meets Yahoo Finance and Myspace,” and offers tools such as free blogging, forums etc. The big question is can they make it happen? My gut says that there will be some who will be attracted to this service because of its free nature.
Others will show up at the service because of the forums, and the community, and many are already looking for options to Yahoo Forums. In the long run this could cause old school companies to look at their own pricing structures hard and lower their prices. But can Zecco be the next ETrade, well not sure about that. What do you think?