Male Gen-Z, Millennial Opps Update: Robinhood runs into PR issues amid IPO plans, increased ad spend (Score 74)

Update: Shortly after announcing IPO plans and seriously increasing its ad spend, Robinhood has run into some serious PR issues. Specifically, regulators are criticizing the company's recent and aggressive ad targeting of newbie investors (more below). A 24-page complaint accuses millennial-oriented Robinhood of breaking state law and regulations by failing to protect customers and system from the explosive expansion that caused dozens of outages and disruptions in 2020. 

Robinhood utilizes tactics to boost user activity through "gamification to encourage and entice continuous and repetitive use of its trading application," the Massachusetts Securities Division claimed. Robinhood's leaders plan to "vigorously" defend the company by enhancing its options offering, extra safeguards and educational materials.

**Trigger warning: mention of suicide**

How are Robinhood's tactics dangerous? In June 2020, a 20-year-old student's family said he died by suicide after the lack of clarity regarding an apparent negative balance of $703k on his Robinhood account; he seemed to have been misled by the app's interface. Robinhood's co-founders were reportedly "personally devastated by this tragedy" and plans to change its options offering and user interface in response.

Regulators also found at least 670 Robinhood customers with limited or no investing experience who averaged at least five trades each day. In one example, a customer with no previous experience made $12.7k+ trades in a mere six months. According to regulators, the company "knew or should have known" that its infrastructure was "incapable of supporting its rapidly expanding customer base." 

These issues will hopefully result in changes to Robinhood's app that more effectively aid new traders more thoroughly. The company's advertising has become far more aggressive recently, so I hope these changes will come sooner than later.

Sellers able to help Robinhood shift its advertising to better reach young men interested in trading while promoting the app's helpful side should reach out soon to see what help the company needs doing so. The app needs to better educate users on how to trade stocks rather than simply allowing users a way to do so. Ad spend is on the rise; read more details about its spend, targeting in the article below.

Agency & martech readers - We already suspected Robinhood might shift its roster around due to its upcoming IPO and relatively recent hire of CMO Christina Smedley. The company has recently shown a high amount of interest in agencies. Its ongoing issues mean Robinhood may seek PR assistance in the near future. Winmo states it currently works with creative AOR TBWA \ Chiat \ Day and media AOR Hearts & Science.

The article below was originally published on December 14: 

Stock trading app Robinhood is working on its initial public offering preparations, which could raise its total valuation to $20b. This IPO could come out next year. Robinhood's latest funding round, a Series G that occurred in September, raised $460m and left the company's valuation at $2.2b, per Crunchbase.

Robinhood experienced a surge in use when consumers entered quarantine earlier this year in response to the global pandemic. The app's popularity rose along with the volatility in stock this year. Robinhood reportedly signed a record 3m new users from January-April 2020. It favors younger, savvy clients acting to minimize risk by capitalizing on market downturns. These customers often see this as the beginning of their trading journey.

An IPO, as I'm sure you assumed, would give Robinhood a bigger budget with which to increase ad spend and/or hire an agency partner.

According to iSpot, the company's national TV commercials of 2020 primarily targeted male sports enthusiasts viewing programs such as NBA Basketball, NFL Football, Ridiculousness, SportsCenter and SpongeBob SquarePants. An approximate YTD spend of $34.5m more than tripled the approximately $9.2m spent by this point last year. Robinhood allocated around $10.7m toward this channel in 2019, the first year during which it utilized this channel.

Since the beginning of the year, Pathmatics estimates the company earned 774.1m digital impressions via desktop display (54%), Instagram (33%), desktop video (9%), mobile display (2%), Facebook (1%) and mobile video (1%) ads. 62% of desktop display ads were placed site direct onto investopedia.com. YTD spend of around $6m reflects a more than exponential increase from the roughly $187k spent within the same 2019 timeframe. In all of 2019, Robinhood allocated around $573.4k toward this channel, double the roughly $223.8k allocated in 2018. Since this full-year spend increased so much last year during December, I expect to see a similar spike before the year's end.

Additionally, Magellan reports the company aired 86 podcasts within the past year.

Remember Robinhood primarily targets younger (Gen-Z, millennial) men interested in stock trading; its spike in digital ad spend and usage of Instagram and podcast ads reinforce this target demographic. Again, an IPO could easily result in continued higher spend. 

Agency & martech readers - This IPO could also lead to agency roster shifts, so keep Robinhood on your radar, especially considering its recent hire of CMO Christina Smedley. Additionally, the company has shown a high amount of recent interest in agencies recently. Per Winmo, your competition will include creative 
AOR TBWA \ Chiat \ Day and media AOR Hearts & Science.