E*Trade Group Inc launched its overhauled Destination E*Trade web-based brokerage in New York yesterday, following its ‘soft launch’ on the web two weeks ago. The company has set a target of one million new customers within two years, according to chief executive Christos Cotsakos. E*Trade is committing $150m in advertising dollars over the next year to help it reach that target at below the average customer acquisition cost and yesterday saw the first of the new print and television ads. Cotsakos says that the account base growth may not all be organic as E*Trade is eyeing potential acquisitions, but declined to name potential targets. The company’s current per-subscriber acquisition cost is $180 and it recently signed up its 500,000th account. The launch of the new service was originally slated for July but had to be pushed back due to technical problems (07/22/98). However, this effort will hit the company’s bottom line. After making more money than any other internet company over the previous eight quarters, according to the ebullient Cotsakos, the company will lose money for the next eight, he says. He maintains that the company could choose to be profitable, but believes boosting its account base is more important. He points to the company’s $600m cash pile and debt-free balance sheet as evidence of a solid company. E*Trade’s coffers were boosted recently by the acquisition of 27% of the company by Softbank Corp for $400m (07/13/98). The company has opened up many of the services that were previously only available to account holders: the public site is practically the whole site, says Rebecca Patton, E*Trade’s senior VP advanced products group. The company also has members who use the site but don’t have an account – some 35,000 have signed up since the service was recently launched, and a Professional Edge premium service for $25 a month that offers real-time research. The company has applied for a patent for its proprietary Stateless Architecture that runs the service, comprising a fault- tolerant Unix system with failover and six million lines of code. It can handle up to one million customers simultaneously, says Cotsakos. On average, he says, transactions using E*Trade are settled within three to five seconds, but it can take longer in busy periods. Cotsakos says E*Trade Japan, which is a joint venture with Softbank, spilt 58-42 in the latter’s favor, won’t be up and running for 12-18 months, due to regulatory issues. He says the pair will probably buy an existing broker and may start with a touch-tone phone service as the Japanese market is not as PC- sophisticated as the US. Its European operations will probably not be underway for probably 14 months, although it has signed many of the necessary deals over the past few months across Europe. So far only E*Trade Canada and Australia are online outside the US. Naturally, Cotsakos, given to regular bouts of hyperbole, reckons E*Trade is out on its own in terms of competition, for instance Charles Schwab is not a competitor – they’ve lost their way [because] they’re fighting on so many fronts, he says – nor are the discount brokerages, such as Sure Trade and AmeriTrade that charge less than E*Trade, and from where, he says E*Trade gets 70% of its new accounts. E*Trade charges a minimum of $15 a trade, but mostly $20 a trade.
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