Arrows falling
GIF: Alex Muravev / The Noun Project; Protocol

Robinhood’s painful reality: Job cuts, plummeting revenue and scared users

Protocol Fintech

Good morning, and welcome to Protocol Fintech. This Friday: Robinhood’s no good, very bad week, Telegram takes on crypto payments and FinCEN reiterates its stance on crypto in a Congressional hearing.

Into the abyss

Robinhood had a rough week.

The company announced Tuesday that it was letting people go before posting results that fell short of expectations on Thursday. And the way forward looks so hazy that Robinhood decided it should stop providing revenue guidance.

Robinhood definitely needs more growth to finally become profitable, but it will have to find a way to do it with fewer people.

The cash flows are drying up for Robinhood. Its revenue dropped by a whopping 43% year-over-year. CEO Vlad Tenev told analysts that the company faced a “challenging environment” which “most of our customers have never experienced in their lifetimes.”

  • Robinhood’s mostly young customers have been used to low interest rates, low inflation and seemingly endless market growth. Not anymore. “Our customers are now experiencing all three of these trends going in the opposite direction, perhaps for the first time in their lives,” Tenev told analysts.
  • “Some are engaging with us less regularly, and reducing their trading activities,” he added. Monthly active users fell 10% to roughly 16 million from the same quarter last year. Though, granted, it’s a tough comparison given the GameStop trading frenzy last year.
  • Crypto has become a critical growth driver for Robinhood, which recently unveiled its much-awaited crypto wallets. But revenue from that business tumbled 39% to $54 million compared to the same period last year too.
  • Slowing user growth is bad news for a company whose “whole model is built around attracting and retaining a high number of monthly active users,” Alex Johnson, author of the Fintech Takes newsletter, told Protocol. “You can’t democratize finance for all if no one shows up to vote.”

Now, its hiring binge looks far less smart. Robinhood grew from 700 at the end of 2019 to nearly 3,900 in two years, Tenev said. Those days are over.

  • Robinhood “needed to grow that fast,” but the expansion led to “inefficiencies in the organization, duplicate roles and sometimes just more headcount than needed,” Tenev said.
  • But can Robinhood remain competitive? “How confident are you in your ability to win market share over the long term after rationalizing your headcount, particularly given the war for talent in the industry?” an analyst asked Tenev.
  • The company still has big ambitions, including new products and a new international offensive, Tenev said. But Robinhood will pursue its “aggressive product plans” with “an even leaner team than we were previously planning.” The company has “significantly cut our plans for hiring this year.”
  • That could be tricky, said Stanford Graduate School of Business lecturer Rob Siegel. “Unless they can start offering more than stock trading, it will be hard to continue to compete with bigger platforms once the day-trading frenzy continues to subside,” he told Protocol.

So, is the party over? Robinhood is pulling back after a period of explosive, if bumpy, growth. The company now needs to show “more discipline on cost,” Johnson said. “It means the end of irrational exuberance for the tech bros” who blazed the trail for retail commission-free trading, said Bill Pearce of the UC Berkeley Haas School of Business.

— Benjamin Pimentel (email | twitter)


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On the money

Crypto payments are coming to Telegram, signifying a potential mainstream move for crypto payments in messaging platforms. Toncoin is currently the only token supported on the platform, managed by the TON foundation.

Homebuyers now have crypto as a mortgage option. Milo Credit, a real estate startup, is letting future homeowners put crypto down as collateral, with no down payments required. But customers run the risk of crypto’s volatility.

PayPal wants to “double down” on digital wallets. CEO Dan Schulman said on its Wednesday earnings call that digital wallets will play a major role in the digital payment giant’s growth strategy.

Deus Finance suffered another exploit. This is the second attack suffered by the DeFi platform within two months. The most recent exploit was through a flash loan, where the attacker made about $13.4 million in crypto as a profit.

The FinCEN Network acting director testified before Congress. Issues around crypto as a method of sanctions evasion as well as concerns around self-hosted crypto wallets were central to the discussions in the hearing.

How successful are new crypto tokens? Not very, it seems: A new study shows that 80% of new cryptocurrencies are underwater relative to bitcoin within a year. The study found that most new types of crypto start underperforming within its first month, with the exception of a few outliers and stablecoins. But at least it does show signs of an efficient market.


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Thanks for reading. We hope you’ve enjoyed these briefer newsletters while we gathered our team for our first-ever Protocol all-hands. The time together helped us generate some great story ideas that we’ll be sharing with you in the months to come. We’ll be back with all of your favorite Protocol Fintech newsletter features Monday!

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