How Does Robinhood Make Money?

Historically, trading was expensive. Decades ago, Wall Street would charge hundreds for a single trade. With the rise of discount brokerages, fees have steadily come down. Now commission-free trading is the norm. Robinhood pioneered commission-free trading - but if they don't charge commissions, how do they make money?

Freemium Gold

Robinhood like a lot of companies gives out their app for free (just take it!). This helps attracts more users and enables faster growth.

The "free" part is only applicable to their base service. Robinhood also has a paid service, Robinhood Gold. Paying $5 a month unlocks features such as margin and after-hours trading.

This two-tier model is known as "Freemium".

Idle Money

Most investors have a couple bucks laying around in their account. Robinhood takes advantage of your idle cash by investing it to earn interest. You don't earn much on a few dollars, but Robinhood has over 10M users. The idle cash adds up fast.

Selling Data

The most profitable way Robinhood makes money is also it's most controversial. Robinhood makes half their revenue by selling order flows to high frequency traders (HFTs). With this data, HFTs will know in advance how Robinhood users are trading. Knowing about incoming buy orders, HFTs can jump in, buy first and sell to you for a slightly higher price (and vice versa).

What's The Cost?

Free is never free. Companies have to make money somehow. The price you pay isn't always going to be cash. It could be your information, your attention, or your time. It's always good to know what you're paying so you can decide if it's worth it.

Comments

Today's Special: Humble Pie

You champion a project, fight for an idea, and then...reality sets in. That churning in your stomach isn't butterflies, it's the realization you've missed the mark. Pride will puff up your chest, and kick in the "defend at all costs" instinct. But arguing with the umpire never changed a call. Admitting you're wrong isn't a sign of weakness. It can strengthen your professional standing. In a world obsessed with the illusion of infallibility, the courage to adjust course is a breath of fresh air. It shows you're confident enough to be wrong, and adaptable enough to learn from it. Do your research, think critically, and stand behind your decisions. But when the data whispers (or screams) otherwise, don't be afraid to swallow that slice of humble pie. Be the first to acknowledge. Don't wait for someone to point out your mistake. Be open, take responsibility, and most importantly, focus on what you're going to do to address it. Don't dwell ...

Starting Really Really Small

On your desk is one of the most intimidating sights known to man. A blank page. The prospect of filling it up with anything resembling decent seems insurmountable. Staring at the long road ahead fills you with anxiety and dread. The first step is the most difficult. So we procrastinate. We " research ", we " prep ", we " plan ". We do everything except tackling the problem. We avoid the pain for as long as we can. To make a blank page less intimidating. Tear it in half. There, half as scary, twice as easy. Still too much? Do it again. And again. Keep doing it until the task is so small that it's too easy not to do. Getting starting is the hardest part. So make the hardest part as easy as possible. This doesn't guarantee amazing results, but it gets you in the game. You can't win if you don't play.

Why We Shouldn't Be Afraid of Ambiguity

Ambiguity. That fuzzy monster that chases us down darkened hallways, whispering doubts about our roadmap and feature sets. You know the feeling. You constantly wrestle with unknowns: Will users like this? Is this the right direction? Frankly, if you had a nickel for every time the answer wasn't crystal clear, well, you might actually want to chase that ambiguity down the hall. But here's the thing: ambiguity isn't your enemy. It's your dance partner. Innovation rarely happens in a land of perfect clarity. Sure, there's a time for well-defined processes. But when you're creating something new, there are bound to be more questions than answers. The key is to learn to waltz with the unknown . Embrace the experiment. Don't be afraid to throw some spaghetti at the wall and see what sticks. Focus on outcomes, not outputs. Don't get hung up on features. What problem are you trying to solve? How will you measure success? Get comfortable with "go...

Herman Ye

Search