Gonna Party Like it's 1999

Today came the announcement that startup Zecco will be launching shortly as a financial portal and online broker.   Zecco's key is that they plan to provide trading with zero commission fees.

Zecco is well-backed, with funding from industry leaders Morten Lund (early investor in Skype), Pier Baarsma (former CEO of Dutch Coca-Cola) and Soren Kenner, former Chairman of McCann Erickson Europe, and is led by founder Jeroen Veth, a former Merrill Lynch VP.

Veth's plan is to keep costs low by relying upon word-of-mouth and guerilla marketing, as opposed to the millions the big boys spend on advertising.  With zero commissions, the site will be funded by advertising.  According to Zecco, they plan to be at “the intersection where online brokerage meets Yahoo Finance and Myspace”.  They will offer social applications such as blogs and message boards.

Will this be enough to compete?  I'm not so sure.  For most investors (including active traders), execution is more important than price.  The $10 per share it costs to trade today really isn't a big issue for most. 

Free trading based on advertising sounds like a throwback to the good old pre-bubble days.  Could free delivery on dog food be far behind?

For more details on Zecco, see Om Malik's note.

UPDATE: See Mort Lund's blog for more information on Zecco's efforts.  He notes that "we use the same trading platform end the same settlement and clearance house as Etrade Canada and as many other brokers plus the fact that our customers are insured to $25 million   - more than competitors as a matter of fact." 

That being said, I still see a hard road ahead against well-funded competitors but they are likely to be somewhat of a disruptive force and will put pressure on eTrade, TD, Schwab and others.  It will be interesting to see how the big guys react - will they reduce commission rates, add more services or both?

Comments

[Mr Wave]

Zecco - Is "Free" a Business Model?

The hot startups today all seem to have one thing in common today - they all have "FREE" as a business model. That is why when I read about Zecco.com, the free online stock trading site backed by the funder of Skype, my eyes rolled over. Have I heard this story before or what? Once and for all entrepreneurs, I would like to address the question that is on every Web 2.0 entrepreneur's mind: Is "FREE" a business model?

[Dimitar Vesselinov]

Morten Lund is Danish. Also, he has a blog.

http://mortenlund.wordpress.com/
http://www.blogger.com/profile/241143