Incumbent Currensee doing only about $100,000 revenue per month.
The Forex social networking scene got a lot more crowded this week, with Oanda announcing today the launch its own network, called fxUnity. Oanda also recently added MT4 trading, as overall Oanda is taking big steps to attract more retail clients to its platform. Oanda's main strength has been among higher-net-worth retail and institutional clients.
Oanda now joins eToro (OpenBook) and IBFX (IBFX Connect) as the only Forex trading firms operating their own proprietary social networks. Most FX social networks are independent, allowing traders to connect and manage accounts at one (or several) outside brokers, and interact with other traders holding accounts at one of many firms worldwide.
And speaking of independent FX social networks, leading incumbents such as Currensee, FX Junction and FX STAT saw a new VC-backed competitor emerge this week, as Tradeo exited from stealth mode and announced it is now open for business. Tradeo, which will support both MetaTrader and ActForex platforms (most others support just MT4), is backed by $1 million in financing from a VC firm called AMV, which apparently is associated with Gigi Levy, ex-CEO of online gaming company 888.com. Levy also joins Tradeo as Chairman.
If Tradeo is to grow and have a chance it will likely need to raise more money. A lot more money. Currensee has raised a total of about $19 million so far. While Forex social networking certainly has grown as far as members go, we recently wrote how the Forex social networks are having a hard time converting members into revenues and profits. Most of the Forex social networks are basically IBs -- making money if and when their members open accounts and/or trade with Forex brokers via the social network, or by following "expert traders" on the network -- and that part of the business has been slow to develop.
For example, Currensee's $19 million has so far got it about 1,000 accounts, and cumulative trading volumes through its system (since inception) of about $20 billion. (Numbers which Currensee published earlier this week as part of the launch of its Spanish language portal). Last June, Currensee reported $12 million in client assets, and $6 billion of cumulative volume. That means that in the last 10 months Currensee has initiated a total of just $14 billion of total volume, or about $1.4 billion per month. That equates, in our model, to about $1 million of annual trading revenue (or under $100,000 per month) for both the Forex brokers and Currensee to share from those trades. Not exactly a great business, when you've raised $19 million and have significant operating costs.
Whether or not Tradeo can offer something different, or achieve different results, remains to be seen. But clearly, as margins for brokers continues to tighten and acquiring new customers becomes more competitive, it is becoming increasingly difficult for FX social networks to get to healthy revenue and profit levels.
For more on Forex social networks, and the global retail FX industry, see the LeapRate Dow Jones Forex Industry Report.