SpotOption Director of Marketing Tammy Levy discusses the binary business model, industry saturation, forex brokers launching binaries, and more.
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The fastest growing part of the online trading industry the past 18 months has undoubtedly been the binary options sector. But it hasn’t happened in a straight line. Some brokers have shut down. Others have caught the eye of regulators. And questions have arisen about the long term business model and viability of the industry. We’re pleased this week to be speaking with Tammy Levy, Director of Marketing at binary options platform industry leader SpotOption in a very candid tell-all interview on what’s really going on today in binary options.
LeapRate: Hi Tammy, and thanks for joining us today. It seems like the binary options platform market is getting crowded. There are a few incumbents led by SpotOption, but we now also see the forex platform providers coming out with their own solutions. How does SpotOption differentiate itself?
Tammy: I wouldn’t say Binary Options has gotten crowded – I’d say that the attractiveness of the option finally reached a world-wide market, and operators have seen how easy it is to market to a whole new crowd, as well as converting existing databases and demo users. So as long as the demand for binary options by traders keep growing, we don’t feel overcrowding. Adding binary options has basically become imperative if you want to grow in forex. It’s true, one or two forex platform providers have come out with their own solutions, but if this is recommended – no. Everyone has their area of expertise, and just providing binary options is not enough if you want to make a profitable business out of it. SpotOption has placed all their focus on binary options, and how operators can maximize their conversion since the first day of its existence. The knowledge and expertise gained, by providing only binary options so far, is exactly the key factor that has placed SpotOption as the largest platform provider with the most successful white labels.
LeapRate: SpotOption has more than 150 binary options broker client brands listed on its website, which is quite impressive. But doesn’t that also show that the binary broker market is already saturated? We can’t imagine that they’re all doing well, or will even all survive.
Tammy: As of today, SpotOption has about 200 brands, and of course some are doing very well, and others less. About half of them are also new businesses, binary options haven’t been around like forex for the last 15 years. So, we give them their time (and it’s super short compared to other businesses) to rise and prosper. However, It mainly has to do with the marketing activities taken on by those brands. Regardless, we currently have 25 brands that generate revenues of $500,000 to $4,000,000 per month. The rest are actively climbing and if we don’t see them approaching those figures, then we provide them with guidance and instructions on their sales and marketing activity through our SpotAcademy. Each one of our brands shows significant growth per month, and if not, then they are purposefully pausing their activity. Binary options are so marketable, especially on a simple and user friendly platform such as SpotOption’s, that there truly is enough room for everyone to profit like our most successful brands. What’s also good about binary options, is that it appeals to the masses, to the laymen. Therefore, you’ve basically broadened your target market from traders to “rest of world”. And as far as the rest of world is concerned, it may appear saturated when relatively speaking, but in actuality it’s still a virgin market.
LeapRate: The knock against the binary options business is that client acquisition costs are similar to the forex sector, but client lifetime values are much lower. Is that indeed the case in your experience?
Tammy: Our experience shows us an average lifetime value of 1000 EUR. This is about half of what forex brokers are claiming. However, you are wrong about acquisition costs being similar, because we have a CPA of about 200 EUR, which is even more than half of forex CPA. Regardless, the main point is that the conversion rate of binary options, being as simple and gratifying of an experience that it is, is 5 times as high as regular forex. You can do the math yourself to see if the knock is justified.
LeapRate: It seems as though regulators have a love-hate relationship with binary brokers. Will more binary brokers seek regulation, or will the brokers generally prefer to operate as unregulated entities. Do you expect more countries to follow the lead of CySEC and the MFSA in Malta and formally regulate the binary sector?
Tammy: Of course we do. Actually, we’ve seen the regulators as being kind to the binary industry. SpotOption led the regulation process with CySEC, and our experience with them was only one of mutual respect and good will, as was with the MFSA. They wanted the industry regulated, as did we, for the sake of the operators, and for the sake of the traders. As SpotOption provides regulated, licensed market making via SpotOption Exchange, all of our brands can receive regulated market making through us. We’ve also developed the Japanese Ladder product, which has passed JFSA regulation in Japan. We’ve said it time and time again, we want to see all of our operators with their own license. However, as their software provider there is only so much we can do to enforce it, what they do with their regulation is in their control not ours. They know that we are pushing them to get licenses, and discourage working without one. We advise them with seminars, and support them through the whole process of obtaining the license.
LeapRate: You’ve done well with some of the leading forex brokers which have added binary trading (FXDD, Alpari, Markets.com…). Do you see more forex brokers adding binaries as a product for their clients?
Tammy: Leaders are leaders, and those that want to stay in the game need to follow. Other big names have followed by taking the SpotOption platform, like HY Markets, ETX Capital, and Forex Club. Forex and binary are now a team, and go hand-in-hand. Those that want to expand and offer diversity, will add binaries. I believe that most will follow, and if they don’t do it from their own initiative, they will do it from the demand of the traders themselves.
LeapRate: If I wanted to start my own brokerage today, why should I start a binary brokerage? And why should I go with SpotOption’s solution?
Tammy: Starting a binary brokerage is the smartest business choice today, as you’re looking at a product that is guaranteed to sell. There are several advantages over traditional forex, such as the simplicity of the Up/Down model, which is as easy to understand as it is for sales reps to explain and sell. You have the limited risk factor, which makes it even more attractive, as traders know from the start how much they stand to lose and gain. You have the high payouts in a short amount of time, with expiries on platforms like SpotOption’s that know to manage risk in 60 seconds and even less, up to expiries of one year. From an operator’s perspective, it’s as simple of a business as possible. SpotOption gives you the complete solution, with a fully operative and branded front end on a customized WordPress website in a matter of days. Most of all, operators are burden-free when it comes to the Risk Management of the business, and rest assured that the strongest experts in the industry are managing their business activity. They need to bring the traders, but with options as tempting as binaries, this is not a problem. Those that want to add binary options because they want to say that they offer binaries can be flexible about choosing their providers. But, those that actually want a binary business that makes money, and a lot of it, need to choose SpotOption.
LeapRate: Tell us more about your key plans and initiatives for 2014. Where do you see growth?
Tammy: Innovation is the key, and in order to keep the traders happy, we need to give the operators new products. This is one form of growth – from adding additional features. In early 2014 we are launching our SpotWiz, algo-trading for strategies, which will do for binaries what Expert Advisor has done for forex. As Binary Options are a stepping stone into the more traditional forex as well, we’ve created a product for those traders who are ready for forex. In fact, we’ve spent a year perfecting the product so that in stays in line with the simplicity of binary options. That was the goal – to keep it simple like our clients’ traders have become accustomed to. The founder of the company keeps telling our IT department, that any idiot can create technology that a genius can use, but only geniuses can make technology that any idiot can use. Not that our traders are idiots, and not that we’re geniuses, but simplicity is a must in our products, and it is the main distinguishing factor in our forex feature. It even has guaranteed stop loss, which is unique to SpotOption and is in sync with the low risk of binaries. We also will reap the fruits of the Ladder feature, which has already been incorporated and has become very popular. Not to mention SpotFollow, which allows traders to follow top traders’ positions in a social environment, which is crucial these days. Due to the popularity and success of our mobile app, which truly is unrivaled in terms of the design and functionality, we’ve expanded it to also include iPad and tablet.
We’re expanding in Asia, as our Japanese Ladder feature is regulated by the JFSA, and Japanese operators are demanding this without hesitation. SpotOption has created the SpotMachine, for land-based activities with the same concept.
If there’s a company that has seen rapid growth, it’s SpotOption, and the pace is not slowing down one bit. On the contrary, we’ve tripled in size as far as manpower is concerned, and this is to support the influx of trades in our system, and what we’re expecting for 2014. SpotOption set a very important vision as the goal for 2013, which was to provide the best trader experience ever. We’re now approaching our 1 millionth trader, and besides being a benchmark to celebrate, this is perhaps a sign of meeting that goal. Our next goal is to keep innovating, and to push the bar further as to what constitutes the best trader experience ever, and of course, to provide it.
For more on the global Forex industry see the LeapRate-Dow Jones Forex Industry Report.