E-Trade Delays Launch Of Portal Site

Jul 10 1998

Christos Cotsakos' turnaround effort for online brokerage E-Trade won't be born for a few more months.

The company will wait until September to launch an ambitious financial portal site, Destination E-Trade, that analysts have called the company's best hope for long-term survival. The site was to have launched next week.

For CEO Cotsakos, the stakes are perilously high. E-Trade, once synonymous with online stock trading, has seen its leadership usurped by competitors including discount brokerage Charles Schwab. Its stock has flatlined at between $20 and $25, a good step down from its high of $47 last October, before market turmoil swamped E-Trade's computers with a rash of trading orders they couldn't handle. And while other online brokers have stepped up marketing and customer acquisition, E-Trade has slowed its outlays.

"This won't kill them, but delays are always costly," says Phil Leigh, an analyst with securities company Raymond James & Associates. "In the Internet industry, you have to work at light speed to stay in the running."

E-Trade demoed Destination E-Trade to analysts and a few journalists in June and has been showing the site to its 400,000 members for the past month. But getting members to change over to the new site is taking longer than planned.

"This isn't about adding or fixing features," says Rebecca Patton, E-Trade's VP of advanced products. "It's about testing the site and optimizing it to make sure it's ready for a public launch."

E-Trade currently cordons off much of its content for members, who must set up accounts to access it. Most of the new site, by contrast, is free to the public. Individual investors will get access to sophisticated portfolios and personalized market views, investment ideas, stock alerts, e-mail and message boards. For $25 a month, subscribers get more research data and can invest in IPOs from Robertson Stephens .

Later, the site will add merchandise, online mortgages, cross-border trading, debit and credit cards, bill payment, fixed-income investments, financial planning, insurance and games. Last week's acquisition of ShareData also will give E-Trade a strong foothold in the corporate market.

"We want to be bookmarked as an all-in-one financial portal," Cotsakos says.

As recently as last fall, E-Trade was the site online traders did have bookmarked. The Palo Alto, Calif., company was integral in establishing trading as one of the Net's first commercial success stories when it became America Online 's premier e-broker in 1992. But the company's guerrilla pricing campaign backfired when a flurry of start-ups like Ameritrade and Suretrade joined the floor. Many online brokers now charge less than $10 a trade.

Today, the undisputed market leader is discount broker Charles Schwab, and E-Trade will have to hustle to remain a big player.

While Schwab increased its share of the online trading market to 32 percent in the first quarter, from 30 percent the previous quarter, E-Trade's share fell from 14 percent to 12 percent, according to Piper Jaffray.

Cotsakos, for his part, is steering away from bargain-basement fees, opting instead for a one-stop financial center that's nearly entirely automated. "Price isn't the only thing that matters," he says. "People don't want to trade through K-Mart. They want information, customer service, reliability."

E-Trade plans to step up marketing in the intervening months before the new site launches. But the company won't say how much it will spend or what kind of a message it will send.

Last month Sprint vet Jerry Gramaglia joined E-Trade as VP of marketing, sales and communications, which may put an end to the company's reticence.

Analysts credit E-Trade with the discipline to test the new site thoroughly but say a delay in its launch after a period of prolonged marketing silence makes Destination E-Trade an even bigger gamble for the company.

"This is going to take a very high budget, but Christos is a master of marketing. It hinges on its marketing strategy now," says Genni Combes, an analyst with Hambrecht & Quist. How the public reacts after the site is launched, Combes says, "will be absolutely critical for E-Trade."