How To Make Money On Robinhood App

Before Robinhood, anyone who wanted to invest in stocks would be charged between $5 to $10 a trade. They also needed to invest a minimum of $500 to open an account.

Vladimir Tenev and Baiju Bhatt (co-founders) had previous experience building these systems and saw the extraneous costs as little more than gatekeeping people out of investing.

"We are not setting any account minimums, which we think unlocks a market of investors who couldn't do this before," said Bhatt to CNBC at launch. "We see Robinhood as unlocking the microinvestor market."

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Robinhood was popular even before launch. In 2014, 340,000 people had signed up to the app's waitlist, by March 2015 (a month before it launched), that figure had doubled to 700,000. Fans from Europe, Australia and South America filled Robinhood's forums, pleading for the app to launch in their country.

That dedication has remained, despite most of the stockbroking apps lowering minimum deposit and commissions, in some cases to zero, to entice younger users.

Even though Robinhood advertises itself as a "free" app, it still generates income through a process called payment for order flow. Essentially, when a person trades on the app, Robinhood sends that trade to a larger entity, which is able to leverage thousands of orders at once for a slight advantage. The larger entity then compensates Robinhood for the orders.

This process has received some criticism, especially after Robinhood halted trades of GameStop and BlackBerry stock. Investors accused Robinhood of bowing to pressure from the market makers who execute the larger trades.

Payment-for-order-flow is also controversial as it incentivises Robinhood to find the highest bidder, not the leader who will execute the trade fastest. Robinhood generates around 50 percent of its revenue from the practice.

The company generates the other 50 percent of its income from account interest and Robinhood Gold, which lets users trade on margin, make larger deposits and access professional reports from Morningstar.

Robinhood seems unconcerned with growing internationally, it cancelled plans for the UK and Australia in 2020. Several free-trade accounts have emerged in both countries, Robinhood would also struggle to generate as much revenue as payment-for-order-flow is banned in the UK.

Robinhood added cryptocurrency trading in 2018, which includes all of the major currencies like Bitcoin, Ethereum, Dogecoin and Litecoin.

In January 2021, Robinhood was at the centre of Reddit's /r/WallStreetBets battle against hedge funds. Thousands of activist investors bought GameStop stock, forcing a "short squeeze" on the hedge funds. Robinhood suspended trading of GameStop stock for a few days, which caused a wave of backlash against the startup, as the move was seen as appeasing Wall Street.

We've collected data and statistics on Robinhood, including its users, revenue, transactions and competition. Read on below to find out more.

Robinhood key statistics

Robinhood generated $682 million in payment-for-order-flow revenue in 2020, a 514 percent increase year-on-year
Robinhood had 22.5 million active users in 2021
It added $3.4 billion to its balance sheet during the GameStop stock squeeze, after suspending trades for a week (TechCrunch)

Robinhood overview

Launch date	18 April 2013
HQ	Menlo Park, California
People	Vladimir Tenev and Baiju Bhatt (co-CEO's), Jason Warnick (CFO), Gretchen Howard (COO)
Industry	Stockbroker and cryptocurrency
Company type	Private

Robinhood revenue

Robinhood annual revenue

Year	Revenue
2015	$2.9 million
2016	$9.3 million
2017	$21 million
2018	$69 million
2019	$278 million
2020	$959 million

*2015 to 2018 only covered payments-for-order-flow, which accounted for between 55 to 75 percent of Robinhood's revenue in those years

Sources: Alphacution, CNBC, Robinhood

Robinhood users

Year	Users
2015	0.5 million
2016	1 million
2017	2 million
2018	6 million
2019	10 million
2020	13 million
2021	22.5 million

Sources: Forbes, Fortune, Robinhood, Pymnts, NYT

Robinhood assets under management vs competitors

Robinhood	$80 billion
E-trade	$600 billion
TD Ameritrade	$1.3 trillion
Charles Schwab	$3.8 trillion

* Assets under management means the total market value of all investments a company holds.

Sources: TopRatedFirms, Brokerage-Review

Robinhood average account size vs competitors

Robinhood	$3,500
E-Trade	$100,000
TD Ameritrade	$110,000
Charles Schwab	$240,000

Robinhood competitors and alternatives

E-Trade	Offers a large variety of investable securities, but still has a commission fee. Purchased by Morgan Stanley for $13 billion in 2020
Charles Schwab	Similar to E-Trade, but recently reduced most commissions to zero to compete with Robinhood
Freetrade	Robinhood's closest alternative in the UK, although it doesn't use payment-for-order-flow
eToro	Another popular trading broker with younger generation, popular across Europe
Coinbase	Robinhood's main competitor in the cryptocurrency market

Robinhood valuation

Year	Valuation
2017	$1.3 billion
2018	$5.6 billion
2019	$7 billion
2020	$11.7 billion
2021	$20 billion

Sources: TechCrunch, CNBC, FT, Business Insider

Robinhood FAQ

How does Robinhood make money?

Robinhood makes most of its revenue through a process called payment-for-order-flow. Large entities, called market makers, execute hundreds of thousands of Robinhood trades at once and pay them for it.

Who owns Robinhood?

DST Global, Sequoia Capital, D1 Capital Partners, IVP, TSP Consumer Partners and Ribbit Capital have all lead investment rounds in Robinhood, although it is unclear how much each venture capital firms owns. Robinhood co-founders Vlad Tenev and Baiju Bhatt both maintain some ownership of the app, although until the IPO, we will not know how much.

What is Robinhood users average age?

Robinhood user average age is 31 (NYT), which is an increase of five years since the app launched in 2015 (WSJ)

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