Let’s face it, today’s binary options industry isn’t what it used to be back in 2010. The main change is the number of operating brokers that grew enormously due to the fact that, unlike a few years ago, these days there are a handful of platform providers who must bring in several new brokers every month in order to grow and feed their operation and since many platform providers did well, followers came along.
In addition, the type of entrepreneurs who come to this industry has changed over time. Today, with the continuously growing efforts of the marketing and sales teams of the platform providers, even if your business is selling souvenirs in a city corner and you saved few thousands of dollars, you are a strong candidate to become a broker. This attracts unqualified businessmen who don’t really know what they are getting into and others who are running scam businesses, which is giving the industry a bad name.
Indeed, some countries have completely banned binary options while others have created strict regulation requirements. This combined with the fact that some brokers are operating in Scam Mode bringing traffic makes it more complicated than it used to be in the past. Moreover, the increasing awareness of internet dangers in the western world also leads to hard times for affiliates in terms of generating leads thus raising the acquisition costs.
The larger brokers, who managed to catch the wave in the early days, are now ruling the market with monthly turnovers in the millions of dollars. They are now rapidly acquiring smaller brokers to cut the competition and offer a solution to a wider audience and to marketing needs. Several acquisitions were out in public and some were done beyond the public eye.
More and more, I see our smaller partners being bought up by the larger brokers and the drop rate of startups is dramatically increasing. Furthermore, these larger brokers are giving hard competition to the small brokers by featuring higher budgets, better marketing, in many cases better conditions and a better user experience. This is without saying a word about the advantages of being a credible broker, which a company has to work very hard to accomplish. The smaller brokers who struggle with a lack of resources and funds are tempted to work with no-name affiliates and fishy traffic generation. As such, many are getting poor traffic, which their sales obviously can’t convert into paying clients. This, my friends, is what market consolidation looks like.
So what is the outcome and how can a company take advantage of such a market consolidation?
Bottom line, if you want to start a business now, you’ll need more funds and experience than what was needed few years ago. Also, ROI is lower today. This phase is an important part of the binary options industry’s maturation. Today, brokers are smarter and require sharper minds in order to succeed.
Like almost everything in life, every bad situation has its advantages. Here I’ll list some of the main advantages and how one can benefit from them.
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The most important thing for small brokers is to choose the right platform provider. As mentioned, there are many providers on the market and some of them are really good, whereas others will just drain your bank account. Choose the platform that gives you an edge and allows you to generate revenues based on a proven record.
Most binary options brokers are focusing on Europe, UK, Russia and rich Arab countries. This is because the life time value of an average trader in these areas is relatively high.
While Asia, South Africa, India and Japan can be considered easier markets for small brokers, it’s not that easy, as the average lifetime value is lower. Therefore, a company whose marketing team, sales, and business strategy builders are based in Asia or South Africa can benefit from these almost untouched markets and work with relatively low competition. Keep in mind that the key is automated funnels and working on masses.
Another way to approach market consolidation is by establishing an efficiently cost effective business – cut down on overheads!
The larger brokers have even larger expenses; millions of dollars are spent every month, and any slight changes take time to come into effect. The larger you are, the larger your risks become too – one slight mistake could make an empire come crumbling down (one such example is the hundreds of millions of dollars of losses incurred by major brokers such as Alpari UK, FXCM and Saxo Bank from risk related to the Swiss franc in January 2015).
A broker that manages to build a tight operation spending only on the essentials with low overheads and a dynamic cash flow gets the best of both worlds. Although the business won’t become a multi-million dollar enterprise overnight, a steady operation will build the groundwork for a long-lasting operation, and act as a springboard for the multi-million dollar enterprise you were dreaming of.
A great example of this strategic business model is QuickOption – a broker that is 100% mobile. QuickOption has a mobile app, both on Android and Apple. They do not hold a call centre. Their method is simple; a self-learning algorithm that uses smart engagement tools to increase conversion rates as well as improve user experience – pretty much a self-functioning company on its own. Their manpower is focused on marketing efforts, therefore driving down low costs and increasing efficiency in one go.
Diversifying the marketing channels is also a very important key factor in succeeding in the binary options field. Brokers who find an affiliate from Asia, build an operation around it and are faced with the problem of a cessation of traffic from the affiliate – an operation that now relies on getting the traffic from the affiliate – need to find a solution quickly. In many cases, the broker will fail to bring in that extra traffic to the business. Therefore, diversifying the marketing channels is crucial. A broker should practice internal marketing, media buying, SEO, IB and affiliation programs together to ensure the business’ ability to cope when one of the channels fail.
While market consolidation is available and will grow stronger in the near future, it doesn’t mean that brokers don’t have the opportunity to grow and create a profitable business. It just means that the operation must adapt itself to the new reality.