Binary Options vs Forex Trading – Dollars & Sense

Taking even a quick glance at any of the six binary options platform providers, one of the first things you’ll

Taking even a quick glance at any of the six binary options platform providers, one of the first things you’ll notice is that they are all highlighting “all in one” front to backend systems.

This includes the building out of client websites, end user platforms, payment systems, as well as CRM and CMS integration. Overall, the binary providers want you to know that time to market with their offerings will be quick and easy. In addition, binary options providers have also been enhancing their platform interfaces by making them more user friendly and adding a diverse set of trading instruments along with shorter time horizons for trades. These features are aimed at simplifying the understanding process of the product for customers.

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John Lewis
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Binary options providers are using these features as selling points, and are emphasizing the increased conversion rates that their offering yields. While the binary options industry has been moving more and more towards marketing these advantages to their corporate customers, a different trend has been taking place in the traditional spot forex sector.

Platform providers continue to advertise B2B issues like integration and customization, but they have also begun to focus more on how their products are advantageous for end user traders. Advantages of new platforms include low latency, multiple order types, STP, charting packages, social trading and automated trading functionality.

Overall, the concept is that a robust platform will lead to greater trading activity from customers. With the gamification process taking place in the binary options sector as opposed to the trend toward higher execution quality and more professional platforms in forex, the two industries are quickly diverging from each other. This contrasts to just one or two years ago when the two products appeared to be offered side by side.

For firms debating on whether to become a forex or binary options broker, or deciding whether to add a binary brand to their pre-existing business, an important part of the equation are the marketing costs involved. To better understand this key issue, Forex Magnates spoke to three experts in the field for their opinions and estimates of the market.

Our panel: Ran Cohen, CEO of Fx-Leads Ltd, a digital marketing agency, specializing in creating traders for the forex and binary options industry.

John Lewis, CMO at ConversionPros, a leading digital marketing agency focusing on retail finance.

Bart Burggraaf, a partner at Media Group London, a full-service marketing agency focused on online trading companies. Media Group London is a part of the Media Group World Wide, a syndicate of niche performance marketing agencies with offices around the world.

How does cost per lead and conversion rate differ between binary options and forex, and are they different types of customers?

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Ran: “I believe that in the end both forex and binary options traders are the same type of clients; risk lovers. For new clients, you can argue that forex should target more experienced people, who are also in a financially stronger position, while binary options brands are targeting the ‘make money quick’ and gambling groups. For existing forex traders, it may be harder to convert them to options as they are probably more educated in trading, analysis etc.”

“Because of the differences in the target groups, cost per lead within the forex sector is a bit higher than binary options and the conversion rates for binary options is a bit higher than forex.”

John: “The cost per lead is lower within binary options companies compared with that of forex companies for two main reasons; the cost per click for binary options related keywords are lower and the conversion from click to lead is higher.”

“For the keyword “forex trading” in the UK the cost is around £7.90 to £9.71 per click whereas in contrast the keyword “binary options” is around £3.28 to £4.04”

“The result is that binary options brands normally have lower cost per click rates and higher conversion rates from click to lead due to the fact that it is easier to understand the concept of trading binary options.”

“Having said that though, the CPA – Cost Per Acquisition maybe lower for Binary Options but the Lifetime Value of a client is lower and the overall life cycle is lower so this needs to be kept in mind when any broker is putting together a business plan.”

Bart: “If you compare like for like, binary options are a simpler product and thus provide higher conversion rates between visitor and lead, and lead and live account etc. The one thing to keep in mind is that very few binary options companies at the moment do their marketing in the traditional sense (buying an advertisement, working on their brand perception and so forth).

Instead, they focus mostly on SEO, Affiliate Marketing and broad (cheap) media buys, in my mind because a lot of them come from a gaming background, and those are the tactics used in that industry. This has an impact on the numbers. Lead quality is lower for these sources, so is client quality if bought on a CPA basis.

There is, however, very little risk so they continue to pursue these tactics. I think there is a place for a well-funded broker to do something better in this space and gather market share quickly – it’s only a matter of time.”

This is an excerpt from a detailed article taken from the Forex Magnates Quarterly Market Report for Q4 2012

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