Quick Case Study – MetaQuotes Trading Platforms

See Bottom of post for Jan 2015 Update

See Bottom of post for July 2016 Update

Oct 2014

Facts:

1)  Changes in technology and regulation have made the Margin Trading Products (“MTP”) industry’s dominant retail trading platform (MetaQuotes’ MT4 Platform) an increasingly smaller part of the software stack that a brokerage needs.

2) Most technology and services components in the software stack charge based on total volumes traded, MetaQuotes charges installation fee plus a very moderate monthly Support fee ($1,500/month).

3) MetaQuotes’s sales are down 30% year over year even as MTP industry sees increased volumes, and increased number of brokers operation.

Question:

What changes, if any, should MetaQuotes make to their sales strategies?

Answers:

Answer A (MetaQuotes Actions)  = Publicly announce they will no longer offer discounts on their $100,000 list price software.  They will no longer discount additional servers to existing clients.  This will cause fewer and fewer start up brokerage firms to license this software platform and they will look to newer platforms.  This also negatively effects the larges of the company’s clients who used to be able to grow their own brokerage business by adding less expensive second, third and fourth platforms from the dominant platform provider.  Now even as a growing, existing client, you would get the same terms for a third, fourth or fifth platform as a start up would pay for their first.  This is just a horrible sales strategy.

Answer B (My suggestion)  The answer is to increase the previously mentioned moderate monthly support fees charged.  Once a brokerage has taken on a trading platform, their elasticity of demand gets quite low.  Increasing the monthly support fees from $1,500 to $3,000 is a small percentage change to a brokerage doing anywhere from $50,000 to $500,000 per month.  And it is a fixed cost that the broker can easily plan for and absorb.  Or make a variable Support Fee structure such that as the Broker grows and their reliance and usage of the Support team increases, they will pay an accordingly increased amount for their monthly Support.  One could even make the razors & blades analogy that the dominant platform provider should be giving their platform to the brokers at the bare minimum costs they can afford to offer, and mark up the monthly support greatly.  That would help them keep their dominant market share (Want to operate a brokerage?  Here is a free retail trading platform.)  It would also increase the gross revenues per brokerage client on any brokerage that operates for more than 14 months or so (my calculations)

Jan 2015 Update:

MetaQuotes has raised their monthly support fees by 33% and backed off their policy of not discounting purchase prices on their platform.  (Did they read this post?)

July 2016 Update:

Metaquotes is (re) launching their follow up to MT4, the MT5 platform.  This platform was first released 6 years ago and made very little headway in the market.  MetaQuotes has made some changes to MT5 to make it more appealing to their core base of users and more like the beloved MT4 platform.  I am not yet sure of their sales/marketing strategy for MT5, but I would like to think MetaQuotes will work in tandem with their existing MT4 brokerage firms.  Find an incentive plan to get the brokers to adopt MT5 and convert MT4 users to MT5.

I will add here something I have spoken of to many in the Margin Trading Products (“MTP”) industry previously.  MetaQuotes made a bad mistake when first launching MT5.  They used a single marketing strategy to the outside world.  But they needed a two-pronged approach.  MetaQuotes blasted the brokerage and the retail trading communities with materials that discussed the “multi-asset platform”, the “position-based” accounting, and the gates ways that link to certain global exchanges.  All those features are appealing to brokerage firms in the MTP industry as they all have grand ambitions to expand their offerings.

But to a retail trader, these words are just confusing.  MT4’s success came from it’s simplicity, and from the ability to simply code up an “Expert Advisor” (read as: simple algo).  MT5 did not have the compatibility to transfer Expert Advisors from MT4 to MT5.  Confusing terminology and lacking a key feature killed the initial launch of MT5.  MetaQuotes should have used a separate marketing campaign directed at the end users of the platforms that talked about the similarities between the beloved MT4 and the new MT5.  That MT5 was simply a “better” MT4.  That would have helped drive end user demand for MT5, which in-turn would have driven the brokers’ demand for MT5.  Instead, MetaQuotes marketing plan relied on selling MT5 to brokerages who would then have to force unwilling clients to switch from MT4 to MT5.

Lets see how they fare this time around.

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