How Does Webull Make Money? Business Model of Webull


How Does Webull Make Money

Webull is a popular online trading and portfolio consolidation app that allows users to trade in stocks and crypto. The platform also focuses on teaching its userbase about investing.

Webull primarily makes money via payments on flow orders. The company also makes money from subscriptions, loans to short sellers, interest on free credit balances, and margin interest.

Founded in 2017 by Wang Anquan, Webull was created with the goal of being an online trading platform for advanced users. It aims to simplify the process of trading with cutting-edge technologies while also boosting profits for individual users.

Webull’s holding company is Chinese, but the company is headquartered in New York.

The trading platform rapidly gained popularity after its mobile app launch in 2018. In 2021, NBA teams Brooklyn Nets and New York Liberty entered into a promotional agreement with Webull and sported its logo on their jerseys.[1]

What is Webull & How Does It Work?

Webull is a fintech platform that provides commission-free trading of various financial commodities. Users can trade stocks, options, exchange-traded funds (ETFs), and various other securities. To make trading more accessible for everyone, Webull also allows users to buy fractional shares.

With fractional shares, users can buy partial shares down to a minimum purchase value of $5. This is useful for investing in high-value stocks that typically trade at hundreds or even thousands of dollars. ETF shares can also be purchased via this method.

Like many other online brokerages, Webull doesn’t charge a commission for buying or selling. It also doesn’t impose any minimum balance requirements. However, users who are interested in margin trading must have at least $2,000 in their deposit account.

Webull provides advanced data and analytics for knowledgable investors. On Webull, users get free real-time stock quotes in addition to detailed graphs. These graphs have multiple technical indicators that can be toggled on or off based on user preferences. With Nasdaq TotalView, Webull also offers what’s known as Level 2 quotes on stock prices.

Level 2 quotes allow users to see the top 50 levels of bid and ask prices for any security listed on Nasdaq, New York Stock Exchange (NYSE), and other regional exchanges. This is a feature intended for serious traders who desire top-tier market insight. Currently, Webull offers a month of Nasdaq TotalView access for free to all new registrants on its platform.

In addition to technical indicators on, Webull also displays financial forecasts for each stock. When a user opens the ‘financials’ tab for a company, they can view its income statement, balance sheet, and cash flow. Each stock also has a comment section where app users can provide their own insight into the performance and future of the stock.

The interactive social aspect of Webull makes it stand out from the competition by offering users valuable market insights and feedback from other investors. Webull further boosts app engagement by providing users with a voting function for each stock. With this, users can vote on whether a stock’s future is looking bullish or bearish.

News articles and press releases are also integrated into the app and curated for each individual stock. By providing this level of functionality within their app, Webull gets loyal users who spend more time inside their app. Comprehensive coverage of all investment media ensures that users are less likely to install apps or get services from competitors.

Investors can get all relevant information for a stock without having to use separate services for things like news, analytics, or reviews. By encouraging its investors to spend their money wisely and providing them with a wide selection of market analytics, Webull generates a significant number of returning users. It functions as a one-stop solution that is both accessible and comprehensive at the same time.

Webull is designed with a mobile-first approach. It appeals to casual, as well as active traders. Based on data from 2021, Webull is the second most popular online trading app after Robinhood, with over 2.6 million monthly active users.[2] Webull, however saw a 265% in year-over-year user growth.

 

Business Model of Webull

Webull offers an all-in-one trading solution for savvy investors in the early to middle adult demographic. It attracts new users by offering commission-free trading and financial analytics within its app. Users can trade a wide variety of commodities, including fractional shares and over-the-counter (OTC) securities.

Webull’s business model is focused on providing indispensable trading analytics and services to attract advanced and sophisticated traders. They provide trading options that many other platforms don’t allow due to their advanced nature or complicated processing.

For example, the app offers crypto trading services which makes it attractive to a very wide userbase. To make sure customers don’t get overwhelmed by the vast array of options and features, Webull has paper trading. This is a type of simulated trading experience that allows users to experiment with virtual currency and polish their skills.

People, therefore, use Webull to learn and experiment with trading in new markets or investment instruments. Webull is seen, not just as a trading app, but as a place to learn and practice trading.

The social nature of the app is also a key part of Webull’s business strategy. It takes builds on the success of trading communities like The Motley Fool, Seeking Alpha, and Reddit’s trading forums to provide a social experience where traders learn from each other and share their thoughts.

That focus on investor education and its social features are what separates Webull from competing services like Robinhood. Webull offers the best analytics and technical indicators of any mobile trading app. It features a professional-tier feature set that’s tucked away behind a streamlined user interface.

Webull’s biggest rival is Robinhood, as they offer similar services. Where Webull and Robinhood differ is in their user experience. Robinhood is more popular, with over 7.3 million users according to a 2021 survey.[3]

However, Robinhood lacks a paper trading system which is an indispensable tool to make newcomers feel comfortable and confident.

Robinhood is better for first-time traders who want a clean user interface with minimal confusion. Robinhood also has a larger range of stocks and ETFs that are available through fractional shares.

Webull’s financial analytics and social features make it a more advanced platform. The in-app comment section and voting system help drive customer engagement. This cultivates more serious users who regularly spend lots of time on the app and make more trades – driving revenue for Webull.

The average Webull trader is 40 years old and has an account balance of $4,000.[4] Webull traders also tend to be more active and experienced compared to Robinhood traders.

Webull has a library of investment guides, resources, and tutorials on its website. These are all free to view, and available under the ‘learn’ tab.

Webull is estimated to have annual revenues of around $32.6 million per year, but it also has considerable expenses.[5] These include things like staffing costs, hosting costs, platform costs, and development costs.

There is no data on the financials of Webull, as it is a private company. It is hard to speculate on Webull’s exact operating costs.

 

How Does Webull Make Money?

Webull makes money from five different revenue streams. These include payments on order flows, subscriptions, loans to short sellers, interest on free credit balances, and margin interest.

As Webull is a private company, details about how much revenue they generate from these different revenue streams aren’t public.

Payments On Flow Orders

This is one of the biggest revenue streams for Webull. Whenever a user places a buy or sell order via Webull, the transaction is handed to a market maker. These market makers function as wholesalers for securities and pay Webull for bringing in order flow.

Market makers earn their profit through bid-ask spread. Which is the difference between rates for sale (bid) and buy (ask) orders. Webull is paid depending on how many securities are traded from one investor’s account to the other within a second.

 

Subscriptions

Webull encourages highly active traders to purchase a NASDAQ TotalView subscription for better market analytics and insight. TotalView also includes Level 2 quotes, net order imbalance indicator (NOII), and various other features. New users get a month of TotalView for free, after which it costs $1.99 per month.

While Webull has to pay NASDAQ for licensing, the company makes money on the difference between what NASDAQ charges and what users pay.

 

Loans To Short Sellers

Short sellers on Webull are loaned shares equivalent to a specific dollar amount. They are then charged interest on the borrowed shares. For short selling, traders must have margin accounts.

The trader anticipates a drop in the share value on the market. When it drops, they sell their shares. During this entire time, they pay interest to Webull until the short position is closed.

That happens when the trader buys back shares at, hopefully, a lower price and returns the shares that they borrowed to Webull.

 

Interest On Free Credit Balances

Free credit is the amount of cash in a trader’s margin account that Webull can withdraw on demand. Free Credit balance is the amount left after accounting for margin requirements and transactions, that is free to be invested.

Webull doesn’t pay any interest to the trader on this balance. But it loans out the money to banking partners who pay interest, helping Webull make a profit from the money they hold in accounts on behalf of their customers.

 

Margin Interest

Margin trading is when a customer borrows money from the brokerage to pay for trades that wouldn’t be possible with their current balance. Webull requires a minimum balance of $2000 in a user’s account before they’re eligible for margin trading. With margin trading, users get up to four times buying power on day trades and two times buying power on night trades.

Webull charges a variable interest rate depending on the amount borrowed by a user to leverage their trades. For debit balances up to $25,000, the annual margin rate is 6.99%. It goes down to 3.99% for amounts above $3 million.

 

Webull Funding, Valuation & Revenue

Webull is currently a private company, and its financials aren’t available to the public. Right now, it is unclear what the company is valued at.

However, Webull raised $224 million in funding over five rounds between 2016 and 2021. Notable investors include Shunwei Capital Partners, Hongdao Capital, Lightspeed Venture Partners, and Lightspeed China Partners. The company’s latest funding round was a series D round in February 2021, which raised $150 million.[6]

Webull’s last disclosed valuation was $1 billion when it raised money through a series C funding round in 2021.[7] Since then, the company hasn’t had any more funding rounds. However, given the 2022 downturn in the value of fintech companies, there is a chance that Webull’s valuation could have slipped.

Annual revenue for Webull is estimated to be around $32.6 million.[8] But there is no official report to verify this. Given the recent dip in the number of online trading users, it is possible that Webull could be making less than this figure.

 

Is Webull Profitable?

Webull is likely not yet profitable. The company is private and doesn’t disclose any details regarding its finances.

Its annual revenue is currently estimated to be around $34.6 million.[9] The fact that the company hasn’t raised money since 2021 suggests that it is generating enough revenue independently to cover their operations. It could also indicate that Webull has become profitable, but that cannot be confirmed.

Given the disruption in financial markets and fintech valuations in 2022, the company could face difficulties if it needed to raise money in the future.

 

Conclusion

In conclusion, Webull is a company that has seen success in their short time of existence. It’s clear that the team has a vision for what the future of the industry will look like, and they are working hard to make it a reality.

As a new player in the game, Webull has been able to gain market share by offering services and products that are more advanced than their competitors. They have also capitalized on the fact that they are not charging commission fees which makes them more attractive to investors.

However, this could also be a risk because they need to keep their costs low, and if they do not find ways to increase revenue, then eventually, they will run out of money.

The industry as a whole is growing at an exponential rate, and there is no sign that it will slow down anytime soon. As more people adopt cryptocurrency as an investment class, then we should see an increase in trading volumes which could lead to higher profits for all exchanges, including Webull.

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Sources

  1. NBA
  2. TradeArabia
  3. Statista
  4. CNBC
  5. Growjo
  6. Dealroom
  7. Bloomberg
  8. Growjo
  9. Growjo