DAB, the German online broker, has reported a loss of E25 million.
The result of DAB’s headlong rush into Europe has been a fist full of debt and a growing pile of bills for marketing and technology. Technology success stories over the past decade have made debt a little more acceptable in business but the situation for online brokers like DAB is beginning to look unsustainable.
DAB acquired 82,000 net new customers last quarter and managed to reduce its costs slightly. However, gross commission income fell by 21.6% compared with the first quarter and the company said that the full integration of SelfTrade over the next twelve months will cost it a further E30 million to E40 million.
Clearly product development and diversification are not going to save the eBrokers and even potential acquirers are loath to fork out on loss making entities. Worse still, one can imagine the directors at HypoVereinsbank beginning to scratch their heads and wonder if they are throwing good money after bad (hint: yes they are).
What DAB has going for it is the best brand recognition of all Europe’s eBrokers and a nifty line in offline service development. What it does not have is as many customers as Consors or Comdirect, even if it appears to be picking them up slightly quicker these days. Business wisdom suggests that, at the very least, it forge an alliance with one of them. Consors, for example, has been slow to develop its offline presence and so would welcome a partner. It would also look less like a capitulation than if it were acquired.
The costs that are crippling eBrokers are marketing and technology – two areas where they all share a great deal in common. Surely now it is time to acknowledge that the only way forward is as allies.
