Binary Options Product Differentiation

The paucity of ‘brokers’ offering any binary options product differentiation is one of the outstanding features of this ‘me-too’ industry. This does not bode well for the industry in the long-term as it is imperative that different products hit the market to maintain the rate of progress this industry has hitherto made. The alternative is that marketing costs soar and we see more and more iOptions going to the wall.

iOption Folds

To many involved in the binary options industry, the demise of iOption is likely to come as a bit of a shock. They ‘began’ in 2008

(according to their ‘Welcome Mail’) therefore were one of the more mature binary options brokers, their problems are not down to teething troubles. So now the dust has settled what went wrong? We know of one shareholder unprepared to put their hand in their pocket again, but for a third fundraising is that surprising? Chasing good money after bad? Binary options product differentiation is clearly an area that hitherto has been overlooked.

Binaries Burgeoning Interest

Over the last five years the landscape within which binary option platforms operate has steadily changed as the binary options market itself has shed its nappies and developed into the mass appeal market it is right now.

The burgeoning interest in binary options, as illustrated by the above Google Trends graph, presents a stark contrast between searches for ‘binary options’ and searches for ‘spreadbets’, ‘spread bets’, spreadbetting’ and ‘spread betting’. With this amount of interest was iOption a one-off or can we now expect a further rush for the exit from fellow strugglers?

‘Me-too’ Offerings

Soon after the announcement of iOption’s demise the SpotOption website under ‘All Brands’ listed 149 white label partners with the well-capitalised Alpari and FXDD in row one, suggesting that maybe these two sites are SpotOption’s flagship partners. iOption was on row 6 with 131 partners beneath them. If this hierarchy has any significance then it is likely that there will be many more brokers shutting up shop in the not-too-near near future.

According to their respective websites Tradologic has 37 white label partners, TechFinancials has 27, TradeSmarter 21, MarketsPulse 6 and HelloBinary 9. SpotOption therefore has 148 of the approximately 248 brokers that these six binary options providers support. But even so, there are 248 brokers with roughly the same product set in terms of strategies offered, with other spread betting outfits like ETX about to enter the ‘me-too’ fraternity.

Differentiate or Die!

Providing the end-user with a ‘me-too’ product relies on either far superior marketing techniques or the old favourite, throw money at it. The Tel Aviv/Limassol marketing efforts are generally slick and polished already, so a new entrant using, say, SpotOption technology needs to accept that the marketing burn will need to be higher than the present incumbent’s marketing spend solely to gain a profile. BinaryOptions.com now charges $400 CPA which is double that of a couple of years ago. This rate is likely to keep rising as the number of ‘me-too’ brokers with lemming-like tendencies heroically pile into the market. The CPA of an affiliate with a decent SERP could go through the roof!

A SpotOption broker has approximately 148 active SpotOption brokers competing directly with them. The individual broker can differentiate by:

  • offering multiple languages
  • multiple currencies for depositing in
  • an aesthetically pleasing site
  • an efficient Landing Page
  • account opening bonuses
  • credible regulation

but all the above are easily replicable; generally the mechanics of trading are identical.

The Future

‘Me too’ products are unsustainable and the likelihood is that most brokers will not be able to afford the marketing budgets required to compete. Binary options product differentiation will then be the outstanding feature of 2014.

Clearly more imaginative strategies will be offered as the Over & Under becomes seen as increasingly mundane. In 1973 the CBOE offered call options only limiting the strategies to calls, call spreads, call flies and condors. It was only after a further four years that puts were introduced which led to volumes more than doubling as the strategies available more than doubled and that is when conventional options came of age. This pattern will be observed in the binary options arena.

The interbank FX (binary) options market is the most sophisticated and heavily traded in the world; at the other end of the spectrum, Over and Under strategies are offered to the retail market. There is a gap between these two fundamentally different markets, a gap which will now slowly be filled as the current retail operators provide more sophisticated ‘Over/Under’ platforms and the mainstream exchanges, having so far only dipped their toes in the water, embrace the concept of binary options.

About the author

I am an experienced Binary Options trader for more than 10 years. Mainly, I trade 60 second-trades at a very high hit rate.

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