Sure, we’ve all heard of these new born-on-the-Web banks and trading companies. They’re cool and trendy, but surely no old-style bank could be like that, right? After all, we all tell ourselves that the traditional companies we work for can’t move that fast or take such chances. Meet the Co-CEO of a company that doesn’t tell itself that. While in Copenhagen, I met Lars Seier Christensen of Saxo Bank, which combines cutting edge technology trading services, primarily in foreign exchange and derivatives. Saxo is not your father’s stodgy bank. Lars agreed to an e-mail interview that I expect you’ll find enlightening
Me: How did you get started with Saxo Bank? How did you get where you are now?
LSC: I founded the bank together with Kim Fournais in 1992. We still share the responsibility as Co-CEOs today. We started as a tiny brokerage on a shoe-string budget of $100,000 (US), and have developed largely organically to being a 1,200-person operation valued at around $2 billion (US) today. We were then, and are today, the first and foremost foreign exchange trading specialists. although we have now expanded to deliver a multi-asset trading platform.
Me: How and when did the bank first decide to get into electronic trading? How did you convince others to try this?
LSC: We became aware of the Internet in the mid-90s and saw this as an opportunity to differentiate ourselves as a very small financial institution back then. As we, the CEOs, always believed strongly in the future of electronic trading, we also drove the process firmly from the top. Interestingly, it was the employees that were very skeptical and the CEOs that were the enthusiasts. Initially, after our first launch in 1998, the results were disappointing—we were simply ahead of our time in a traditionalist markets such as foreign exchange. Business began to pick up around 2000, and since then, neither we nor the rest of the industry has ever looked back. Today, more than 50% of all global foreign exchange is traded electronically.
Me: Who are the target customers for Saxo? How do you know if a technique is working or not?
LSC: Our customers are sophisticated individual traders, smaller to mid-sized institutions and, most importantly, white label partners that use our technology in their name towards similar client segments. Our most prominent white label partners include names like E*Trade and Citigroup. Originally, we developed the platform for our own customers, but realized that we could gain significant leverage on our heavy technology investments by letting other financial institutions white label the product. Our approach is one of flexibility and to a certain extent, hit or miss. If something works, we add resources, if something does not work we are pretty good at shutting it down before it becomes a millstone around our necks.
Me: Can you relate an anecdote of an on-line marketing tactic that started slowly and eventually started to work as you modified your approach?
LSC: We were among the very first to use paid search. I remember buying—personally, in those days, because it fascinated me, and still does—fantastic words at 5 cents (which was the minimum bid) and having no one else bidding. The same words are in the tens of dollars today. So over time , the ROI has dropped on search, but on the other volume has become more scalable, a fine balance, when you operate a $50 million (US) annual budget for marketing campaigns.
What has been our biggest problems have been to scale efficiently while the company grew exponentially, and today we are deploying a much more diversified approach including a lot of offline events, such as seminars, closely coordinated with highly-targeted local campaigns on the net. We do business in some 170 countries, so we need to both brand our name widely in some contexts, but very narrowly in others, to attract a small niche segment of investors. Quite complex, really, and we make many mistakes, but also here, we track carefully, and stop things that don’t work.
Me: You seem to use search marketing very heavily. How much of your marketing budget is devoted to search marketing, and to Internet marketing as a whole?
LSC: Pure search is around 20-25% of our total budget of around $50 million (US). As stated above, we increasingly find it necessary to combine different methods intelligently to keep results at the right level.
Me: What do you see as the biggest opportunities and challenges remaining for Saxo? Do you see changes in on-line marketing that Saxo needs to adapt to?
LSC: We used to be very cutting edge, and have probably relaxed a bit too much in the past couple of years. But we are very aware of this and our beefing up our internal expertise in various aspects of online and offline marketing. There are lots of new formats and opportunities out there, and as Internet users become increasingly resistant to advertising, you’ve got to get smarter all the time. We are currently trying to move towards one-to-one dialogue in our campaigns, which is cost- and labor-intensive, but justifiable because the value of a customer is quite high for us.
Me: Do you see the Internet emerging as a force that punishes bad behavior in corporations (and rewards good behavior), much like the media and government have served as those forces in the past?
LSC: No doubt that the Internet creates transparency and accountability. It also creates a lot of opportunities for operators to manipulate debates in bad faith, unfortunately. But we are very focused on increasing our user and client involvement, and I believe that most of the really successful new concepts are based primarily on user-generated content. This is also applicable to financial services, although not many use it yet, but we hope to be trend setters in this area in the future. People want to sympathize with the provider they buy from, and that goes for financial institutions, too.
Me: Thanks so much, Lars, for taking the time to talk to us. Saxo is a great example to all of us that think we work in stodgy companies and industries. If we want it badly enough, we can make things happen.
