Start a prop firm in 5 days with cTrader today
For the first time in a while we have a new podcast out.
This one is with Stanislav Galandzovskyi.
Stanislav was at NAGA for 7 years and headed up paid media there. He has also worked with 7 prop firms as a consultant.
In our conversation we look at…
How many challenges do people buy?
Are there ‘prop whales’?
What is the biggest discount you can offer as a prop?
How brokers are using props like trading academies
Improving retention
…And a lot more
We’ve synopsised some key points from the conversation below but there is more on the audio version covering the broker space. We even ended up talking about Afghanistan at one point.
Listen with the button below or read the short version
DK: The main thing that we were going to talk about today is actually not crypto and not Forex it’s props. So you published an article on the TradeInformer website about a month ago now, and that was basically looking at different growth strategies using paid ads for prop firms today. And so, yeah, I mean, to kick things off, can you talk about your work there, what you’ve been doing with prop firms and that sort of thing?
SG: Yes, I did consulting for seven prop firms for the last three years. And I do for them mostly like acquisition, user acquisition and growth. And also I help some of them with creative strategy. My main focus is paid acquisition and after that, creative strategy.
DK: Can you talk about how the industry has changed in that time? Because my impression is that in about 2021 and 2022, the prop industry kind of exploded. It’s obviously difficult to know exactly who the biggest companies are in revenue terms, but I think the general consensus is it’s probably FTMO, FundedNext, FundingPips, Alpha Capital, with the last three all founded about that time. So has it become harder to acquire customers since then?
SG: If you compare just paid acquisition in 2022 and 2023, it was pretty easy if we compare to right now. I am sure it’s because two years ago, it wasn’t so easy to start a firm. There wasn’t big hype.
But right now I see a lot of white labels. And if two or three years ago, prop firms compete between each other, right now, white labels compete between each other. And there are a lot of prop firms. For me, like every week we have some new prop firms, like new couple of prop firms.
And if previously we can start and get customer acquisition cost which we need and profitability from first months, or even first weeks, right now, maybe you need two, three, four months to find segments and countries in which you will get profitability. But now I know the market. Three years ago, I had no idea what a prop firm was. I had no idea where the traders were. We just started and made a profit.
Right now you know that in India, for example, such offers work, such targeting work, but it was two months ago, yes? And for these two months, a lot of changes. And after this, you start to analyze and you see that five new prop firms in India started and they started to use like 80% promo codes. And of course, users don’t want to go to one new prop firms and buy challenges without promo codes because they have five and other options with 80% discount.
It’s a big problem. And for me, looks like right now, there is a lot of hype from people who are not from the forex industry. And some of my clients also have such mindset. They think that prop, it’s a very good chance to go into the forex industry because it’s not a broker. It’s easy with regulation.
You don’t need licenses. You don’t need anything. You just need to buy a white label, create a couple of landing pages and start ads and be profitable. Some white label solutions promote this offer – ‘buy white label and be profitable’ and it’s a big problem. Right now acquisition is much more expensive and you can’t expect to be profitable from the first month.
DK: On the 80% discount point, it seems like props offering this are not really sustainable. One prop firm in the UK shut down and actually said it’s because what most props are doing, in terms of discounts, is not sustainable. So what discount level is sustainable for prop firms?
SG: In general, if you are just a prop firm without any backend, we calculated you can give a client a maximum 30% or 35% discount.
But some prop firms have a broker on their backend. It’s another style and maybe if you have a broker open a prop firm, advertise this prop firm and after this start to onboard those customers as broker clients, it’s just one more funnel for brokerage to get clients with lower customer acquisition cost and without any regulation. It’s like using academies as a funnel for brokerage. There are a lot of examples of that in the market.
DK: That’s another interesting point, which is, when this started, obviously the original, if you want to call them that, prop firms were not brokers. Some of them have now got, I don’t want to say licenses, because a lot of them are just in St. Lucia, so it’s not regulated, but they have in theory set up brokerages.
At the same time, you’ve also seen a lot of brokers. So I mean, there’s so many at this point, right? Blueberry, IC Markets, Taurex, they’ve all set up a prop offering.
What’s never been obvious to me is how well that converts if they are trying to convert into a trading client, right? So if I think of an analogy, you used to work at NAGA, I’m sure lots of people signed up to buy real stocks or buy real crypto ultimately converted into someone who was trading CFDs.
SG: Right, there are some affiliation teams who work as affiliates for brokers, and they use prop firms like a funnel. They created some prop firms with really low challenges, low cost per challenge, and if you buy this they call you and try to onboard you to their CFD brokerage.
And they say, you bought some challenge for $10, yes, like, or $20. They call you and say, ‘we’ll give you a bigger challenge for 50K, for 100K’ or ‘We’ll give you something, if you will go to broker x, put a deposit of $250’ and they get the FTD.
I think brokerage will filter this traffic, or will try to filter this traffic, but it is also competition to classic prof firms who want to be profitable in acquisition, just doing prop, without any additional upselling.
DK: But let’s say for example, you are Blueberry who has a prop firm and they also have a broker as well, how successful do you think a company like that is at taking someone who is a prop client and transferring them to become a CFD client
SG: I don’t know about Blueberry but I speak with some companies about this style and I know that for some companies it’s really profitable. Prop firm is a separate business and totally unprofitable. But you start to onboard clients to your brokerage account, so the funnel becomes profitable.
That’s why I say it’s like one more additional funnel. It’s like you build an academy, give free courses, user registers, learns one, two lessons. After this, you call them – ‘if you want this course, full course for free, please make a deposit’ – ‘Do something and we will open this course for you for free.’ Pretty standard.
DK: Prop is still comparatively new so when you, as a marketer are targeting customers, does the customer actually understand the product that you are trying to sell to them?
SG: Different segments as in brokerages. I mean in my mind it’s classic you have nobody, you have hamsters. You have beginner traders and you have professional traders and it depends what you want to get.
If you talk to a nobody, they won’t know what you’re talking about. If it’s about hamsters, it’s users who touch trading a little bit here, it’s possible to make money, it’s Binance trading, crypto trading, futures, Props, CFD – they want to do something.
Beginners, it’s people who learn something, maybe some courses, some educational content and et cetera, et cetera.
And professional, it’s professionals. Every firm wants professionals.
But not right now, I think FTMO started this, a lot of prop firms built their academies, built educational content. And of course, FTMO is a good example, but for example, For Traders, they also have good educational content. And I see that prop firms started to do this and try to educate users. Because, I mean, if you work just with nobody and hamsters, they have no retention. That’s why you need an increased level of audience from hamster to beginner traders. It’s pretty similar to CFDs. But props need it more than CFD brokers because the retention is lower.
DK: That’s actually another question I have about this industry, which is do you see people buying more than one challenge and what does retention look like?
SG: Right now it’s much more difficult because when I started I remember my first client, one of my first clients, they had an average of 5.5 and most of the users bought 50k challenges. I mean it was I mean just from ads you get profit 4.5x or 5.5x just from direct ads it was crazy
Right now it’s much more difficult and if you talk about new prop firms who provide promo codes we can forget about them because they have one maximum buy. I advertise one such prop firm with this 70% – 80% promo codes and for every for 50 purchases they have just two people who buy a second time. I mean 48 bought one time and forgot about it.
But the average, I think between 3 and 4, it’s realistic. It’s for firms who have not just acquisition, but they have some social media, have some trust points. They do payouts periodically, they do some, you have YouTube channels, maybe, like educational content, so the retention is higher. And I think it’s logical, yes?
Because you lost one time. After this, you check their content, see that someone finally got this payout, yes? You have some educational content, you saw video about another methods, I don’t know, about risk management, and you wanted to try one more time, and you think, ‘okay, I can go to another profile, or I can buy one more time here, maybe with 10 % promo code, and I know this platform, I have registration, and I can try one more time’
DK: Another question I have is if you see whales in the prop sector, right? So if you look at the broker or like, let’s say CFDs or gambling industries, typically what you have, right, is a very small number of customers make the majority of your revenue. What I find interesting about the prop model is that your revenue is essentially capped at how much you’re charging for a challenge.
So if you think about running a CFD broker, you can theoretically take a deposit of millions, right? Which does happen in some companies. But if you are a prop, then you’re basically like, well, I can sell a challenge for, I mean, I would guess a maximum of $1,000 or $2,000, but you can’t take a deposit, right? Like you can’t take much more than that.
And if someone is only buying on average, even if it was amazing, they’re buying five challenges that is somewhere between, let’s say, $5,000 and $10,000 in revenue. And to me, that just makes the model a bit different. And I wonder how sustainable it is because of that and how much the industry can really grow. Because if you can only charge a thousand dollars, you can never make much more than, let’s say, three to five thousand dollars from your biggest customer in a year.
SG: Yes, if you talk about iGaming or the forex industry, there are whales, in prop it’s totally impossible. That’s why, I think that’s why there will be modernization of the industry because you need to do something additional, I don’t know what.
Right now it looks like if you started four or five years ago, you are profitable because you have brand. But if you started right now, you can just do something and die finally. That’s why I think in the future, there will be some modernization and I don’t know, maybe it will be some collaboration, not just between brokerages.
Because right now it’s totally logical, prop firms should be friends with brokerages because it’s the same target audience, maybe even affiliates for brokerage. But if someone wants to start a prop firm right now and be profitable, it’s possible just if you generate a lot of educational content with real quality, if you can grow traders for yourself.
Because acquisition can help you start, but when you do acquisition, when you get some quantity of customers in parallel, you should do something for organic stuff. Not just SEO, but social media, YouTube, educational content on YouTube and so on. Otherwise you will not survive.
