The rise and fall of Robinhood and GameStop: what does this say about branding?

In the final weeks of January 2021, Robinhood and its merry millennial investors made history, as an army of Reddit users advocated a short squeeze on GameStop, propelling the stock price by 1,500% over the course of two weeks. Many of these Everyman retail investors were using Robinhood, trading on the basis of everything Robinhood’s brand purpose was meant to evoke: sticking it to the man.

But when news surfaced that the big hedge funds faced a loss of $19bn, on 29 January Robinhood restricted trading on GameStop. At one fell swoop, the people’s trading app had now aligned itself with the big Wall Street bankers against its own base. Reasons for Robinhood’s reversal range from platitudes with the chief executive officer stating that they needed to protect their users from the volatility of stock prices, to more believable technical difficulties such as their inability to post the collateral needed at clearinghouses, in order to accommodate the excess orders they were seeing from their traders. They even included conspiracy stories – that Robinhood had agreed to the demands of their hedge fund investors, or even worse, that they had colluded to manipulate the market and protect the interests of these trading giants. In any case, this single decision exposed Robinhood’s brand purpose to be subject to woke washing: the outlaw hero was just another sheriff in disguise.

As Robinhood now faces a deluge of user complaints and government investigations, it’s time for marketers to ask: what does this modern-day story of David and Goliath tell us about the fragility of branding?

1. Strong brands are built on trust and a shared value system with their consumers.

Not only do purpose-led companies outperform the S&P 500 by 14 times, brand purpose is the animating force behind driving and sustaining growth. Research shows that consumers overwhelmingly choose to financially support firms that are seen to give back to society. In the 25-44 age group, more than four out of five consumers exclusively purchase or actively purchase more from purposeful brands. Robinhood’s appeal with new young investors prior to the GameStop clampdown is a testament to this. Collins, a New York design studio commissioned to help with Robinhood’s visual identity, explains that everything from Robinhood’s name to its UX design has been carefully curated to target “younger generations, marginalised populations, and those groups who have been side-lined from American financial engagement” in the hopes of a financially liberated future. As “financial advocates” rather than a financial services firm, Robinhood’s brand purpose and stock trading product are thus fully aligned in a single aim: to empower retail investors to chase the same profits as the top 1% of society.

2. If brand purpose is simply a convenient façade, the fallout from a misstep is inevitable.

It is no longer enough for companies to talk the talk without walking the walk. Once the shared value between a brand and its consumers has been breached, it can feel near impossible to recoup the trust and loyalty of the original community. A purpose statement must be backed by a meaningful activation plan to be useful, and it must be fully integrated across all business functions to be authentic. Over three quarters of marketing leaders believe that their organisation has a defined social purpose, but less than one in ten have a purpose statement that is backed by tangible action points. Research has shown that the most effective purpose-driven activation plans are those that leverage a company’s existing products, services, or resources in innovative and useful ways. The Covid-19 pandemic has witnessed a number of such examples, from Michelin using its metal and plastic 3D printing production tools to manufacture masks, to the Swedish telecom operator Telia providing the Finnish government with anonymised location data to track the spread of the virus. While these are certainly short-term initiatives, consumers value such contributions – 75% of consumers state that they will reward organisations that have helped in the Covid-19 response even after the pandemic is over.

3. Brand equity is hard-gained and easily lost but it can be rehabilitated.

The fallout from the GameStop mania is just starting to become clear: Robinhood now faces over 30 class action lawsuits, and the app has plummeted down to a one-star rating on Google Play after Google initially deleted over 100,000 negative reviews. It might appear that Robinhood’s chances are over, but there is yet one small saving grace. Tens and thousands of complaints from betrayed investors have inadvertently been directed towards the wrong Robin Hood twitter account. The World Wide Robin Hood Society based in Nottinghamshire, United Kingdom, saw a surge of followers on their Twitter page, from 350 on 28 January to over 60,000 today. After being inundated with angry messages about the fintech app, the tiny folklore society was forced to issue a statement clearing up the confusion.

Lovely to have all these new followers .. can we just check that you know that you’re following The World Wide Robin Hood Society in Nottingham and not the Robin Hood App .. if so .. a big welcome from Sherwood

— Robin Hood (@robinhood) January 28, 2021

This tale of mistaken identities tells us that consumers are often willing to search out companies on social media – and sometimes indeed even take the time to write out lengthy messages – but don’t necessarily have the extra two seconds to check that the company they’ve followed is the correct one. Consequently, as outsiders we shouldn’t make the mistake of over-estimating the impact of public perception during a short-term PR crisis against long-term business success. Despite the initial outcry from its community, Robinhood has now raised a cash injection of $3.4bn to help maintain trading, and now app usage and trading has resumed to pre-GameStop levels.

Susan Maginn is a consultant at Capgemini Invent.