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Square Prices Its IPO at $9, giving it a $2.7B valuation

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Re: Square Prices Its IPO at $9, giving it a $2.7B valuation

#151

Post by lsc »

mbesto wrote: post #148
jes5199 wrote: post #142

Earlier quoted context omitted.

Square does high enough volume to negotiate better rates than you'd expect.

The size and strength of our payments and POS business have allowed us to develop a deep understanding of our sellers’ business performance and to build a cohesive commerce ecosystem. As such, we are well positioned to provide financial services and marketing services to sellers efficiently and intelligently. For example, one of our financial services, Square Capital, uses our deep understanding of our sellers’ busin…

Oh my... merchant account advance loans are the "payday loans" of the small-business world. Much like the 'payday loan' business, the rates usually end up being usurious, but if you are cool with that, there's certainly money to be made.

But... that's completely not what I thought square was doing.

Re: Square Prices Its IPO at $9, giving it a $2.7B valuation

#152

Post by cbeley »

untog wrote: post #102
heydenberk wrote: post #69

Is anyone willing to give a contrarian take? I'll give it a shot: Square is an ambitious company with some great engineers, stellar UX and a giant total addressable market. Their business loans are interesting and could grow into something important. Square readers are a fashion accessory for hip businesses. No sooner would a coffee shop be seen without a Square reader and an Edison bulb than its yuppie hipsters patr…

No sooner would a coffee shop be seen without a Square reader and an Edison bulb I'm not so sure about that. I'd agree that they all have "fancy" (for want of a better word) payment systems, but I don't think there's a reason they have to be the fancy ones made by Square. But more importantly: the US is (finally) moving to chipped and tap-to-pay transactions. That means that pretty much all merchant hardware is going…

Square has had chip readers for a little while now and they are pretty cheap too --> https://squareup.com/shop/reader . One of my favorite bars is already using it. Why would someone switch away from square if they are happy with it and there is a cheap upgrade path to support chip readers? Switching services potentially costs time...I can't imagine people wanting to spend that time unless they were inherently unhappy with square.

Re: Square Prices Its IPO at $9, giving it a $2.7B valuation

#153

Post by anupmm »

A combination of things are responsible - a super old/competitive market (processing), the ever changing risk dynamics and Square's targeting

Let me illustrate points 1 and 2 with an example.

a) Square earns $2 in revenue per $100 of transaction volume b) $0.5 would be their gross margin accounting for expenses i.e. bank/visa fees c) The next biggest line item to subtract would be risk. If there is a fraudulent transaction of $100, then square has to compensate it with 200 transactions of $100 each. (200 txns *0.5 gross margin). Net effect is not only do they have to deal with low margins, they also have to manage risk very well. And this is not something you accomplish overnight especially as you enter new markets. Personal anecdote: I had $120 or so disappear from my Starbucks wallet a couple of months ago and the merchant had to eat the loss.

Lastly, large payment processors get out of this loop because they manage the big (Targets and Walmarts of the world) with the small and over time have fine tuned their risk engine. Square went into it in the reverse order, targeting mom-and-pop stores first (which have low volumes and high acquisition costs) and then trying their hand at large merchants (Startbucks in this case and they lost a ton doing this). In the process they never got risk management right for either segment. And oh, they did not go with an online first strategy which PayPal did in the 90s and the likes of Braintree and Stripe did recently.

My 2c.

Re: Square Prices Its IPO at $9, giving it a $2.7B valuation

#154

Post by lakeeffect »

anupmm wrote: post #153

A combination of things are responsible - a super old/competitive market (processing), the ever changing risk dynamics and Square's targeting Let me illustrate points 1 and 2 with an example. a) Square earns $2 in revenue per $100 of transaction volume b) $0.5 would be their gross margin accounting for expenses i.e. bank/visa fees c) The next biggest line item to subtract would be risk. If there is a fraudulent trans…

I'm pretty sure Starbucks, the merchant, would have to cover the costs not square as the processor. I used to work at MBNA and when there was fraud on an card the retailer was responsible.

Re: Square Prices Its IPO at $9, giving it a $2.7B valuation

#155

Post by caseyf7 »

mbesto wrote: post #148
jes5199 wrote: post #142

Earlier quoted context omitted.

Square does high enough volume to negotiate better rates than you'd expect.

The size and strength of our payments and POS business have allowed us to develop a deep understanding of our sellers’ business performance and to build a cohesive commerce ecosystem. As such, we are well positioned to provide financial services and marketing services to sellers efficiently and intelligently. For example, one of our financial services, Square Capital, uses our deep understanding of our sellers’ busin…

True, but this type of loan has been around a long time in the payments world. These are loans of last resort and the other processors haven't been able to make them into multi-billion dollar businesses so I'm a little skeptical that Square can do it.

Re: Square Prices Its IPO at $9, giving it a $2.7B valuation

#156

Post by [deleted] »

mbesto wrote: post #148
jes5199 wrote: post #142

Earlier quoted context omitted.

Square does high enough volume to negotiate better rates than you'd expect.

The size and strength of our payments and POS business have allowed us to develop a deep understanding of our sellers’ business performance and to build a cohesive commerce ecosystem. As such, we are well positioned to provide financial services and marketing services to sellers efficiently and intelligently. For example, one of our financial services, Square Capital, uses our deep understanding of our sellers’ busin…

[deleted]

Re: Square Prices Its IPO at $9, giving it a $2.7B valuation

#157

Post by LordHumungous »

heydenberk wrote: post #69

Is anyone willing to give a contrarian take? I'll give it a shot: Square is an ambitious company with some great engineers, stellar UX and a giant total addressable market. Their business loans are interesting and could grow into something important. Square readers are a fashion accessory for hip businesses. No sooner would a coffee shop be seen without a Square reader and an Edison bulb than its yuppie hipsters patr…

>Square readers are a fashion accessory for hip businesses

Disagree. This is not a consumer electronics market, its a business market.

Re: Square Prices Its IPO at $9, giving it a $2.7B valuation

#158

Post by LordHumungous »

potatolicious wrote: post #120
singsong wrote: post #105

Earlier quoted context omitted.

Hmmm interesting.... I have had in depth conversations about this, and I strongly feel that you are missing something. Sure, in certain areas having a ipad/square reader combo is not necessary. It may actually be detrimental I would imagine. I am not talking about some random small town in Missouri, I am talking about less trendy districts of a city or a coffee shop with a more old school vibe. BUT in large cities an…

I disagree - I live/work smack in the middle of Manhattan and I'm not really seeing a Square dominance in coffee shops around me. Yes, every coffee shop needs their cool iPad credit card processing machine, but anecdotally I'm seeing more non-Square ones than Square ones. The choice here isn't between "usable iPad thing made by Square" vs. "crappy 90s POS terminal", it's "usable iPad thing made by Square" vs. "other…

You're lucky if they take cards at all in Manhattan, half the stores are cash only.

Re: Square Prices Its IPO at $9, giving it a $2.7B valuation

#159

Post by caseyf7 »

jes5199 wrote: post #146
heydenberk wrote: post #69

Is anyone willing to give a contrarian take? I'll give it a shot: Square is an ambitious company with some great engineers, stellar UX and a giant total addressable market. Their business loans are interesting and could grow into something important. Square readers are a fashion accessory for hip businesses. No sooner would a coffee shop be seen without a Square reader and an Edison bulb than its yuppie hipsters patr…

Square has a habit of wasting a bunch of energy on bad ideas: half the company worked on Square Wallet, which was a dead-end. Half the company worked on the Starbucks integration, which is now known to be a money pit. I sort of think this means that they're undervalued . All they have to do is stop throwing time and money away and they'll be a lot more productive and profitable.

Don't forget the Etsy clone, Square Market.

Re: Square Prices Its IPO at $9, giving it a $2.7B valuation

#160

Post by weisser »

omegaham wrote: post #137
untog wrote: post #102

Earlier quoted context omitted.

No sooner would a coffee shop be seen without a Square reader and an Edison bulb I'm not so sure about that. I'd agree that they all have "fancy" (for want of a better word) payment systems, but I don't think there's a reason they have to be the fancy ones made by Square. But more importantly: the US is (finally) moving to chipped and tap-to-pay transactions. That means that pretty much all merchant hardware is going…

I have a quick question about this - there is exactly one business in my area that has actually switched over to chipped cards, and that's Home Depot. Everyone else goes "lol we don't do that, use the magnetic swipe like a normal person" when I try it. I thought that the adoption date was in October, and seeing as how everyone has the machines already... what the hell is going on?

I was just at a coffeeshop today in SF that had a chip reader and it seemed to be plugged into a Square register.
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