
Square Now Processing $4 Million In Mobile Payments Per Day - ssclafani
http://techcrunch.com/2011/07/31/square-now-processing-4-million-in-mobile-payments-per-day/
======
pnathan
This is a startup I want to put stock in.

This idea is _great_. I can see it being ported to all smart phones... the
cash register industry completely disrupted.

~~~
thinkcomp
Though it may be cool, it's not disruptive at all, actually.

[http://www.quora.com/Aaron-Greenspan/Of-Round-Pegs-and-
Squar...](http://www.quora.com/Aaron-Greenspan/Of-Round-Pegs-and-Squares-
Holes)

~~~
brycecolquitt
It's actually very disruptive, that post is missing the point. Yes, for some
established businesses, it may not make sense. And they aren't overthrowing
credit cards or banks, but that's not their aim. Square is democratizing
payments--allowing anyone to be able to accept a credit card payment. Think of
the implications of that: any small business owner will be able to accept
credit cards, anywhere. Or my friend can directly pay me back money he owes me
with a card. That wasn't possible before. They also have a really good chance
of closing the "redemption loop," which is a huge, hairy, unsolved problem.
They're very disruptive.

~~~
grayarea2011
"any small business owner will be able to accept credit cards, anywhere. "

Sure, after buying an iphone for around $200 + $100/month in data plan. Not
cost effective for a "small" business owner.

"Or my friend can directly pay me back money he owes me with a card. That
wasn't possible before. "

Yes, you could do that with paypal, without carrying a huge hardware in your
pocket and paying less in transaction fee.

This is not to say they won't make money. They will, but many others will make
even more money.

~~~
ConstantineXVI
That's presuming they don't already have a cell phone and intend to use mobile
data. If they already have a phone (extremely likely), their cost would be
more realistically $75 (mid-range Android phone) + 15-30$ a month depending on
data plan. And if they have wired Internet and don't want to change up phones,
they can simply use an iPod touch ($230 once) and use their existing
connection (already paid for).

~~~
grayarea2011
I don't know who you mean by small business owner. I am sure high end small
business owners(coffee shops, bars, night clubs) will eat it up and agree with
it. I am talking about taco truck, etc. If there are many
transactions/customers, which would be cost effective for the SBO, the data
usage might go over the limit, and I am sure ATT/Verizon will have something
up their sleeve to over charge(apart from the $30/month) which would make this
less appealing, apart from the already high transaction cost.

~~~
DannoHung
This objection is idiotic. The number of transactions required to go over a
2GB limit would be in the millions. A 200mb limit would still be in the
thousands if not tens of thousands.

~~~
grayarea2011
Yeah, well if square is "disruptive", millions is not far away.

~~~
starwed
On the off-chance you're not trolling, Square wouldn't be processing all the
transactions with a single android phone. The other poster's idea was that
individual small-business owner would each have a device.

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A-K
Well at least one of Dorsey's startups isn't having any trouble generating
revenue. ;)

~~~
pbreit
Neither are having trouble generating revenue:
<http://mashable.com/2011/01/24/twitter-revenue-150-million/>

~~~
cletus
Perhaps I'm being overly pessimistic but I see Twitter as this decade's
Myspace.

Myspace was generational. A given (mostly teenager) demographic used it
through the early to mid part of the last decade. It was, as we all know,
supplanted by Facebook. There are many reasons for this, among them that
Myspace (IMHO) sat on their laurels and that broader appeal (ie FB's cleaner
page design rather than the Flash-swamped monstrosity that was Myspace)
ultimately won out.

Twitter was and is touted as a means to:

1\. send status updates to your friends (original idea);

2\. disseminate news; and

3\. follow "celebrities" (broader than the Hollywood notion of celbrities).

In spite of Twitter's stated 175 million accounts [1], how many uses does
Twitter REALLY have? [2]. They don't state their 1, 7 and 30 day actives. As
another example, Facebook's 750 million users is "monthly actives' [3].

Registered accounts and monthly active users are an important distinction,
particularly for Twitter as it appears many people signup, try it out and then
"leave". I believe that this problem is far bigger than Twitter has let on.

I simply don't see use (1) taking off. Twitter seems to be a medium for (3).
There is definitely a market for that but I think it's a fragile one, easily
replaced by something else.

That leaves (2), which is a complicated story. If there's two things
podcasters (particularly former journalists, in the traditional sense) like to
wax lyrical about it's the death of newspapers and how Twitter is changing the
(journalistic) world, both of which are now boring (to me).

Twitter suffers from what I call "bubble thinking", much like Quora does.
People in the Valley, in social media, etc think its huge. Normals have, by
now, probably heard of it but won't necessarily even know what it is (let
alone use the service).

My (unsubstantiated) feeling is that big brands haven't embraced advertising
on Twitter. They're simply playing with it. Twitter advertising suffers from
the same problems Facebook advertising does: unlike Google, which has the huge
benefit of _intent_ (you're searching for something, so Google knows your
intent is to find out something about it, a natural fit for advertising), most
people view such advertising as noise unrelated to what they're doing.

In Twitter's case it's exacerbated by their 140 character message format and
the heavy reliance by users on third-party clients that Twitter doesn't
control.

I know it's hip to not worry about how you monetize something in the Valley.
While I generally agree with that sentiment, I think Twitter has gotten to the
point where it's now a problem.

They recently had an $800 funding round. A profitable company doesn't do that.
What I'd be looking at is this: where is that $800 million going? Is it
largely paying out early investors? If so, run away. Run as fast as you can
(much like Groupon).

[1]: <http://techcrunch.com/2010/10/31/twitter-users/>

[2]: [http://www.businessinsider.com/chart-of-the-day-how-many-
use...](http://www.businessinsider.com/chart-of-the-day-how-many-users-does-
twitter-really-have-2011-3)

[3]: <http://techcrunch.com/2011/06/23/facebook-750-million-users/>

~~~
cdcarter
Most of the people I know use twitter almost exclusively for use #1. In my
friends, we don't want news or celebrity posts taking up our feeds, we use it
to chat and share stories. And this group isn't just local, I'm friends with
entertainment professionals all over the US, and twitter is the best way to
ask for help or to share a hilarious on-site anecdote.

------
aresant
Such a simple, elegant solution to fixing an abusive and shady marketplace.

Square completely clicked for me when I recently paid for coffee @ a small
neighborhood stand.

Their digital receipt was cooler than anything I've seen at big merchants, and
because they virtually give away the service and eliminate the monthly every
small business owner is going to wind up using them.

At $4m a day their take is ~2.75% or ~$110,000/day revenue - figure they've
got 100x that in potential growth?

~~~
smanek
Some (most?) of that 2.75% is going to other people. I know nothing about
Square's internal infrastructure - but they are either paying ~3% to some
other payment processor, or have become their own processor and are paying ~2%
in interchange fees directly to the issuing bank. So, in the best case, Square
is pulling in closer to ~0.75% => $30K/day in revenue.

To make matters worse, that 2% in interchange fees is an average across all
credit card transactions. But most interchange agreements are "fixed fee +
percent of transaction" and I suspect Square's average transaction is
significantly smaller than the average credit card transaction. That would
imply their cut is even _smaller_ than the 0.75% that it would be otherwise.

On the plus side, at scale Square should be able to directly negotiate better
interchange fees with issuing banks - but I'd be very surprised if they ever
drop below 1% on average. It would be impressive (but possible, given Square's
pull in the industry via Visa et al.), that they've already pulled off some
agreement to that effect.

~~~
dan_manges
Some processing companies include interchange as revenue and some don't. If
Square does, then they still have ~$110,000 / day in revenue, and what you're
calculating is their profit. But you're still right that they have high
variable costs because of interchange and therefore may not be as profitable
as one might think with that revenue.

As an example, Heartland includes interchange in their revenue. "Heartland
reported $526 million in gross revenues for the quarter... Interchange
accounted for $365.2 million of second-quarter revenues."[1]

At Braintree we don't include interchange in our revenue, so our processing
volume is higher than Square's, but our revenue is lower.

[1] <http://www.digitaltransactions.net/news/story/3138>

~~~
pitdesi
That's interesting... I wonder why there is no GAAP measure for accounting for
pass-through revenue. I can see it both ways (this problem exists for Groupon
as well, who counts the full amount of the voucher as revenues even though
they pass half of it on.

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chemmail
Square is great for the small guys who don't want monthly fees. If you do
anything over $2000 a month, intuits gopayment is a full 1% lower with a $20
monthly fee. I even like gopayments app a little better. But the free
cardswiper they give out is quite rubbish.

