

Square IPO Postponed Indefinitely - TDL
http://www.foxbusiness.com/markets/2014/02/28/square-ipo-postponed-indefinitely/?cmpid=cmty_twitter_fb

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2pasc
Congratulations to Square for making people that it was in the mobile payment
business.

Square is typically the kind of Company with a great initial product that
raises too much money for its own good and end up chasing 500 battles because
they have the team do so. Fab comes to mind as well.

Square has a significant problem: their product is mostly used by merchants
with low average selling prices (ASP) and their pricing model (flat 2.7% vs.
the usual X%+0.3) kills their margins at this price point. On the other hand,
their POS, which could/should allow them to sign more sophisticated retailers
or restaurants with higher ASP does scale with businesses because it does not
have any of the workflow management features that are necessary.

Overall, they are stuck with an unprofitable customer base and with a
(beautiful product) and are trying to throw things on top of this to create a
consumer product (like the failed Pay with Square thing).

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monkeyspaw
Can you elaborate? My understanding is that most merchant accounts are in the
2% + .45 range. Are you suggesting that merchant margins depend on a 1%
margin?

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antr
2% can have a big impact. Many business have a gross margin of 20-30%. If you
take Square's 2.75% from $100, that's $2.75 off a $20-30 gross margin – or
9.2% to 13.75% of the gross margin. That is a very large cost for a service
seen as a commodity.

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us0r
That's not how this works.

Square gets 2.75%. They pay their acquirer (I think Wells Fargo)
Interchange+maybe a small fee. For example a swiped (card present) debit card
purchase at a retail store is 0.80% + $0.15 (an example - this varies wildly).
On $100 that's $0.95. They get $2.75. That's a 60% or so margin. It can also
go down quite a bit depending on the type of card used which they really have
no control over. For example it could drop to 20% on a corporate rewards card.
I would say overall they probably have a very good margin.

~~~
antr
I don't think you understood my comment. The 20-30% gross margin refers to the
business using Square, not Square.

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iambateman
> "The mobile payment industry is saturated with competition"

No. No it isn't. The mobile payment industry is saturated with a lot of
average products and tons of opportunity to do things better.

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myko
Square's products lately have been amazing. Have you seen Square Cash?

[https://play.google.com/store/apps/details?id=com.squareup.c...](https://play.google.com/store/apps/details?id=com.squareup.cash&hl=en)

I'm pretty much a Square fanboy at this point. I'm sure they could improve,
and are actively working to do so - but I wouldn't label Square's products as
average.

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latchkey
Given that they don't make any money on it, isn't Cash really just a fantastic
marketing tool for them?

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wzsddtc
It has < 50k downloads since its launch (almost half a year ago now), I
wouldn't call it fantastic if the main function is to spread the word. (not
that it is not a great product, the app is awesome!)

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latchkey
You don't need the app to use the service (cc: cash@square.com or
request@square.com). We have no idea how many people are using the service.

Remember that for every single person that uses it, they gain another user on
top of that. Even more potentially with request@. I consider that a fantastic
marketing tool since it must effectively cost them very little to run the
service.

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TDL
'“private-market valuation could not be substantiated by their revenues as a
public company,” said one person with knowledge of the company’s activities.'

~~~
al2o3cr
Hasn't been a problem for Salesforce... /snark

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sbisson
I'm also guessing that they now have to figure out how to redesign their
product for C&P, post-Target. That's going to be expensive, as it'll change
the backend as well as the reader - and require significant certification as a
two-part system.

