Month: March 2019

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After his exit from WPP in April 2018, Sir Martin Sorrell started S4 Capital as a “clean sheet of paper,” he said in an interview in February. However, he began to fill in that paper by looking back at his former company.

“I looked at the WPP portfolio, and I identified three areas of growth. One would be data, one would be digital content and one would be digital media planning and buying,” says Sorrell. S4 Capital bought the programmatic media firm MightyHive in December 2018 to go along with the digital production firm, MediaMonks, which it purchased last July.

With stakes in two of the three identified growth areas, Sorrell reflected on the progress of his new company (which he still called a “peanut,” albeit now a “$650-million peanut,” he said) and how it aligns with the in-housing and direct-to-consumer trends among marketers.

S4 Capital is less than a year old. How would you characterize the company at this point?
Good start. We’ve got two legs in content and in media, MediaMonks and MightyHive, which are very strong. And our approach is purely digital. It’s focused on data — first-party data — driving content creation and media planning and buying or programmatic. It’s faster. It’s better. It’s cheaper, but cheaper might be the wrong word.

Why do you say cheaper?
It’s amazing how that phrase on its own resonates with CMOs and marketing people. It resonates with financial and procurement people, too. Faster, better, cheaper really does resonate.

You mentioned being digital only. Why digital only as opposed to digital primarily?
It’s controversial because there are some people who say there’s no difference. It’s a bit boring of a comment, but they say there’s no difference between digital and analog. I think separating them draws attention to the need to shift the thinking from analog to digital. It’s very difficult to do that because often the analog business is the cash cow, and the digital business is the spendthrift business, and you get these tensions. When I’ve talked to a client and said we’re purely digital, I’ve not been shown the door to exit. The door’s been opened.

Correct me if I’m wrong, but it seems S4 and MightyHive have aligned pretty closely to the in-housing trend that’s going on.
The clients felt that what agencies were focused on is permanent incumbency. Talent and technology are the two areas which most occupy you when doing these in-housings. We’re not looking to establish ourselves permanently, not like bed bugs.

Are there challenges when it comes to in-housing?
The areas that people talk about most is keeping talent — if you limit them to one category or a couple of categories — good talent wants to work on lots of things. That’s one thing. And then keeping up to date with technology.

We’re seeing the direct-to-consumer brands kind of pressuring the larger CPG companies especially to adopt more DTC-type tactics and roll out their own versions of DTC brands—
If you went back in time, manufacturers were worried about Walmart, Tesco, Carrefour controlling the consumer relationship in-store. How do you influence purchasing habits in-store if the retailer controls it? Along comes the internet, and you think, “Ah wonderful, we’ve got a direct relationship with the consumer. Oh, hold on a second, the growth of the e-retailers — Amazon, Alibaba, Tencent — are now interposing themselves along with Google and Facebook through the control of data.” So it’s driven by the battle for data. That’s the issue. It’s not “I want to be direct-to-consumer.” It’s “I can get the data, and I will have the data, and that will enable me to build a direct relationship with the consumer.” Direct-to-consumer is a symptom of the disease.

What’s your overall assessment of the state of the agency business?
It’s summed up by that tagline of faster, better, cheaper. I think we’ve identified those needs, and we’re delivering, on a small scale, what needs to be delivered. So the question for us now is how do we take it to a larger scale, both organically and via acquisition?

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Media observers have already decided that Apple News+ is a terrible deal for legacy publishers. But some digitally native companies think the subscription service could be a useful way to test new paid products.

On Monday, amidst intrigue about which legacy publishers were in or out, Apple announced that several digital-native publishers, including Vox Media, Business Insider and theSkimm, were joining its service, which costs $9.99 per month.

Though they differ in most respects, all are in the early stages of trying to develop consumer revenues. Earlier this month, Vox Media CEO Jim Bankoff announced at SXSW that his company was going to be rolling out a number of membership products in the fall; theSkimm, which has been quietly expanding past its core newsletter product, now hopefully describes itself as a “membership company,” and has designs on growing a collection of products, such as a members-only app and calendar service. In addition, New York Media, which added three of its digital vertical brands to News+ in addition to its print magazine, launched a flexible paywall at the end of 2018.

So instead of having to worry about cannibalizing an already-vital business, this new crop can try out new ways of packaging content or product ideas, while collecting an easy stream of incremental revenue along the way.

“This is a grand experiment,” said Daniel Hallac, New York Media’s chief product officer. “The Apple audience is not the same as our web audience. Someone who will want to subscribe to us directly is different from someone who’s interested in the bundle.”

Many publishers, particularly those with developed subscription operations, saw a lot to dislike about the terms Apple was offering for News+, which costs $9.99 per month. Apple’s control of the customer relationship meant very little data would come back to the publisher, and the metric used to determine publisher payouts after Apple’s 50 percent cut is murky at best.

“Unconscionable is a word I’d use,” said Aron Pilhofer, the James B. Steele chair of journalism innovation at Temple University. “That Tim Cook says he cares about journalism and then takes that cut is ridiculous and tone-deaf.”

Yet the product offered the 300-odd titles some wiggle room. Not all of the publishers participating in News+ are required to put all of their content into it – The New Yorker, for example, is only putting its weekly print issues up every week; The Los Angeles Times, according to a spokesperson, is not including any content from its archives – and so the digital natives are each using News+ as a platform for experiments.

Vox, for example, will use Apple News+ to test a kind of windowing strategy, where the handful of pieces it publishes there every week, via a product called the Highlight, will be available exclusively on Apple News+ for a week before they are released widely.

theSkimm will produce a custom digest of content that will live on Apple News+ exclusively, and for an indefinite period, said Dheerja Kaur, theSkimm’s chief product officer.

New York Magazine’s digital verticals will treat each week as an opportunity to explore what a magazine version of their product might look like, said chief product officer Daniel Hallac. For The Cut, which has had a digital “cover story” for years — it debuts them on Instagram — that process is more developed than it will be for, say, Vulture.

Even The Wall Street Journal, whose participation in News+ surprised many observers, is treating Apple News as a distinct product in some ways. The Journal will reportedly hire 50 reporters to work on a “snackable” version of the paper that will appear in Apple News+. Katharine Bailey, the newly named general manager of the Journal’s Apple News+ operation, operates independently from Karl Wells, the gm of the Journal’s membership operations.

These experiments make sense because most of those publishers see content as being just one element of a direct relationship they’d like to have with their readers. Bankoff suggested that Vox Media’s membership tiers will involve more than content; Hallac said that New York’s membership will likely include events and community and other things beyond content as well. Being able to signal that the content they make is valuable, even as part of a bigger package, is useful.

That the digital native publishers can conduct these experiments without straying from a core strategy helps too. “I can completely understand why Vox is in it,” Pilhofer said. “For them, it’s all incremental revenue, it doesn’t cannibalize any existing subscription business. It’s the kind of content that I think people are going to want.”

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On Snap’s 2017 third-quarter earnings call, Snap CEO Evan Spiegel promised that his company would prioritize building “more distribution and monetization” opportunities for creators. But over a year later, creators say Snapchat has gotten worse for them, specifically with the availability of brand deals and communication from Snap.

Digiday spoke with 10 creators, many with more than a million daily viewers on the app, who say that the opportunities for sponsored content have been minimal and that their reach has declined. Many of these creators, who requested anonymity for fear of retribution from Snap, said they have had some of their sponsored posts deleted without warning. This move is especially detrimental since, unlike on YouTube, creators with high follower counts on Snapchat do not have access to ad revenue sharing between them and the platform. Several creators who have worked with Snap in the past said they haven’t had luck with brand deals on Snapchat lately and have shifted their efforts to other apps like Instagram and TikTok.

One executive at a large influencer agency in Los Angeles said they have not done a Snapchat activation in years. The executive said they started to see the shift away from Snapchat about two years ago due to a lack of audience insights and discoverability limitations. But while Snapchat has attempted to improve those areas, their clients haven’t been interested in rejoining. “They don’t ask for it,” the executive said.

Another executive at a large global agency said Snapchat is not in the vast majority of their content strategy. “There’s nothing I get out of it. The only stuff we do is [AR] lenses because it’s fun but influencer work is all either Instagram, YouTube or TikTok,” they said.

Snap attempted a charm offensive for creators last year. In May, it held its first-ever creator summit in May. Snap has continued to support some of these creators by orchestrating brand deals. For example, attendee Cyrene Quiamco recently worked with McDonald’s on a Snapchat campaign. But several of the other attendees have decreased their efforts on the app. Shaun McBride, also known as Shonduras, who attended the event, told Ad Age in December he has given up hope on Snapchat and has focused his efforts on other services. Another attendee, Mike Metzler, told Digiday he has not done any brand deals on Snapchat recently. Billy Mann, who also attended the summit and credits his early online success to Snapchat, has been investing the majority of his time in TikTok. Mann’s public snaps on March 24 promote his TikTok account, where he now has 1.2 million followers.

Meanwhile, other Snapchat users who still post daily on the app to millions of followers say they receive little to no support from the company. A creator, who runs one Snapchat account that averages between three to four million views daily, said his posts featuring brand deals started getting deleted in late 2018. Deletions happen nearly daily, without any warning from Snapchat.

“It’s crazy to me that I could have almost 4 million viewers daily and Snapchat could not have a care in the world about either partnering up or at least reaching out to discuss properly monetizing,” the creator said.

There doesn’t seem to be any noticeable trends in the type of content that gets deleted. The creator said they thought maybe it had something to do with promoting e-commerce stores so they switched over to working with apps but some of the account’s posts were still deleted. Other creators say they have had posts that link to articles deleted.

“It’s so random. Sometimes it’ll stay for 24 hours, and I’ll post the same thing again, and it’ll get taken down in an hour or two. All of my ads have [disclosures], and it ranges from videos to pictures. It’s nothing dirty,” said another creator, who manages a few comedy accounts that average between two to four million daily views.

Other creators said they have received in-app warnings in response to their sponsored posts. One creator who manages about 20 Snapchat accounts said sometimes the app will log the account out. When they log back in, they receive a warning that links to Snapchat’s community guidelines.

A Snap spokesperson said posts related to spam, fraud and violence are all in violation of the company’s community guidelines and that the company regularly sends warnings to accounts and takes action based on user reports. The spokesperson said creators also must abide by FTC rules.

Chris Higa, who is a verified creator on Snapchat, said he’s experienced deletions on his account and has worked with creators that have run into the issue, as well. He speculated that some of the deletions might occur because the creator is working with Plug app or Espire app, two services that help manage influencer deals.

“I think because of the link attachment [Snap will] block the link now sometimes. Plugcoin is very popular for trending accounts, and I’m not sure why Snap doesn’t allow it, but sometimes I think because they want them to use [Snap Ads], but I’m not aware of any policies that state Snap users can’t post links to advertising via Stories,” Higa said.

A Snap spokesperson said creators are only allowed to use third-party apps and plug-ins that are authorized to work with Snapchat through Snap Kit. Plug is not a partner. But creators who had their posts deleted said not all of them involved Plug or another third-party service.

Three of these creators also alleged that Snap restricted their reach after they posted brand deals. The creator who manages 20 accounts said that one of the accounts often used to be featured on Discover, but when they began to put ads on it, that featured spot vanished. That account “used to be hitting three million views daily,” the creator said. “It was very big, but now since I started posting ads, I haven’t been able to pass 1.3 million views daily.”

Another creator, who works on a team of six that manages six Snapchat accounts that together reach more than two million people daily, said they have seen the reach drop by around 25 percent since Feb. 23.

Christon Cash, who manages two Snapchat accounts, said his views dropped from 2,000 views per snap minimum to 500 views per snap maximum about a year ago. Zach, the owner of the account WeSnapDogs, said his daily reach has dropped from 750,000 to 400,000 over the last year.

A Snap spokesperson said the company has not been doing anything to restrict reach. Snap’s internal team also advises brands to work with creators for their creative skills, not for their reach, because it is unpredictable on the app, the spokesperson said.

One bright spot for Snapchat and creators is in augmented reality. Snap launched its AR creation platform last year and has been courting AR creators since then. At South by Southwest this month, Snap hosted events with some of its AR creators. Sophia Dominguez, who attended SXSW with Snap, said her team at SVRF has been actively pursuing brand deals for AR. For example, her team recently made an AR portal for Imagine Dragons’ new album

“We created their album cover art into a 3D world. I think it was our second most popular portal,” she said.

Going forward, creators say they would like to see clearer guidelines from Snapchat on influencer marketing. These creators have tried to communicate with Snapchat’s team via email, LinkedIn and Twitter, but the majority have not received a reply. Higa, who is verified, said he was able to get his account unlocked via a Snap employee after he was restricted for 24 hours.

The creator who manages a few comedy accounts said they did not plan to stop growing on Snapchat but would appreciate more transparency from the company.

“I’m waiting it out. I sell so many ads a day, and they’re not all getting taken down. But when I have to explain to my advertisers what happens they get confused. They think I’m scamming them. It seems like [Snap doesn’t] want any competition with their own ads,” the creator said.

 

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David Jones spent a career inside advertising agencies — and did quite well at it. By 2011 he had risen to be CEO of Havas at 45 years old. But three years later, Jones left the agency business — for good, he insists — to strike out on his own with You & Mr Jones, a newfangled type of holding company that is one-part venture capitalist, one-part consultancy and one part, well, agency.

“I just want to make sure that you don’t call me an agency,” Jones says as we settle in for an interview. “There’s a name for our category that we hope is going to be brandtech. You know, like fintech, ad tech.”

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With over 500 million users, the number of people using stories features on Facebook and Instagram long ago eclipsed the 188 million people using Snapchat every month. Now, Stories ads on Facebook and Instagram are outperforming Snapchat Story ads too, advertisers say.

Digiday polled 211 media buyers this March and asked them to rate their return on investment from Stories ads on Instagram, Facebook and Snapchat. Respondents’ answers were weighed on a scale of one to five, where five delivered the highest ROI for advertisers and one delivered the lowest. Instagram Stories came out as the top performing Stories ad with a weighted average score of 3.34. Facebook’s Stories ads, though much newer than Snapchat’s, had an average score of 2.75, just above Snapchat Story ads’ score of 2.64.

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Managing client expectations around transparency, figuring out ad buying with stricter data privacy laws, and dealing with frustrations caused by antiquated metrics, tighter budgets and a lack of alternatives to the duopoly remain tension points for ad buyers looking to ease pressure on the squeezed agency model.

At Digiday’s Media Buying Forum in London, media agency buyers shared their biggest challenges and frustrations. Here’s some of what was said, under Chatham House Rule.

GDPR confessions
“GDPR was a convenient excuse for missing targets last year, let’s face it. Just look at how many businesses exited Europe citing GDPR as the reason when in reality they probably had failing businesses.”

“If my client had a 10 million customer base before, post GDPR only 50 percent of that figure have consented to marketing, and of that 50 percent, only half have strong match rates on Google and Facebook — so you’re looking at 25 percent of the former audience. We need to look at getting people to consent to marketing more.”

“We all have to think about GDPR for everything now. As marketers, we must ensure our recommendations won’t put anyone in prison.”

“Third-party data sets are shrinking under GDPR. But what keeps me up at night is that clients’ first-party data sets aren’t fully up to scratch.”

“When you are the chief data officer in an agency you end up being the lightning rod for GDPR.”

“Everyone is a GDPR consultant these days; they can charge whatever they want.”

Transparency gripes
“Transparency is all good, but it just takes one person to not show their cost margins for the rest to fall apart.”

“I worry that too much emphasis is being put on transparency. If I’m buying a sausage roll from Greggs I don’t need to know exactly how the sausage is made if the end result is that it’s serving the customer well.”

“Agencies hold data as a hostage in procurement discussions.”

“I used to work at a social agency years ago, and at one point, we were buying media for all the four major beer brands in the U.S. because the holding companies briefed out those contracts to us. That epitomizes the lack of transparency in the industry, and it’s the sort of thing that’s still happening now.”

“If you outsource media buying to a DSP and it produces results, then that’s transparent because you ask for a result and the ad tech vendor delivered it. You won’t, however, get transparency into the operating model because that vendor runs a block box managed service business. Depending on the advertiser knowing how that black box model works may or may not be a priority. There are varying shades of transparency.”

Facebook-Google duopoly addiction
“The duopoly is gaining more market share despite being in the news more than ever for negative reasons. It’s a weird quirk of the industry: We’re leaning on the things that have driven us to good circumstances, but not allowing ourselves to be stretched away from things we know are fundamentally flawed.”

“YouTube took a real hit a few years ago [after the brand-safety scandal] but where did that money go? To Facebook.”

“There aren’t enough deep relationships with [traditional publishers]. The relationships are too transactional.”

Client frustrations
“There is real confusion on the client side as to what they actually want from agencies. It’s deeply frustrating.”

“In the last three weeks, we’ve had four RFPs [requests for proposals,] two which have been inspiring and two dreadful because they’re based on how cheaply they can get everything.”

“If a client just goes after price, they’ll end up with the agency they deserve, not the best agency.”

“Comms planning is a forgotten art, and most of the time clients don’t see the value in it.”

“There is a structural issue where marketers are becoming subservient to their procurement teams. In the worst-case scenario, marketers are actually reporting to procurement teams. The result is, marketing gets commoditized and there is a race to the bottom.”

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In a turbulent time for media companies, Italian social publisher Freeda Media is one of the rare good-news cases: The publisher is expanding its staff and growing branded-content revenue through longer partnerships and repeat clients.

Born on Facebook in September 2017, the female-focused Italian startup has grown to over 130 people with offices in Milan and Madrid. Revenue, which is generated from content created with brands, has seen triple-digit growth in the first quarter of 2019 compared to the previous year. The average price for a campaign has grown 150 percent in the same time frame. The publisher declined to share specific revenue numbers.

“Quality pays off; we have been very focused on our community,” said Andrea Scotti Calderini, co-founder of Freeda. “A lot of people are saying that media is in crisis. That might be true if you are very focused on programmatic or print revenues. It’s about the approach. If you’re consumer-driven and focused on qualitative content, you can leverage Google and Facebook to make a sustainable business model.”

Freeda publishes in Italian and, since last May, Spanish too. Now it’s eyeing up further expansion in South America, where 18 percent of its audience is from, and across Europe and Asia in order to keep growing.

Each day, Freeda creates around five Facebook videos and between eight and 10 posts for Instagram. Across Facebook, Instagram and more recently YouTube and LinkedIn, it has an audience of 4 million, 94 percent women. The content covers authentic stories about women, either through their achievements and individual style. Videos include interviews with Italy’s first female airplane pilot and an Italian Paralympian with a rare skin condition. Freeda doesn’t shy away from topics like domestic abuse or female genital mutilation but often covers it in hopeful, more positive ways. With its expansion, it will replicate its model of having global guidelines with local stories in the local language. For the most part, the content in Italian and Spanish is local; there are some instances where a video is from outside these regions, like interviews with people in the U.K., is translated into both languages.

According to Tubular Labs, it had 49 million views on Facebook, Instagram and YouTube in February, the first month the publisher was tracked by the firm. Freeda’s launch of its Spanish channel Freeda ES last year, saw them grow views across their channels by almost 10 percent, per Tubular. While the overall views and follower numbers aren’t the biggest, Freeda has a weekly interaction rate with its content on Facebook of 0.36 percent, higher than larger female-focused competitors, according to CrowdTangle. Being hyper-focused on this region means it can corner a market global players haven’t moved into.

Freeda has worked with around 150 brands on content campaigns, including Netflix, Nike and Gucci, ranging from short two-week campaigns to one-year campaigns. The retention rate for repeat bookings was 70 percent in the first year, said Calderini. Around 15 percent of its content is currently created with brands, but since July 2018, the organic reach for its branded content on Facebook has been equal to its editorial content. Creating branded content on social has its limits, but increasingly clients are asking for it to make videos or products that live on their own platforms, the goal is to grow the services it can offer to become more of a consultancy.

A small number of clients want to know how their campaigns have driven business objectives like brand uplift and purchase intent. Freeda uses a combination of surveying its community, using the clients’ own data and working with third-party pre- and post-campaign measurement firms to gather this. In some recent campaigns, the uplift and purchase intent grew around 15 percentage points, although the publisher was unable to share the name of the clients.

In total, the company has raised $15 million dollars (£11.4 million). Last year, the Italian division of the company became profitable, and the publisher is reinvesting into the company.

“We believe in social platforms. That is where our audience spends most of its time. We need to be there to be the most relevant to them,” he said. “Engagement is the only thing you can’t buy from Facebook.”

Image: courtesy of Freeda Media, via Facebook.

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Wayfair is moving beyond pop-ups into permanent retail stores, joining the likes of online-first brands like Casper, Warby Parker and Everlane that built physical stores to amplify their online presence. For Wayfair, the move is part of a bigger strategy to test the waters of physical retail, assess offline customer traffic and habits, and ultimately drive additional traffic to its online store.

A Wayfair spokesperson told Digiday that the store launch in Boston’s Natick Mall this fall fits alongside Wayfair’s other experiential marketing efforts, including forays into television, direct mail and print catalogs. The physical store is a way to bring the brand to life in a new format, and more closely resembles a traditional mall store where customers buy and return products inside stores, along with a delivery-to-home option. The store will showcase a wide variety of products spanning decorative accents, decor and housewares, as well as furniture for bedroom and living room, but the company declined to comment on how it will choose physical store inventory.

The Natick Mall store isn’t the first physical store launch for Wayfair. It set up pop-up shops in the Natick Mall and Westfield Garden State Plaza Mall in New Jersey during the 2018 holiday season, and earlier this year, opened an outlet store connected to its Florence, Kentucky warehouse. The company plans to continue its pop-up locations, with four locations slated to open this summer (it didn’t say where). Its emphasis, according to the company, will be on curated items that include decorative accents, wall décor, and seasonal pieces.

A permanent store adds a new element to its physical strategy, featuring its products in spaces in which customers can browse, and can help build word-of-mouth brand recognition at a time when the digital marketing channels, particularly for furniture is becoming more competitive. Wayfair, with $6.8 billion in revenue last year and nearly 15 million active users who spend an average of $440 per year, has shown that it can scale as an online-only e-commerce business. Stores, however, represent untapped growth. Wayfair is taking a double-sided approach to offline retail to maximize that growth: using stores as marketing channels, like the Natick store and the pop-ups, as well as an inventory tool. Instead of a marketing play, the outlet store takes the burden off online returns.

“The home [category] is exceptionally competitive online — there are more than 2,000 retailers appearing in shopping ads against home keywords,” said Gartner L2 senior principal Bill Duffy. “Opening stores is a valuable way to gain organic visibility.”

Physical retail helps offset the impact of digital advertising costs for the online-first brand. According to Gartner L2 data, Wayfair is still the top home retailer that appears against furniture keywords searched appearing against 80 percent of search terms in the category last year. Amazon, however, isn’t too far behind, with its offerings appearing against 60 percent of furniture keywords searched during the same period. As a result, a physical retail store could help offset the impact of digital advertising costs for the online-first brand.

Physical stores also have an impact on driving traffic to online stores: According to a 2018 International Council of Shopping Centers study, for emerging brands, physical stores help increase online traffic by an average of 45 percent within a given market. Since Wayfair offers a range of brands’ products, alongside other online retailers with similar products, a physical store amplifies Wayfair’s brand proposition to the customer, wrapping up a physical “showrooming” experience with personalized service.

“When you’re seeing brand incubated online and moving to real world, they’re beginning to compete on customer value, and moving away from price and convenience,” said Ben Weiss, director of retail platform strategy at digital agency SocialCode.

Wayfair would not comment on whether future permanent store openings are planned, and whether it plans to add additional features like online order pickup or in-store fulfillment hubs. While the impact of one permanent store will be difficult to assess, it can be seen as part of the brand’s bigger experiment to test how physical locations impact customer behavior and growth.

“Whether it becomes a bigger part of the company’s revenue mix still remains to be seen,” said Forrester principal analyst Sucharita Kodali. “Many of the ‘pureplays’ [online-only retailers] have opened stores here and there in high-traffic locations to test ideas and drive some brand awareness. Most retail, especially in the furniture and home space is still offline, so it’s not surprising.”

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Square is moving beyond payments, with hopes of becoming a full e-commerce toolkit for merchants.

Last week, the company relaunched the Square Online Store. Previously, a one-page e-commerce store platform with limited functionality, Square built out the Online Store to help retailers manage all of their operations, integrated with Square’s checkout system. It connects easily for sellers already using Square as a checkout method by putting functions like payments, online-to-offline inventory management, fulfillment and order pickup in one place. The platform also offers marketing and social selling through an Instagram integration.

Moving into online retail is a natural move for Square, which currently has more than 2 million merchants on its payments platform, but it isn’t quite going head to head with Shopify. Shopify, which has become a primary e-commerce platform, particularly for DTC brands, forecasted $1.1 billion in revenue in 2018. Square, which brought in $3.3 billion in revenue last year, wants to strengthen its relationships with sellers that are already on its payments system by equipping them with the ability to manage digital-to-offline interactions with customers. By integrating payments with inventory planning, delivery and other online-to-offline integrations, Square is looking to become a more encompassing e-commerce and retail solution for its partners.

Square’s pitch to brands includes an affordable entry price point (pricing starts with a free tier, along with three paid plans ranging from $12 to $72 per month) coupled with a turnkey solution for brands that want to build an online store. For merchants beginning to grow their e-commerce stores, it’s a solution that’s positioned as simpler and cheaper than alternatives like Shopify, for example, which has paid plans that range anywhere from $29 per month to more than $2,000 per month for specialized plans serving larger brands. Square continues to add new features for merchants: On Tuesday, it rolled out an invoices app, a self-service feature for merchants to create, manage, and send invoices from anywhere.

As more enablement platforms are helping direct-to-consumer brands scale, Square is seeing an opportunity.

“We’re looking to tap into the power of Square’s ecosystem, that everything is built in out of the box,” said David Rusenko, Square’s head of e-commerce. “That’s different from a lot of other platforms that require you to integrate a lot of apps, and the cost can go up pretty dramatically once you start doing that.”

Square would not comment on how many merchants currently use its e-commerce platform. But it adds that along with a system that’s easy to plug into, the company has added some partner integrations. Some examples include PayPal for payments, Instagram and the ability to create gift cards. Rusenko said the platform integrations were added in response to customer feedback; for instance, PayPal is a feature added in response to customers who asked for it. Rusenko said Square is open to more integrations, but decisions will be made based on customer response. As shown through its PayPal integration, it’s willing to include payments systems that compete with its own products to drive a more robust e-commerce platform.

Square’s online store was built as a result of the company’s $365 million acquisition of website builder Weebly last year. At the time, Square said it was using Weebly’s tools to create “one cohesive solution” for businesses looking to build both online and offline presences. Weebly was part of the 10-year-old company’s effort to grow its retail and e-commerce ecosystem, alongside other recent acquisitions, including corporate catering startup Zesty last year and food-delivery service Caviar in 2014. Square enters a field with well-heeled competitors among the likes of Shopify, BigCommerce and Adobe-owned Magento.

By adding an e-commerce layer to payments, Square can grow its relationships with existing merchants on its payments and onboard new merchants looking for an easy-to-onboard, affordable e-commerce solution. It’s a tool that has obvious appeal to emerging or small-scale brands, but Rusenko said it’s not expressly geared toward them.

But with a large group of small and medium-sized businesses using its payments platform, the e-commerce functionality is a big advantage.

“I see the logic — there are two sides of the small-business coin,” said eMarketer e-commerce and retail analyst Andrew Lipsman. “This is being positioned in terms of solving for omnichannel needs — my sense is that among the core customer base of merchants, there’s not a lot of overlap with Shopify today.”

The challenge for Square, he said, is to grow adoption. But despite the crowded field of e-commerce solutions, Square still sees room for growth.

“It’s still a growing market for DTC companies,” said James Lanyon, vp of strategy and innovation at digital agency T3. “The view is that we can compete in it — it’s good for small businesses to have choices.”

 

The post How Square is taking on Shopify pitching its e-commerce platform to sellers appeared first on Digiday.

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