My friend Therese Torris is a smart marketer. I met Therese in Scoop.it and follow her thoughts and Scoops closely. The other day she scooped an interesting article about Square becoming a Business Intelligence (BI) play. The death of money is making payment processing potentially disruptive, disruptive to the POWERS THAT BE.
Disrupting MONEY isn't easy since the companies that run that space don't take kindly to you messing with their kid's college tuition payments or there strangle hold on the most important content network, the one that controls the zeros and ones that translate into MONEY. Square is disruptive. The question is are they disruptive enough. Here is the conversation we had on my Curation Revolution Scoop.it feed:
From the Scoop
Jack Dorsey recently offered a look at the early days of Square, but today at the Techonomy Detroit conference, he was asked about the company's future — specifically what Square will look like in five years
Therese's comment: Let's hope Square has a future in payments, too...
Marty Note
I agree with Therese. Seems a good idea to conquer one world before dreaming of conquering others. My other reaction is how crowded the Business Intelligence (#BI) space is about to be since everyone seems to fancy their tool and the next great, BI hope. The problem with BI is gold you haven't mined yet can't be worn around your neck :).
Therese Posted A Follow-up
Marty, a friend of mine called Nicolas Guillaume (FI entrepreneur and very good analyst of financial markets... in French) opened my eyes about this: Jack Dorsey talks about BI but what he really wants to do is direct marketing à la "Groupon meets Cardlytics".
It makes sense to me: the 2.75% commission on a payment transaction is horrendously high but 1) it will go down and 2) there may be not much left of it for Square after everybody in the payment chain gets their cut. Merchants don't want to pay such fees for payment processing anymore. But they are definitely ready to pay for new customers.
Square will not sell the data but the prospect! It will send a voucher for MacDo to a regular customer that did not visit for 2 days and a discount on the pants to the lady who bought the suit's jacket. Your take? »
Marty Take
Thinking about Square again after your friend’s comment it all comes down to how disruptive are they really. Your friend and Square’s actions indicate not disruptive enough and I tend to agree. As far as spreading out into strategic areas such as cart abandonment and coupon creation and redemption go I wouldn’t invest in there personally if my money was guaranteed since my time wouldn’t be (lol).
Square won’t be the first in the abandonment space (MyBuys is large and in charge in there for carts but not strong in mobile yet). Visa and MC are sure to come in with something similar and play a MAD (mutually assured destruction) pricing game with Square. Square has to create enough value add to justify their existence and growth when they are knocked off (as is sure to happen).
The problem is, and I work in an industry rife with this, not just anyone can morph into a strategy play. Those outside the fence under count the complexity. I see how a BI base could provide much higher margin engagement since "marketing services" pays better than CC processing, but jury is out on GroupOn-like couponing for me.
Groupon's idea is to disrupt a market using a single tactic - price. Short term such disruption can be massive and painful especially to the Small to Medium Businesses (SMBs) NOT paying "stay alive" protection money to Groupon. I'm an old school brand strategist and so I HATE selling on price. Selling on Price is the last refuge of the truly desperate.
That price translates so well online is not a mystery. Any comparison engine reduces the world to its lowest common denominators. When you are a hammer, to quote a piece I wrote this morning, everything looks like a cheap nail. My Internet marketing friend swears by the juice Groupon shares, but I wonder if Groupon doesn't poke a mortal wound into a restaurant, fitness center or other local businesses. Is there appreciable brand loyalty and profits from repeat customers or just a raid?
Big brands can afford a few GroupOn-esque games. Their reputation is established and they are trying to push out to the margins. Little guys don't have as much brand elasticity. They establish their tribe and brand advocates with every action. They sing for their supper daily.
I don't deny that there is BI gold in them there payment hills since money is the ultimate "can only use once" vote. Given the coming squeeze Square is sure to face I can understand the desire to run up the "BI Strategy" flag. The question is will anyone salute. Any data that can provide persona characteristics combined with actual purchase history is valuable right now.
In fact, it is the "actual purchase" data that continues to vex Facebook. What my former direct marketing bosses taught me is to FEED THE MONSTER. You will never see more or better marketing focus than among a tribe of direct marketers. DMers don't know from "branding". They do things that make money or they stop doing them. Creating a feedback loop to conversion is and will always be valuable.
Nice to know my Facebook followers love Tom's, drive hybrid cars and eat natural foods. My personas are stronger with such profiling data, but the missing piece is how did/do they spend their money. The virtual vs. social identity thing creates dissonance between how we consumers SEE ourselves vs. how we actually ARE (lol).
If Square can add the missing piece to the puzzle, where the money goes, they will create value. While I see their squeeze now better thanks to your friend I don't envy Square the journey. Money only really has one "job" - to replicate itself. Those who understand how to do that better and faster tend to accrue benefits that make attack hard to impossible.
This is why banks become "too big to fail". Networks, according to one of my favorite books Linked by Notre Dame network researcher Barabasi, do much the same thing. This is why there is always a gold rush-like scramble for territory as an Internet empowered market opens. Territory grabbed at the beginning costs less and may make the difference in the end as Facebook may prove yet.
I thought your original point, that the market Square is attacking is sufficiently arduous that it should demand full concentration, was valid and insightful. There may be a tiny spec of blue ocean in the payment BI space for a second or two so getting in and grabbing probably makes sense. Not knowing the exit strategy I can't judge for sure.
I bet the exit is acquisition with enough money to live next to a sandy beach and have frosty drinks with little umbrellas served at a moment's notice. Actually, like most entrepreneurs I've met, I bet the exit is to have enough cash to not worry and start something new. Either way carving a niche playing against the "rich get richer" nature of two markets (BI and money) takes courage. Wish them well. They will have to disrupt and create a new value proposition.
Can be done, never easy :).M
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