The Square CEO and Twitter founder explains how his company’s recent spate of initiatives fit together in the big picture.
Photo by Roger Askew/REX Shutterstock
Standing in a conference room, sipping from an exquisitely curved water glass, Jack Dorsey looks a little older, and considerably more ragged, than he did the last time I saw him, not much more than a year ago. His face is more lined. His beard is all wires, jutting out at opposing angles from his chin. It's a very different look for a man who has been, for many years now, just as exquisitely put together as the glass he holds in his hand. You can't help but comment on the beard.
"There's a forthcoming article about that," he says, grinning. "Kara hired a new reporter, pointed her my way, and said, 'Can you tell us the history of the Lincoln beard?'" (It's not, technically, he explains, a Lincoln beard.)
But the burly beard is likely not the only reason he looks a bit aged. The interview marks something of a re-emergence for Dorsey. Once a media darling, he hasn't spoken on the record to the tech press since a New York Times interview in December of last year. It's not that he's been hiding, exactly, but he has lowered his profile considerably. (In fact, Square refused to let BuzzFeed News bring a photographer to take his portrait. The one at the top of this page comes from a wire service.)
His company, Square, is coming off a tough 12 months — at least from a media perspective. The payments-processing startup, which began with bottomless buzz (it promised to democratize credit card payments by turning anyone with a smartphone into a merchant, and was founded just as his first company, Twitter, began to truly take off) ran into a wall of media blowback last year.
Much of that followed from one particularly brutal story in the Wall Street Journal last April that claimed the company had lost $100 million the previous year, was forced to shelve IPO plans, and was now looking for a savior in the form of a Google acquisition. The gossip that followed, at least in the streets of San Francisco, was that the company was headed for disaster. It was the kind of press that might make you want to grow a beard and stop talking to the media.
"It didn't match reality, it didn't match what was actually happening," Dorsey argues to BuzzFeed News. "The most negative press — the loss, the acquisition, the IPO — was just not based on reality. We invested our money to grow the company, which every single company out there does. We chose not to focus on profit in order to focus on growth."
That's a line one commonly hears from founders — and in fairness, it's often true, or at least truthy. Certainly Square has been investing in new products over the past year. Its biggest new initiative was a program called Square Capital, which uses transaction data to identify potential borrowers from among its merchants and automatically offers them cash advances, which are then repaid by Square taking a cut of each subsequent transaction. It also bought Caviar, a high-end restaurant delivery service. It began pushing its data insights, trying to prove that there were more reasons for merchants to use it than simply because it made accepting credit cards easy.
In recent weeks, it relaunched its individual person-to-person payment program, Square Cash, adding the ability for organizations, not just individuals, to collect fees — which lets groups such as Wikipedia use it as a fundraising tool — and added a novel system called Cashtags that lets users advertise the ability to take payments, on or offline, with a unique payment address. (Cashtags work much like Twitter usernames, but instead of being prefaced with an @ symbol, Cashtags start with a dollar sign. Dorsey, for example, is @Jack on Twitter and $Jack on Square Cash. Organizations can claim Cashtags too, like $Wikipedia. Go ahead, send them a buck.) More interestingly, it rolled out a CRM tool that lets businesses on Square run targeted email marketing campaigns to previous customers.
But the larger question is whether it's capable of turning a profit. Just because it is investing money back into the company does not mean that it can ever flip a switch and generate enough revenue to pay back its investors and turn a profit. Dorsey argues that isn't the case.
"The reason that we have been successful in our margin and have the choice to make payments profitable is [because of] risk. And that's all around data. If we can take all the data and minimize risk, then we can create an extremely healthy margin."
Data! Everyone loves data. Big data. Small data. All kinds of data. And Square is very much starting to leverage the data it's sitting on. Both Capital and its new CRM program, which lets vendors run email campaigns with people who have previously made purchases, are not just data-driven but data-dependent. Data is the essential element, the driving element, for much of what Square is trying to accomplish. How can it tell a business what the effect of moving a biscotti jar from one side of the counter to another is? (An actual case study Dorsey cited.) Data.
Yet all of these initiatives raise the question of what kind of company Square even is now. Is it still in the payments business, or is it some sort of business services company now?
Image: National Museum of American History Smithsonian Institution
Square has now loaned out about $100 million to 20,000 merchants over the past year that Capital has been up and running, according to Dorsey. And although Square balked when asked how much of that $100 million had actually been paid back, it did note that the average period is 10 months and that 80% of its clients take a second advance.
Capital, taken together with the CRM tools, and its ability to help businesses use previous sales data to make marketing decisions, makes it seem very much like Square is trying to reorient itself as a small business services provider. "I think a lot of people have seen us in that way because small businesses don't have tools and we're definitely serving that," he says. "But if we were only focused on small business, we would by definition not be able to grow with them."
Sure. But it definitely seems like an effort to recruit small businesses, even if it does intend to help them grow. And while it has to both get new accounts and grow existing ones, the former is more important than the latter in terms of Square's overall health. Similarly, in order to demonstrate its health, it has to demonstrate the ways its business all fits together; that it isn't just trying a scattershot approach to making money.
When pressed on how the Caviar acquisition fit into the core business — how does a restaurant food delivery service square with, well, Square — Dorsey argued that it was to some extent a marketing move that gets the company inside restaurants in a way that Square Register — which doesn't have support for table management systems — cannot. Dorsey argues that Caviar makes the most sense if you look at it as a marketing tool for Square's other services, and as a way for it to get inside restaurants that its point-of-sale system can't currently support.
"If we do that well, we may have the opportunity and we will have the opportunity to show the restaurant our other products, such as Capital. We have a bunch of requests today from Caviar restaurants around, 'Hey, delivery is working out really well and I want to build a whole separate line for my restaurant just for delivery. Can I use Capital? Can I get an advance of cash to actually build that up?' Even without that, Caviar represents a new behavior, which represents new customers."
Yet that perception, that Square had been simply bolting additional features and acquisitions onto its core business, is something that Dorsey admits to BuzzFeed News was a problem.
"I think the biggest thing that the year of bad press put upon us and focused us on was how important it is to make sure that we have not just an internal cohesion but an external cohesion, and that there are visible connections between everything that we're doing," he says.
"I think the connection is payments at the core, the underlying financial services, which we've been doing for five years, and the marketing services — which we knew there was something there, we just didn't have the right answer. CRM is a first start to that right answer. Caviar is another take on that right answer, with the other concern that we just don't want to build a restaurant point of sale right now because of the table management complexities, but we can go above the physical constraint by adding delivery, without the restaurant having to do anything."
And that ease he describes — more than individual card readers, or registers, or delivery services or marketing campaigns, or money transfers, or cash advances — that seems to be Square's ultimate connective tissue.
"I think our purpose is to make commerce easy," he says, pausing. "That's really what we're all about."