Square, a company that was co-founded by the creator of Twitter, is a service that lets anyone with an iOS or Android powered device accept credit card payments via the use of a relatively low cost accessory that plugs into a headphone jack. It’s received a lot attention by the media, we think it’s mostly due to the fact that the guy who built Twitter is involved, and today the company has just announced that they’ve received $100 million in funding and a $1 billion valuation. Their latest numbers: over 500,000 Square “readers”, the accessory previously mentioned, are in the wild, more than 1 million transactions are being processed per day, and they’re processing more than $3 million per day; to put that into perspective, a typical Square user will processes $42 per week. Square’s business model is to take 2.75% of each transaction, so $3 million per day, 90 days in a quarter, multiplied by 0.0275, comes out to $7.425 million in revenue per quarter. Does a company that makes that little deserve to be valued at $1 billion?
Looking 2 to 3 years into the future, when Isis will be in full swing in America, as well as Google Wallet, why would people want to use a Square device when they could just as easily tap two phones together using an application built by Visa, MasterCard, their bank, or their operator? Some may point out Square’s appeal has a lot to do with the way their application is designed, which is all well and good, except that companies can hire an army of designers to create a clone that’s 95% as pretty and just as useful. We don’t want to say Square doesn’t deserve the success they’ve already receive, but we do want to point out that it’ll be short-lived since their claim to fame is solving a technical problem (lack of NFC) that will take care of itself with time.