With Stripe hunting logos and volume, landing Kickstarter is a double win
Pando, perhaps more than most other publications, has consistently questioned Stripe’s position in the payments market – mostly its massive (over)valuation. Elegant user interfaces and seamless developer integrations aside, the payments business is all about scale, we’ve argued. Anything less than massive numbers here is a recipe for disaster. And with Stripe collecting startup logos but losing out on the bulk of the Web’s true giants, there’s been genuine cause for concern.
So it is that when Stripe scores a new marquee client, it’s meaningful news in terms the balance of power in the payments ecosystem – particularly given the pain of switching. The company landed a decent one with Kickstarter announcing today that it’s made the switch from Amazon Payments – a crusty, old product if there ever were one – in favor of the Valley darling.
Kickstarter may not be close to Uber (a Braintree client) in terms of payments volume, but it’s no small account. Through Q3 of this year, when its most recent quarterly numbers were published, the company was on pace to collect more than $525 million in contributions in 2014 – up from $480 million in 2013. Moreover, in its fifth year, the crowdfunding platform is clearly reaching scale, with the 2014 contributions amount representing more than one-third of the company’s $1.47 billion lifetime total. Uber, for comparison, was projected to generate roughly $2.5 billion in 2014 transaction volume in 2014, and grow to $10 billion in 2015, making it roughly five times the size of Kickstarter and growing more quickly.
Based on fees of 2.9 percent plus $0.30 per transaction, and making the assumption that Kickstarter’s estimated 4.1 million backers for the year each represent a single transaction, Stripe’s take on this account would be slightly more than $16.5 million – and likely one of its largest accounts. But the exciting thing is where Kickstarter might be in a few year’s time, assuming Stripe can retain the company as a client.
We should note, we don't know the terms of the deal. It's not uncommon for smaller players to promise all sorts of developer resources or wave fee in order to land a big fish. If that was the case here, this would be more a case of momentum and a much-needed optics win, than a true game changer.
Braintree, which is now owned by PayPal, has won most of this generation’s marquee customers – a list that includes Uber, Airbnb, Dropbox, HotelTonight, TaskRabbit, and Fab (back when that mattered). Stripe’s masthead of Lyft, Shopify, Rackspace, and Hipmunk was nice, but not quite in the same league. Thus, adding Kickstarter, the clear leader in its category and a household name both in Silicon Valley and middle America, is exactly what the doctor ordered.
Today’s announcement similarly speaks to the sad state of Amazon Payments, a listless product in a highly competitive category. The top-ranking Hacker News discussion thread on the news is equal parts praise for Stripe – a favorite owing in part to its Y Combinator roots – and disdain for Amazon’s competing product. Commenters lobbed descriptions like “a huge pain in the ass,” “an ugly, smelly mess,” “absolutely horrible,” and “the [company’s] most non-Amazon-like experience.”
These assessments shouldn’t be terribly surprising, given that Amazon appears only loosely committed to payments as a core product category. As we’ve argued elsewhere, such as when discussing Facebook’s opportunity to compete in payments, this category is so big and so hard, that anything less than absolute focus is a recipe for disaster.
While Kickstarter may or may not have had a similarly painful experience with Amazon Payments, its leaving may be explained in part by news that the company is killing off its “Flexible Payments Service” (FPS), a self-described highly customizable, developer-focused product, as of June of this year. All FPS customers are being transitioned to something called Login and Pay with Amazon, and many are less than pleased. So given that Kickstarter was being forced into a new integration, it makes sense that it surveyed the full landscape of options.
For Stripe to come out on top in that assessment is a big win for the company. This deal won’t make or break the company’s fortunes – it will still need to outcompete a newly independent PayPal, with subsidiaries Braintree and Venmo, and an emerging threat in Apple Pay. And it still doesn't justify Stripe rumored $3.57 billion valuation – not by any reasonable math, at least. But at least it's more positive momentum.
[Image via ThePrintful]