Inside Square's long-term plan, its quest for non-payments revenue, and the Starbucks disaster
Back To Square One — Jack Dorsey's dazzling startup promised to transform the credit and finance industry with a sweeping, digitized vision of the future. After losing $100 million, has his company lost its edge?
Context & Ripple Effects
Two years ago Square was a growth story on a steep curve: SplatF charted its rapid merchant uptake in March 2012, and by that July DealBook reported Square expecting new financing at a loftier valuation. Fast Company's August 2014 profile is the corrective ledger to that arc — reporting roughly $100 million in cumulative losses despite Jack Dorsey's sweeping vision of transforming credit and finance.
The profile's sharpest finding is structural rather than anecdotal: Square's flagship Starbucks partnership, once its marquee brand win, is described as a failure, and the company is openly hunting for revenue beyond payment processing. The story traveled widely the same day — picked up by TechCrunch, Business Insider, The Next Web and several prominent tech writers — alongside Square's own launch of the Square Appointments booking tool aimed squarely at small-business services revenue.
First-order effects
- Square must replace the economics of its Starbucks deal — a volume-heavy partnership Fast Company frames as a loss-maker — with higher-margin revenue, which is exactly what the same-day Square Appointments push targets: service businesses that pay for scheduling software, not just card swipes.
- Dorsey faces investor skepticism about the gap between the company's 2012 valuation ambitions and its reported losses, putting the next financing conversation on shakier footing than the DealBook-era round.
Second-order effects
- Merchants get pulled deeper into Square's stack: if payments alone don't carry the P&L, Square has an incentive to bundle appointments, analytics and other paid tools, raising switching costs for the small businesses that made its 2012 growth curve attractive.
- Any partner weighing a Square deal now prices in the Starbucks precedent — a cautionary example of a big-brand volume commitment that reportedly cost Square money — making Square's future partnership terms harder to sell internally at prospective partners.
Third-order effects
- If the pattern holds, point-of-sale startups stop being payments companies that give away software and become software companies that subsidize payments — a shift that would force the whole mobile-payments category to compete on attached services and margins rather than swipe volume.
- Sustained losses at a high-profile fintech also raise the accountability question for the sector's private valuations: the 2012-era assumption that growth alone justifies lofty marks gets tested against unit economics when companies approach public markets.
The trend: Mobile-payments platforms are pivoting from thin-margin transaction processing toward software and services revenue, with marquee partnerships re-evaluated against their actual contribution to the bottom line.