Square lost $56M+ in Starbucks deal over three years, partnership to end in Q3 2016
Square's deal with Starbucks is a bust, and will end in Q3 next year — In 2012, Square formed a partnership with Starbucks that ranked among the biggest of the payments company's history.
Context & Ripple Effects
The Starbucks partnership was Square's marquee brand win of 2012, but the arc has been running downhill since late 2014, when Starbucks said it would not adopt Square Order once Square Wallet was retired — leaving Square without a consumer product for its biggest retail counter. The $56M+ loss figure lands the same day as Square's NYSE IPO filing on $560.6M first-half revenue and a $77.6M half-year loss, so the disclosure reads as pre-IPO housecleaning: pricing a money-losing anchor deal out before public-market scrutiny.
First-order effects
- Square exits Q3 2016 without its highest-profile merchant, removing both the Starbucks payment volume and the halo that anchored its pitch to other retailers during the IPO roadshow.
- The disclosed per-deal economics give IPO investors their first hard look at what logo partnerships actually cost, right as Square argues it can narrow the $77.6M half-year loss.
Second-order effects
- Square's post-Starbucks distribution push shifts toward software partners where it controls pricing — the TouchBistro and Vend integrations extend payments and Square Capital to their installed bases instead of subsidizing one giant counter.
- Competing mobile-payments players courting national chains now face sellers who know Square paid over $56M for the privilege, tightening terms across large-format deals.
Third-order effects
- If the pattern holds, big-brand payments partnerships get judged on unit economics rather than press value, pushing smaller processors toward embedded distribution through POS software vendors instead of subsidized flagship accounts — a quasi-exit from loss-leader scale deals.
The trend: Payments companies are trading vanity anchor-tenant deals for unit-economics-positive embedded distribution through vertical software platforms.