Yesterday I saw a bunch of news alerts, emails and tweets regarding Square’s announcement extending its existing desktop small business payroll service to its mobile app. Reading through some of the news, Square’s announcement moved its stock favorably and trimmed a little from the valuations of ADP and Paychex – a combined $91 billion.

A story on CNBC suggested that an “S” be added to the FANG acronym (for Facebook, Amazon, Netflix and Google) due to the considerable disruption that Square is causing.

Square is slowing but surely building out a mobile app platform that could one day do most, if not all, of the important business functions that SMBs rely upon. Yet when talking to SMBs, as I often do, I almost never hear about Square — my dentist doesn’t use it, my dry cleaner doesn’t use it, my favorite wine store doesn’t use it and my contractor (yes, an older guy) still only takes paper checks. Sure I see Square at the Marin Farmer’s Market and the upstart food truck and hot new ramen shop — but its not yet pervasive. And further, most Square users do not engage will all the elements of its platform. Payments volume is still its key revenue driver.

In fairness, this is an issues across the board among companies offering the “full stack.” Speaking at LSA ’18 this past spring, Zoho President Raj Sabhlok admitted that the typical Zoho One user actively used about four of the suite’s 40 business applications.

If we looked at the SMB dollar value of transactions processed by Square vs. the rest of the SMB dollar volume, we’d probably see chart that suggest Square does a high volume of low value transactions. In Q2 2018, $21.4 billion in GPV (gross payment volume) passed through Square’s platform. In Q1 2015, that figure was $7.1 billion.

And while that’s a great foothold into the SMB market, time will tell if Square is as disruptive across the entire SMB ecosystem as it’s $39 billion valuation would suggest. Don’t take that as a shot against Square — but perhaps a caution against moving from FANG to FANGS just yet.

Square’s deeper moves into payroll intensifies its competitive position vs Gusto, the leading challenger in the crowded SaaS HR and payroll space. Gusto’s head of marketing, Tolithia Kornweibel, will be a featured speaker at the LSA’s Tech Adoption Summit, Nov. 6-7 in San Francisco. We’re confident Square will come up in Q&A. The event has limited seating and is expected to sell out, so be sure to act soon if you are planning to attend.

 

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