How Square’s Deal for Weebly Sets the Stage for Expansion to Bigger Merchants

Since its founding nine years ago, Square Inc. has focused on simplified checkout options and software for small brick-and-mortar merchants. With its acquisition of Weebly Inc., announced late Thursday, San Francisco-based Square is not only staging a major expansion into e-commerce, it’s also laying the groundwork for a significant outreach to larger merchants and clients overseas, according to Square and outside observers.

According to the terms of the deal, Square will pay $325 million in a combination of cash and stock for Weebly, an 11-year-old, San Francisco-based company that creates Web stores for entrepreneurs. The two companies expect to close the deal by the end of June. The announcement moved Square’s stock up slightly in mid-morning trading Friday, with the shares trading close to $48, up about 2.5% over Thursday’s close.

Weebly supports some 625,000 subscribers who pay for design and hosting. Millions of other sites use the company’s free hosting services. All told, Weebly-supported sites attract more than 325 million visits per month, according to information on its own site and data from Square. Almost 40% of these paid subscribers are based outside the United States, which Square says will set the stage for further international expansion.

Square has been providing payment-gateway services to Weebly’s clients, along with Authorize.net, PayPal, and Stripe. Both companies were quick to say these current arrangements will not change, at least in the short run.  “Square will continue to provide an open platform to offer sellers the flexibility to select and integrate the third-party solutions that are best for their business,” the company says in a press release.

In a blog post, David Rusenko, Weebly’s chief executive and one of its founders, says, “Over time, we hope you find increasing value in our Square integration, but we have no plans to limit what payments processors you can use — the choice should be yours.”

For Square, the deal represents a major thrust into running an e-commerce operation, a move that could bring with it advantages in cross-selling a range of Square products, experts say. It also creates opportunities for Square to present integrated in-store and e-commerce processing, known as omnichannel services. to its client base as well as somewhat larger potential clients, they add.

“[Square] wants to be a one-stop shop supplying the underlying infrastructure for a merchant to run its business end-to-end,” says Jordan McKee, principal analyst for payments at New York City-based 451 Research, in an email message. “It’s no secret that larger merchants make up a growing percentage of Square’s gross payment volume each quarter. These larger merchants are more likely to be multichannel, and Square sees a clear opportunity to further penetrate those accounts.”

Square’s existing base also offers a fertile field, other observers say. “Beyond selling payment services to Weebly’s customer base, Square can expand omnichannel services to its existing 2 million-plus customers,” says Robert Napoli, an analyst who follows Square for Chicago-based William Blair. He adds that one cross-sell opportunity could lie in the company’s person-to-person payment service. “Further expanding into e-commerce could help drive demand for Square’s Cash app,” he says.

Ultimately, the Weebly deal is a key step toward what McKee calls Square’s “end goal.” Square, he says, wants “to embed itself into its customers’ operations, increasing their dependence and the likelihood that they will buy more services, such as payroll, [customer-relationship management], gift cards, invoicing and more.”

Square did not immediately respond to a request for comment on the deal from Digital Transactions News.