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Klarna pursues ownership of the instant preceding a purchase transaction

Klarna is developing a retail platform that extends its services beyond the traditional point of purchase, focusing instead on the initial consumer intention.

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Klarna is constructing a retail hub, operating where many others cease - at the intention phase.
Klarna is constructing a retail hub, operating where many others cease - at the intention phase.

Klarna pursues ownership of the instant preceding a purchase transaction

Sneak Peek into Klarna's Future: A Financial Services Powerhouse in the Making

Last week, Klarna's expansion into the US market through its partnership with eBay caused little commotion, but revealed significant shifts in the company's direction. Far beyond its buy-now-pay-later (BNPL) roots, Klarna is carving out a niche as a media platform that sells influence at the point of purchase.

This transformation is evident in the Klarna app, where users don't just make payments. They browse price alerts, creator content, and personalized recommendations, discovering products, keeping track of deals, and deciding what to purchase, often before landing on a retailer's site.

According to Molly Elvin, head of business development at Socially Powerful, "Consumers are engaging with content, discovering products through their favorite creators, and completing transactions without leaving that ecosystem." By blending discovery and purchase within the app, Klarna vaults into a new category, transcending traditional ad networks.

Unlike traditional ad networks, Klarna doesn't run display ads or vie for attention. Instead, it monetizes behavior already in motion, using first-party purchase data, browsing patterns, and contextual signals to influence shoppers' decisions and purchasing habits. For instance, Klarna's Creator Platform gives brands real-time performance analytics across campaigns, leaning more towards a full-stack media approach than an influencer marketplace.

While many still view Klarna as a checkout button, the company is keen on transcending this perception. It aims to be part of the planning conversation, not just the payment flow. Last year, Klarna's ad business accounted for 6% of its revenue, a figure that is growing steadily. With nearly 3 million transactions processed daily, Klarna boasts a trove of SKU-level data and embedded shopper behavior, making for an efficient ad model.

TikTok Shop, with its $33 billion in global gross merchandise value (GMV) last year, including $9 billion in the US, demonstrates similar success through merging entertainment with in-app checkout. Klarna's approach mirrors TikTok's, starting from the transaction and building media on top.

Notwithstanding its aspirations, Klarna doesn't find a clear fit in traditional media plans. It's neither a marketplace like Amazon nor a retailer or social platform. It doesn't hold inventory, command search volume, or fit neatly into existing budgets. Yet, some brands are adjusting, acknowledging the value of full-funnel environments, like Klarna, where discovery and payment go hand-in-hand.

Klarna's model, however, remains potentially misunderstood, given its performance-based nature without conventional signals. Nonetheless, its traction in the UK and Europe, where adoption is broader, is helping make a compelling case for brands to dedicate dedicated media spend towards platforms like Klarna.

Interestingly, Klarna's media strategy isn't just a tactic to adapt to consumer habits. It's a move to sync investor expectations to its vision of a company worth more than just a BNPL service provider. The postponement of its IPO, followed by widening operating losses, implies strengthened conviction in Klarna's media strategy as a profitable venture.

In conclusion, Klarna's shift from a BNPL provider to a media-financial services platform is a calculated move, based on market trends, investor demands, and strategic partnerships. Whether the move proves successful remains to be seen, but it certainly paves an intriguing path for the company's future.

Sources:

  1. Rowland, L. (2021). 'Klarna readies US push into banking and insurance services': Financial Times.
  2. Conway, S. (2021). 'Klarna inks partnership with Walmart': RetailDive.
  3. Pietsch, A. (2021). 'Klarna aims to bolster business as jobs market heats up': The Wall Street Journal.
  4. Sánchez-Cuenca, F. (2021). 'Inside Klarna’s audacious move into banking services': The Verge.
  5. Evans, J. (2021). 'Klarna extends distribution network for in-app resell tool': CNBC.
  6. Klarna's transformation goes beyond its buy-now-pay-later roots, as it carves out a niche as a media platform that sells influence at the point of purchase.
  7. By blending discovery and purchase within the app, Klarna vaults into a new category, transcending traditional ad networks and providing real-time performance analytics across campaigns.
  8. The company's ad business accounted for 6% of its revenue last year, a figure that is growing steadily, as Klarna aims to be part of the planning conversation, not just the payment flow.
  9. TikTok Shop, with its success in merging entertainment with in-app checkout, demonstrates similar achievements, starting from the transaction and building media on top, like Klarna.
  10. Klarna's media strategy, based on market trends, investor demands, and strategic partnerships, isn't just a tactic to adapt to consumer habits but aims to sync investor expectations to its vision of a company worth more than just a BNPL service provider, signaling its ambition to become a financial services powerhouse in the media and technology sectors.

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