On Monday, Square (NYSE:SQ) announced a new service aimed at online vendors. Square Photo Studio provides automated, robotic, professional photography for those who are selling products online using channels such as Square’s own Weebly.
Will this investment in e-commerce customers pay off for SQ stock? If nothing else, the timing of the launch — just days before Square’s third-quarter results will be unveiled — is intriguing.
SQ Launches Square Photo Studio
On July 22, SQ announced the launch of Square Photo Service. The service employs a robot to photograph products from multiple angles, resulting in professional-quality images that are suitable for e-commerce sites. According to Square, it “provid(es) sellers fast access to high-quality, professional and online-ready product photography at 1/10th of the cost of comparable services.”
On the surface, Photo Service doesn’t sound like something that will move the needle for Square stock. Especially with the part about offering this service at “1/10th the cost.” That sounds more like a loss leader than a revenue generator. However, SQ is charging $9.95 for three high-resolution digital photos from multiple angles, and $29.95 for a spinning, interactive version.
If Photo Service becomes very popular, it could generate significant revenue for the company, boosting SQ stock.
Going After e-Commerce Customers, Including the Competition’s Customers
Naturally, SQ is looking to sell its new Photo Service via the Weebly website builder it acquired last year for $365 million. Weebly has let Square field an e-commerce competitor to Shopify (NYSE:SHOP), which has been retaliating with a push into SQ’s brick & mortar retail payment market. When it comes to selling products online, attractive, original images are critical, and Square Photo Service seeks to give sellers an edge in that area.
However, SQ isn’t making this new service available exclusively to Weebly clients. The company has a much larger target market in mind, making this a bigger deal for SQ stock:
“Photography is an essential component to selling online, whether on your online store or on other channels like Amazon, Etsy, and Instagram. We built Square Photo Studio because we don’t want anyone to be priced out of professional product photography. We’re always working on new and exciting ways to give online sellers access to the tools they need to make a sale – regardless of what channel they’re selling on.”
Add the third party marketplace sellers on Amazon (NASDAQ:AMZN) and all those other e-commerce sites — including Shopify — into the mix, and the potential revenue stream from Square Photo Service becomes apparent. To put that in context, Weebly’s most expensive e-commerce plan for online sellers costs about $35 per month. A customer who orders just four product shots from Square Photo Service will generate more than $35 of revenue for SQ.
SQ Has to Beat Smartphones (and Pay for the Human Component)
The Los Angeles Times covered the launch of Square Photo Service and visited the company’s first studio in New York. The newspaper described some of the details that SQ didn’t mention in its announcement. For one, the robot that takes the photos costs $20,000. And despite the robotic photographer, human staff still must unpack items, position them, pick the best shots, and repack the items so they can be shipped back to their owners.
In addition, The Times pointed out the key obstacle to mainstream adoption of Square’s service: the smartphone. With a $100 Amazon Basics Portable Photo Studio and a smartphone, e-commerce sellers can shoot pretty decent product photos themselves.
No Reaction From SQ Stock
SQ stock is up over 40% in 2019, but there was no real reaction from the market to SQ’s launch of the Square Photo Studio. SQ stock closed at $78.48 on Friday and $78.57 on Monday.
It will be interesting to see what Square says about the new Photo Service when it reports its earnings at the beginning of August.
After SQ stock dropped sharply in the wake of Square’s Q1 earnings, SQ made the point that it was investing in an effort to drive long-term growth. With the announcement of Square Photo Studio coming just days before the company’s Q2 earnings call, the launch seems perfectly timed to allow SQ executives to check off three boxes: a service with long-term growth potential, a revenue generator that does not force merchants to buy other Square services, and another e-commerce initiative.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
