Have you tried buying something online in recent months, and you notice an option that lets you buy the item and delay or split payments. You’re witnessing a Buy Now Pay Later service (BNPL) 2020 was a good year for Buy Now Pay Later services as they established themselves as a relevant player in the e-commerce sector. Now, they are expanding into advertising.
Afterpay announced recently that it is launching AfterpayAds, which would be an in-house ad network. This isn’t an isolated incident, as another BNPL company, Klarna, has started investing in something similar.
The choice of advertising as the next frontier for BNPL companies isn’t a strange one. In recent times, these companies have reported significant losses despite acquiring more customers and becoming more relevant. For instance, Afterpay lost $159 million in the last quarter, while Affirm lost $247 million within the same period. Klarna, which was profitable before 2019, also lost a lot of money expanding into overseas markets.
With ads revenue, BNPL companies will have the opportunity of reducing their losses. Advertising also gives them the chance to charge merchants more for their services, including ads networks access in their deals.
Although only Klarna and Afterpay have officially launched their advertising offering, it’s expected that BNPL companies are also considering it. Affirm claims it already has a service similar to advertising where brands can pay to list exclusive offers on their app. Sezzle is also considering having an in-app ad system.
Expanding into advertising isn’t a new thing for companies in the e-commerce sector. According to the CMO of Klarna, David Sandström, the company takes a page from what Amazon has done with its shopping app. By expanding into ads, the Amazon app became one of the most lucrative aspects of the company’s business. Going further, Sandström claimed that his company’s selling point is sufficient data to predict its relevance to a buying consumer.
While BNPL companies selling ads isn’t a surprise given that almost all shopping apps end up doing it, the fact that it took this long might need an explanation. BNP has finally acquired sufficient users to make advertising worthwhile.
For example, Klarna has 20 million users in the US, while Afterpay also claimed a similar amount signed up for its service at a time. These companies acquired most of these customers at a loss, and advertising offers a way to monetize them. With consumers starting to see BNPL apps as a shopping tool and not just a payment app, there’s no better time than the present to start advertising offerings.