Despite the best efforts of multiple tech and e-commerce giants, no company has yet been able to crack the code for building a successful super app in the US
Super apps offer multiple services through a single, easy-to-use interface. In some markets, like China, they are multi-billion dollar businesses and deeply integrated into everyday life. But in 2021, driven by strong economic conditions and record venture capital funding, more U.S. tech companies have begun to dip their toes in the super-app approach. They acquired new companies and services that allowed them to add features to their app, such as return processing, live shopping, and travel booking. But now, as economic conditions worsen, companies are starting to unwind some of these acquisitions and scale back their super-app ambitions.
In October, UPS acquired return logistics platform Happy Returns from PayPal for an undisclosed amount. This comes just two years after PayPal acquired its previous investor, Happy Returns. But now, PayPal appears to be refocusing on its core payment processing business. It’s not the only company choosing to return to core services this year. In July, Affirm made the decision to close its returns business, Returnly, which it acquired for $300 million in 2021, choosing instead to form a strategic partnership with Loop, another returns processor.
While these companies have retreated from loftier multi-use ambitions, there are still a few prominent players who have their sights set on building super apps in the US. Last year, Meta CEO Mark Zuckerberg expressed a super-app-like vision for WhatsApp. “The end goal here is to be able to find, message and buy from businesses in the same WhatsApp chat,” Zuckerberg said. And when Elon Musk bought Twitter (now X), he hinted that he planned to turn it into a “do-it-all” app, the Western equivalent of WeChat. However, the company has yet to integrate payment and banking features that would bring it closer to WeChat. Become a true super app.
While various US-based apps have been able to offer some of these services, no consumer app comes close to the accurate description of a super app. Analysts say the U.S. isn’t as conducive to the formation of super apps as other markets because it doesn’t yet have apps that dominate the market in key areas like payments. However, the efforts of companies have not stopped. There’s no shortage of e-commerce companies trying to prove that their apps can do more than one thing, even if they ultimately bear no resemblance to the super apps Asia has become famous for. .
What’s driving interest in super apps?
U.S. interest in emulating the superapp approach has waxed and waned over the years, largely driven by economic conditions and how well-capitalized the companies are.
Harvard Business Review defines super apps as “those that can be accessed from a mobile device or web browser, provide multiple and diverse services for daily personal or commercial life, rely on a common financial transaction platform, and leverage in-app data. defined as a single application that customizes services. Widely adopted. ”
The term has become more popular with the rise of WeChat and Alipay in China. These services have 1.2 billion and 711 million users, respectively, and are integrated into people’s daily lives. Besides messaging, people also use WeChat for various tasks such as video conferencing, video games, and mobile payments. Alipay, on the other hand, is an all-in-one financial app that supports debit, credit, and transfer payments, as well as providing services such as asset management and loans.
Humphrey Ho, managing partner at Hylink Group Americas, said the execution of multi-service apps in the U.S. tends to be focused on integrating capabilities built by acquired startups. . While this may work for some logistics and backend solutions, it’s “time-consuming and often wasteful” when it comes to consumer-facing apps, and “acquiring B2B SaaS apps to build super apps” It’s a flawed strategy to do so,” Ho said.
This is in contrast to platforms like WeChat, where users switch between various independent services built in-house. “The success of many app ecosystems in Asia stems from their self-built nature,” Ho said.
build and buy
When tech companies acquire service providers to expand their services, they talk about the potential to expand their users and generate multiple revenue streams. When PayPal acquired his Happy Returns in 2021, the company was looking for ways to engage with shoppers in more ways than just the initial point of purchase. “Our technology and platform will help extend PayPal’s commerce platform beyond product discovery and payments to the post-purchase experience,” said David Sobee and Mark Geller, co-founders of Happy Returns. he said at the time.
But post-acquisition plans don’t always work out. It can also take years to integrate different services into a new app, and infrequent users may not be familiar with all the different changes.
Klarna is another example of a company looking to take a super-app approach in 2021, making acquisitions to integrate new features into its buy now, pay later app. In the same year, Klarna acquired virtual shopping startup Hero for $160 million, as well as influencer marketing platform APPRL, price comparison service Pricerunner, and AI-based travel booking platform Inspirock for an undisclosed sum. .
Back in 2021, Klarna CMO David Sandström outlined a super-app-like vision for Klarna that would bundle multiple features such as live shopping and package tracking into one app. At the time, he said the super app path was a way for BNPL players to “create even more reasons for brands to work with us.”
Sandstrom said in an emailed statement that Klarna still plans to realize its vision.
“Unlike the ‘super app’ trend we see in many companies today, Klarna’s mission is to save time, money and financial anxiety for 150 million consumers around the world, and create a dedicated shopping experience for 150 million consumers around the world. Our goal is to empower consumers by acting as an assistant, while at the same time being a growth partner for our customers. Over 500,000 retailers. Our continued progress in this direction is driven by the enhancement of our product offering and strategic acquisitions. It is clear throughout.”
Klarna says many of the startups it acquires are integrated into its ecosystem.
For example, the Klarna Creator platform comes from APPRL technology.Earlier this month, Klarna announced the expansion of its Creator Shop following 5x year-over-year growth in the U.S. market. Klarna is also bringing Shoppable Video, an evolution of Hero, to consumers around the world after testing in the US. According to the company, the tool helped increase average viewing time in the U.S. by 60% and click-through rate by 25%. Meanwhile, Pricerunner is built into his Klarna search and comparison tools both in-store and online.
However, a company spokesperson confirmed that the company is pausing its integration with Inspirock for now as it focuses on other areas, such as developing Klarna travel products with partners such as Airbnb. Earlier this year, a Reddit user noticed that the Inspirock website and its Klarna URL were no longer available.
Kevin Kennedy, an analyst at global research firm Third Bridge, said entering a new space is difficult for fintech services that may not have the resources or human expertise to successfully operate them. He said it was particularly difficult.
On the surface, there is logic behind these acquisitions. “If you’re already using Affirm or one of these services as your primary checkout option, it makes sense to use that for returns,” Kennedy said.
But going into the logistics business is a big undertaking, he said, and trying to do it in the same way as a giant company like Amazon is difficult. This explains why companies like Klarna and Affirm, which have focused on growth and profitability, have not built on the businesses they have acquired.
For these companies, when interest rates were low and capital flowed freely, there was a sense that there were no limits to growth into a variety of services, Kennedy said. “I think the narrative has clearly changed” now that there’s an increased emphasis on profitability, he added. Kennedy pointed to Affirm as a company that is investing heavily in building a marketplace for customer discovery. As a result, Kennedy said, trying to grow a retail-focused service like Returnly can be costly and divert attention from the company’s core business.
“Logically, it makes more sense for a logistics company to own a logistics platform than a fintech company like PayPal,” Kennedy said, citing Happy Returns’ acquisition of UPS as an example.
Another hurdle when trying to build a multi-service app is competing for talent and getting them to use the app, Kennedy says. This is because there are many competing platforms in the US free market. Countries like China, on the other hand, have state-backed all-in-one apps like Wechat.
“I think a lot of people want super apps, but I don’t think the U.S. regulatory environment, operational environment, competitive environment is conducive to that,” Kennedy said. “It could probably exist in the U.S. market, but it would be targeted at a specific group of people.”