New products contribute 37% of revenue
Each year, Square (SQ) introduces new products to cater to the evolving needs of its customers, and 2018 was no exception. Last year, Square introduced a consumer-lending service where people can obtain small loans to pay for big-ticket items. For merchants, Square introduced several new products last year including an employee benefits program designed for small business employers. Square also launched a business debit card that gives merchants instant access to their sales funds and gives them more discount opportunities with the Square network.
There is a good reason Square doesn’t stop launching new products: they are driving growth. According to an investor briefing document released recently, new products introduced in the last five years accounted for 37% of Square’s total revenue in the fourth quarter, which was up from 22% in the year-ago quarter.
Over 15% of revenue spent on product development
Square’s steady stream of new products and their growing contribution to the top line can be credited to the efforts of the company’s product development team and the company’s willingness to fund innovation. In the December quarter, Square invested $142 million in product development, representing an increase of 53% YoY. Product development spending accounted for 15.2% of Square’s revenue in the December quarter. Product development spending accounted for 7.0% of revenue for PayPal (PYPL) and 12% of revenue at Fiserv (FISV) in the December quarter.
For technology companies with big ambitions, funding innovation is usually a top priority. Google parent Alphabet (GOOGL) and Facebook (FB) invested 15.5% and 17.2% of their revenues on product development in the December quarter, respectively.