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How is business for Adyen (adyen.com) these days? What are their strengths, weaknesses, threats and opportunities?
Greetings and thank you for your request for an overview of adyen.com's recent business developments including any insight into their current strengths, weaknesses, threats, and opportunities. Research findings for this topic were mostly sourced from the most recent interviews from Adyen executives, business publications, and press release announcements. Sources included Bloomberg, Fortune, Forbes, and the company website. The research demonstrated that Adyen is a rapidly growing B2B technology company with a payment solution platform and associated services. Currently, Adyen continues its exemplary growth trend through funding, revenue, market access, and brand reputation, with few notable weaknesses or threats. Below is a presentation of the findings echoing your request with a breakdown of Overview, Strengths & Weaknesses, and Threats & Opportunities.
OVERVIEW
Founded in 2006, Adyen has enjoyed relative anonymity as technology company specializing in "a single solution to accept payments anywhere in the world," using a "modern end-to-end infrastructure connecting directly to Visa, MasterCard, and 250 other payment methods." As a B2B company, Adyen has strategically avoided interaction with the consumer, instead defining themselves as a merchant support service. Regarding this strategy, CEO Pieter Van der Does states, "that role means that we don't want a relationship with a consumer and that role means that we sit behind the merchant in an invisible way." Instead the company has positioned itself as the go to payment solution provider for the tech elite, "including 7 of the 10 largest U.S. Internet companies."
From the company website, we see the current business model of "the Ayden platform" involves numerous components, ensuring a robust and unique product:
-Point of Sale: "One system, one partner and one contract to manage all point of sale payments across Europe and the U.S."
-Acquiring: "No third parties, no acquisitions, just a single platform managing the entire payment flow - from the moment the customer hits 'pay', to settling the amount in the business' account."
-Pricing: "We charge a processing fee + commission per transaction" (includes risk management, payment optimization, and rich-data insights services)
At the end of 2014, Adyen had a $1.5 billion dollar evaluation, bringing it's rapid growth to the forefront as a "unicorn". With its notable affiliations, Adyen was recently able to acquire a $2.3 billion dollar valuation after receiving funding from the well-reputed Iconiq Capital. Adyen's growth continues in leaps and bounds. At the end of 2016, Adyen opened access to "400 million Chinese shoppers" with a single partnership, tapping into a market that was expected to reach $86bn in transaction value at the end of 2016, rising exponentially in the four years after. An Adyen exec declared, “when combined with our existing UnionPay and Alipay integrations, it gives businesses access to the world’s biggest ecommerce market with a single partner. This is the final key to unlocking full access to the Chinese shopper.”
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STRENGTHS & WEAKNESSES
The research demonstrated that as a company, Adyen presents certain key strengths:
-From its inception Adyen was built with a hard-to-argue-with USP: "Van der Does says he and his co-founders decided to build a competing business focused on improving conversion rates instead of trying to reach the massive transaction volumes that bigger companies use to push down costs. “We felt if we have the best quality service,” Van der Does says, “we will attract the best merchants,” even if other services are cheaper."
-The company has positioned itself globally, "Adyen was founded in Amsterdam and also has offices in San Francisco, Boston, São Paulo, Singapore, London, Paris, London and other cities around the world."
-The company has targeted strategic clients in lieu of larger retailers: "Today, the company acts as a middleman for companies like Facebook, Airbnb, Spotify, SoundCloud and Vodafone to help them process payments."
- Adyen is emulating tech giants like Google, by making it's company culture a key part of its competitive advantage: "The culture which we have has contributed to our success," Pieter Van der Does, co-founder and chief executive of Adyen tells CNBC." The Adyen way focuses, in part, on nurturing employees through "freedom, opportunities and responsibility," encouraging teamwork in lieu of hierarchy, and "informal but direct" feedback.
-Adyen has never neglected the bottom line in favor of scaling up. The company has been profitable since 2011: "It's a very European attitude the founder takes versus the often high "burn rates" shown by U.S. start-ups...Often start-ups will eschew profitability in exchange for scaling and growth. But Van der Does said that while this is important, founders need to have a plan to become profitable."
Adyen is also noted for key strengths in its product development:
- Adyen provides much needed transparency so merchants can gain insights from transaction activity: “We open up that black box,” he says, letting merchants review transactions or broader payment activity in real time.
-Investors are attracted to the platforms online and offline application capability: "Iconiq partner Will Griffith says Adyen’s systems are unique in their ability to seamlessly handle both online and in-store transactions."
-The transparency also works to reduce fraud vulnerability: "...its integrated system and platform approach enables it to process payments at scale quickly and reliably, and that its huge data mining abilities allow the company to more accurately combat fraud – one of the industry’s biggest headaches."
To be honest, the research demonstrated few if any notable weaknesses for Adyen, either as a company or product.
-As a product, the lack of control over where a company will use the platform, can make the assessment of market penetration "complex" according to the CEO:
“The United States remains a very very important market, but it’s always a complex question for us. You see that many American companies start with us in, say, Latin America, and then the São Paulo office will grow quickly in terms of revenues. We could attribute that growth to Brazil or to the US, depending -on where the client’s headquarters are.”
-As a company, Adyen receives outstanding ratings from even the most discerning critics. I was also able to find one overwhelmingly positive review, that did mention the platforms pricing is disadvantageous to "lower volume, mobile businesses." One such merchant confirmed having a negative experience that was likely caused by the their low expected volume. The reviewer echoes the merchant's experience in the otherwise glowing review, stating, "I would think that once Adyen has boarded you as merchant, they take very good care of you. It may be getting your foot in the door to begin with that’s the hard part if you’re on the smaller, riskier side."
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THREATS & OPPORTUNITIES
As when looking for weaknesses, the research demonstrated few viable threats to Adyen's current growth track. In fact, at the end of 2016, Adyen achieved "leader" status, the details of which confirm that the company has demonstrated the capabilities to overcome challenges and harness opportunities: "Adyen was highest ranked in the 'Strategy' category and scored among the highest in the following criteria: reporting capabilities, product and service vision, and corporate strategy and performance."
The only possible threat I found was the fact that Adyen reports a fraction of the transaction activity of its competitors ($70 billion) who "each handle about $1 trillion." One analyst elaborates on this threat, stating, "'And Adyen has yet to make serious inroads at large retail chains, where the traditional processors are strongest,' says Brendan Miller, an analyst with Forrester. He says Adyen, like Bibit, could be swallowed by one of its larger rivals well before it grows to their size."
However, Adyen management is so conscious of this discrepancy that it is framed as a strategic opportunity:
" Van der Does says he won’t sell out, and that large retailers increasingly want a single provider that can handle all their physical and online transactions. His next goal is to process more than €100 billion in a year. “I can live with being one digit less than those guys,” he says, referring to Worldpay and the others, “but not two.”
Regarding other possible opportunities, when a start-up performs with to such a remarkable degree vis a vis market penetration, merchant acquisition, revenue, and exponentially growing valuation figures, a promising IPO begins to dominate discussions of the future. Unlike many other start-ups, even other unicorns, Adyen has the financial advantage to chose when to go public, but for that very reason, the Adyen CEO affirms it is not a strategy to take immediately: "Today is not the right timing. It's not a fundraising mechanism which we need to start to be able to continue our business. There is no pressure there."
As Adyen expands into the brick & mortar space also expanding reach in the U.S market, the company will continue to use the expert experience of the management to guide future strategy:
“We’re a very experienced team that has been working together for some time now, and we’re not in a hurry to do anything other than expanding and making the product even better.”
SUMMARY
The biggest insight the research demonstrated is that Adyen has done a wonderful job of impressing the big players, but still remains elusively out of reach for small volume-merchants. Without a need to address funding issues, or to demonstrate profitability, Adyen has a unique chance to cement its position as a global leader in the payment solutions space by reforming its services to better serve the micro-merchant.
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