Bits Blog: Jack Dorsey Talks Square and Wearable Devices

Mary Altaffer/Associated Press Jack Dorsey, the chief executive of Square, said he fancied devices that wrap around the wrist.

Many technology enthusiasts have had their eye on Glass, Google’s monocle that looks like something out of Star Trek. But the Internet-connected eyewear doesn’t really pique the interest of Jack Dorsey, chief executive of the mobile payment system Square and a co-founder of Twitter.

“Glasses are very compelling, and I think it’s an amazing technology,” Mr. Dorsey said, “but I just can’t imagine my mom wearing them right now. What is the value of Glass?”

Mr. Dorsey said he fancied devices that wrap around the wrist, like smartwatches or exercise bands, because they felt more natural. The conversation might hint that Square is considering a payment app for a smartwatch, perhaps the watch from Apple that has long been rumored to be in the works.

Mr. Dorsey shared his thoughts last Friday while at a grilled cheese shop in New York to talk about a new feature in Square’s cash-register software for iPads. The new feature allows restaurant owners to speed up the process of placing customized food orders with Square’s cash-register app for iPads, called Register.

With the new software, a restaurant can more easily customize orders. For example, if a customer chooses a grilled cheese sandwich, but wants it with gluten-free bread and extra peppers, the merchant can hit the grilled cheese sandwich button and then individually select the type of bread and extra peppers. In the past, a merchant would have needed to create a separate button in advance for each variation of each sandwich offered — for example, one for a regular grilled cheese sandwich, one for a grilled cheese with wheat bread and one with gluten-free bread and extra peppers.

Mr. Dorsey answered several of our questions about Square and its future. A transcript of the interview follows, edited for length and clarity.

What’s the message behind the news about the customized food orders?

People have known Square for accepting credit cards. This is a big push we’re making into smaller businesses and brick and mortar, specifically around restaurants. There’s this huge movement around quick-service restaurants all over the country, especially in places like New York, where you order at a counter. Food trucks are often an offshoot of this. These places are doing really creative crafty things and doing them very well.

When it comes to speeding up food orders for businesses, some of your competitors are enabling the ability for customers to order ahead and pay with an app, then skip the line and grab the food. Are you looking into that capability, too?

That’s definitely something we hear about it and it’s something we’d naturally want to do.

Last year Square introduced the ability for customers to pay with their face through Square Wallet, its payment app. Are people using that feature a lot, or is it just tech nerds?

We do have early adopters. I don’t want to disparage tech nerds because they’re the ones that spread things like Twitter and Facebook. I think we’ve been happy with the residence of Wallet, but we haven’t been thrilled. A lot of that is due to people understanding how to use it. We have a lot more work to do to surface it.

For those who use it, they love it. For the merchants who receive it, they love it. They get to know their customers as they walk in, what they like, what they might order, and it increases their revenue.

How has the Starbucks partnership been going? Have you seen an increase in users?

We definitely saw a surge in Wallet. We definitely saw a surge in Register, actually. It really validates the high end. They’re using the same tool that these guys are using, they’re using the same infrastructure. It really levels the playing field for them to compete with each other. It really validates that this is something businesses can trust —this huge company is using it, and I can also build my business on it.

Have you looked into Google Glass?

I don’t think glasses are the answer. I think it might be a 10-year answer, but not in the next five years. Maybe if they’re in sunglasses or what not.

I think the movement you see around Fitbit, Up and FuelBand, that seems to be the next step in wearable. So something on the wrist that feels natural, almost feels a bit like jewelry.

Glasses are very compelling and I think it’s an amazing technology, but I just can’t imagine my mom wearing them right now. What is the value of Glass?

Sounds like you have a lot more faith in the rumored iWatch.

(Laughs.) I don’t know, I think there’s a lot going on. The Pebble watch I think is pretty compelling as well.

TIMESCAST: New Year’s in Times Square Goes Digital

December 26, 2012By Fritzie Andrade, Krishnan Vasudevan and David Gillen

TimesCast Media+Tech: Song apps to keep the party going. | A conversation with Allure’s 85-year-old plastic surgery editor, Joan Kron. | A look at the social media tied to the ball drop.

Square Feet: Rackspace Revitalizes a Defunct Mall Into an Unorthodox Tech Campus

“I thought, This is going to be awesome!” the infectiously enthusiastic Mr. Weston said of his idea five years ago to move Rackspace’s operations to the defunct Windsor Park Mall in northeast San Antonio. “But everybody else pretty much thought I was crazy.”

Today, his idea to move his company to the very mall where he got the blue ruffle tuxedo he wore to his junior prom seems more innovative than insane, with 3,200 Rackspace employees keystroking in cubicles set up where retailers like J. C. Penny, Zales, Casual Corner and Piercing Pagoda used to be. The project suggests that there might be hidden opportunities in the nation’s glut of dead and dying malls and represents one of the country’s largest and quirkiest recycling efforts.

As ruefully documented on the Web site Deadmalls.com, the recession has shuttered scores of enclosed malls in the United States, and estate analysts at the CoStar Group predict that at least 10 percent of the remaining 1,500 malls will fail in the next few years. This is despite recent improvements in retail sales, because shoppers these days are more likely to visit free-standing stores or strip centers than invest time and effort entering and navigating a mall.

Most dead malls are razed, but some have been repurposed, like the Penn-Can Mall in Cicero, N.Y., which now houses several auto dealerships. Malls in Florida, Massachusetts, Michigan, Mississippi, New Jersey and Ohio have become mixed-used spaces, incorporating apartments and unconventional tenants like government offices, churches, medical clinics and satellite university campuses. Rackspace’s mall conversion, though, is unique in that it is the exclusive owner and occupant.

Mr. Weston was in a bind in 2007. Rackspace had outgrown the 200,000-square-foot office space it had leased just two years earlier in northwest San Antonio. The growing company, founded in 1998 in a garage apartment, was adding 600 employees a year.

And these employees, who call themselves Rackers, were cramped, cranky and craving a corporate campus like those of their competitors Amazon, Microsoft and Google. Needless to say, they were not enthusiastic at the suggestion that they decamp to a decrepit suburban mall, despite Mr. Weston’s assurances that it would be “totally cool.”

“A lot of Rackers worked at Foot Locker in the mall, and the last thing they wanted to do is go away to school, get the fancy degree and come back and work at the mall,” said Lanham Napier, the chief executive at Rackspace, who admits that he shared their resistance. “I thought Graham was nuts,” he said.

There was also some trepidation that the frugal Mr. Weston just wanted cheap office space and wasn’t going to do much more than slap a coat of paint on the mall and set up card tables and folding chairs as office furniture.

Despite an estimated net worth of $1.2 billion, Mr. Weston, 48, lives modestly with his wife and three children in a 2,300-square-foot double-wide trailer on the banks of the Guadalupe River just outside of San Antonio. In addition to being a successful dot-com and real estate investor, he descends from British nobility on his mother’s side and Canadian grocery magnates on his father’s side, whose holdings include Twinings tea, Karo syrup, Fleishmann’s yeast, Fortnum & Mason and Selfridges.

Mr. Weston was indeed looking for a good deal, but he also had a grand vision of creating a tech mecca comparable to Austin’s so-called Silicon Hills, located 60 miles east of the mall and home to Dell and Hoover’s. He hired the New Urbanism pioneer Andres Duany to conceive a master development plan emphasizing diversity, sustainability and walkability.

“I grew up on a cattle ranch not far from the mall, and it was where we came as kids,” the boyish and bespectacled Mr. Weston said. “Rackspace desperately needed more space, true, but I wanted us to be leaders in the community, not just squatters.”

Undeterred by his employees’ opposition, he negotiated to buy the mall for a bargain-basement $27 million. Rackspace also received $72 million in tax abatements and development grants from the State of Texas and the City of Windcrest, a struggling suburb adjacent to the mall. As a precursor to the deal, Windcrest had assumed taxing authority on the property from San Antonio. Windcrest, which has a population of 5,600, had been losing $100,000 in tax revenue annually since the mall closed in 2005.

“Mr. Weston was a tough negotiator and was certainly taking care of his company,” said Ray Watson, who was the executive director of the Windcrest Economic Development Corporation at the time. “We started out offering about half of what they ended up getting, but the good thing is that they took care of the community.”

DealBook: Square Near a Deal to Value It at $3.25 Billion

Square Register uses the company’s reader and an app to turn an iPad into a credit card register.

For all of Square’s challenges, raising money has not been one.

Square, the mobile payments start-up best known for its pint-size credit card reader, is close to raising roughly $200 million, which would give the company an implied valuation of $3.25 billion, people briefed on the matter said. This financing round is expected to be led by Suhail Rizvi, the head of Rizvi Traverse Management, a small private equity firm that has made investments in Twitter and Playboy, these people added.

The hefty investment — the company’s third in less than two years — will help Square battle with the likes of Google, Intuit and PayPal. But it also puts enormous pressure on Square, led by Jack Dorsey, the co-founder and executive chairman of Twitter, to prove its worth.

The company, which is three years old and based in San Francisco, still has to prove that it will be a big winner in mobile payments — and that it will grow into a highly profitable business.

On paper, at least, Square’s value has soared in just a short period of time.

Last summer, it raised $100 million, valuing the company at $1.6 billion. Several months before that, Square had another investment at a $240 million valuation. All told, the company’s valuation has grown by 13.5 times in less than two years.

Still, it may have wanted more from this round.

In recent months, Square had been seeking an investment that would peg its value as high as $4 billion, people familiar with the discussions said. Although it found some investors willing to participate at that level, it ultimately preferred a different group. And those investors didn’t have the stomach for $4 billion, these people said.

Unlike Square’s previous financing rounds, which prominently featured big venture capital names like Sequoia Capital and Kleiner Perkins Caufield & Byers, this one was not led by a traditional Silicon Valley backer. In fact, several major venture capital firms declined to participate at the lower level.

A Square spokeswoman declined to comment.

In the increasingly competitive and crowded world of mobile payments, Square stands out.

Its marquee product is a square-shaped credit card reader that plugs into smartphone earbud jacks. It helps individuals and small vendors, like taxi drivers and nail salons, accept credit card payments on their mobile phones. Square provides the reader and the software free, but charges the users 2.75 percent of the transaction. Of that fee, it collects a small amount and sends the rest to credit card companies.

Adoption has been fast. In the first six months of this year, the company has roughly doubled the number of users to two million. At its current pace, it is processing $6 billion in transactions a year.

Since introducing the hardware, Mr. Dorsey has expanded the company’s offerings to include Square Register, an application that turns an iPad into a credit card register for small businesses, and Pay With Square, an app for customers to use.

Under Pay With Square, users can link their credit card accounts to trusted merchants and open “tabs” with these vendors. Once a tab is set up, a user can then walk into a store and simply tell the cashier to put purchases on his tab. The cashier, using Square’s software, will then see a photo of the user and confirm the purchase.

But Square, despite its early success, is still just one of many players trying to own the future of real-world payments.

Google recently introduced Google Wallet, a mobile app that lets users pay by tapping a phone on special readers at participating vendors. Several companies now have their own hardware, including Intuit, Verifone and PayPal, which has a triangle-shaped card reader named PayPal Here. Apple, with its loyal fan base and giant cache of credit card information, is expected to get in the game soon.

Square, meanwhile, will also have to prove success outside of its signature reader. Because of the fees it pays to third parties, the company makes very little on each transaction. And given the competition, margins will remain under pressure.

Instead, its financial future may hinge more on apps like Pay With Square, which could deliver customized ads and promote premium merchant services. The company has signed up more than 75,000 vendors, but it is unclear how many consumers are regularly using the app.

Claire Cain Miller contributed reporting.

State of the Art: As Pay-by-Phone Advances, Square Takes Another Leap — State of the Art

And if those squealing rugrats don’t believe us, we can crack open the history book to 2012, the dawn of the twilight of cash and credit cards. That was the year when, for the first time, paying for things in stores required nothing more than saying your name to the cashier.

But first, some history. In 2010, a company called Square invented a credit card reader in the shape of a tiny white plastic square. It pops into the headphone jack of your iPhone, Android phone or tablet. Together with a beautiful, simple app, it lets you swipe people’s credit cards (meaning scan them, not steal them).

Suddenly anyone can accept cards: baby sitters, cabdrivers, farmer’s market vendors, piano teachers, personal trainers, bake salers, carpenters and lawn-mowing teenagers.

Square takes 2.75 percent of each transaction. Unlike traditional credit card arrangements, there are no monthly fees or minimums, setup costs or variable percentages. There aren’t even equipment costs; the headphone-jack reader is free. There truly are no other costs or catches. (My column online has a link to my full review.)

The Square went viral. Today, the company says that two million Americans are happily swiping away.

Where there’s a hit, there’s a copycat, or a whole litter of them. It’s the same idea each time — you get a free plastic attachment for your phone’s headphone jack — with differences only in rates and target markets.

Intuit offers something called GoPayment, with a rather huge phone attachment and a complicated rate structure. (It advertises a 2.7 percent rate, but the fine print reveals that you’ll pay 3.7 percent for reward cards, American Express and corporate cards.)

A company called mPowa is aimed at big companies that want the money to flow directly into their own accounts — not be deposited first into a holding account, as Square, Intuit and others do. PayAnywhere’s notable feature is that it takes the lowest cut of all: 2.69 percent.

And then there’s the elephant that’s just barged into the room: PayPal. Its rate is a hair lower than Square’s (2.7 percent), and its reader is a triangle instead of a square. The reader is more stable than the Square when you swipe the card, but it’s relatively giant. (I’ll review some of these services in more depth on my blog, Pogue’s Posts.)

All right, we get it: The little-guy-accepting-cards racket is heating up. But to Square, that’s all been just a warm-up act. The main event is even more disruptive. It’s a little something — a big something — called Pay With Square.

You walk into a shop or cafe. The cashier knows that you’re on the premises, because your name and thumbnail photo appear on his iPad screen. He rings up your items by tapping them on the iPad.

And now the magic moment: To pay, you just say your name. The cashier compares your actual face with the photo on the iPad’s screen, taps O.K., and the transaction is complete. No cash, no cards, no signatures — you don’t even have to take the phone out of your pocket.

It’s glorious for you, because it’s so much faster and less fussy than the old ways of paying. It’s fantastic for the merchant, because lower friction (hassle) means more sales. The merchant’s iPad Register app also offers a clear, useful “analytics” screen, showing how much of what was sold when. All of this is free for both you and (except for the usual 2.7 percent Square fee) the merchant.

You set up the phone app by choosing your photo and linking your credit card. Using GPS, the app automatically lists shops and cafes near you that offer the Pay With Square system. If you turn the phone 90 degrees, you see them as pushpins on a map. Square says that 75,000 merchants already accept Pay With Square.

I tried out Pay With Square in a San Francisco coffee shop. I tapped its name and then tapped Open a Tab (a one-time operation).

At the counter, I asked for a mocha and a muffin. While the employee went to get the muffin, I peeked around at his iPad, which was on a countertop mount. To my surprise, it showed photos of two other customers — all of us had the Square app on our phones. The register app uses GPS and other location services to know when these people are in the shop.

When the cashier returned, I said, “I’m David.” He said, “I know,” tapped the screen, and that was it. I’d paid just by saying my name.

Last month, Square upgraded the system to make it even juicier for you, the customer. Now merchants can offer first-visit discounts, 10th-visit rewards and other bonuses; these offers show up on your phone app in the list of nearby merchants.

This article has been revised to reflect the following correction:

Correction: July 20, 2012

The State of the Art column on Thursday, about advances in mobile payments, misspelled the name of a company involved in the technology. It is mPowa, not mPower.

This article has been revised to reflect the following correction:

Correction: July 19, 2012

A caption with an earlier version also described incorrectly how Pay With Square works. Customers with the app on their smartphones are recognized automatically, without the need to swipe a card. (The picture was of a regular Square transaction using an iPad.)

State of the Art: As Pay-by-Phone Advances, Square Takes Another Leap — State of the Art

And if those squealing rugrats don’t believe us, we can crack open the history book to 2012, the dawn of the twilight of cash and credit cards. That was the year when, for the first time, paying for things in stores required nothing more than saying your name to the cashier.

But first, some history. In 2010, a company called Square invented a credit card reader in the shape of a tiny white plastic square. It pops into the headphone jack of your iPhone, Android phone or tablet. Together with a beautiful, simple app, it lets you swipe people’s credit cards (meaning scan them, not steal them).

Suddenly anyone can accept cards: baby sitters, cabdrivers, farmer’s market vendors, piano teachers, personal trainers, bake salers, carpenters and lawn-mowing teenagers.

Square takes 2.75 percent of each transaction. Unlike traditional credit card arrangements, there are no monthly fees or minimums, setup costs or variable percentages. There aren’t even equipment costs; the headphone-jack reader is free. There truly are no other costs or catches. (My column online has a link to my full review.)

The Square went viral. Today, the company says that two million Americans are happily swiping away.

Where there’s a hit, there’s a copycat, or a whole litter of them. It’s the same idea each time — you get a free plastic attachment for your phone’s headphone jack — with differences only in rates and target markets.

Intuit offers something called GoPayment, with a rather huge phone attachment and a complicated rate structure. (It advertises a 2.7 percent rate, but the fine print reveals that you’ll pay 3.7 percent for reward cards, American Express and corporate cards.)

A company called mPowa is aimed at big companies that want the money to flow directly into their own accounts — not be deposited first into a holding account, as Square, Intuit and others do. PayAnywhere’s notable feature is that it takes the lowest cut of all: 2.69 percent.

And then there’s the elephant that’s just barged into the room: PayPal. Its rate is a hair lower than Square’s (2.7 percent), and its reader is a triangle instead of a square. The reader is more stable than the Square when you swipe the card, but it’s relatively giant. (I’ll review some of these services in more depth on my blog, Pogue’s Posts.)

All right, we get it: The little-guy-accepting-cards racket is heating up. But to Square, that’s all been just a warm-up act. The main event is even more disruptive. It’s a little something — a big something — called Pay With Square.

You walk into a shop or cafe. The cashier knows that you’re on the premises, because your name and thumbnail photo appear on his iPad screen. He rings up your items by tapping them on the iPad.

And now the magic moment: To pay, you just say your name. The cashier compares your actual face with the photo on the iPad’s screen, taps O.K., and the transaction is complete. No cash, no cards, no signatures — you don’t even have to take the phone out of your pocket.

It’s glorious for you, because it’s so much faster and less fussy than the old ways of paying. It’s fantastic for the merchant, because lower friction (hassle) means more sales. The merchant’s iPad Register app also offers a clear, useful “analytics” screen, showing how much of what was sold when. All of this is free for both you and (except for the usual 2.7 percent Square fee) the merchant.

You set up the phone app by choosing your photo and linking your credit card. Using GPS, the app automatically lists shops and cafes near you that offer the Pay With Square system. If you turn the phone 90 degrees, you see them as pushpins on a map. Square says that 75,000 merchants already accept Pay With Square.

I tried out Pay With Square in a San Francisco coffee shop. I tapped its name and then tapped Open a Tab (a one-time operation).

At the counter, I asked for a mocha and a muffin. While the employee went to get the muffin, I peeked around at his iPad, which was on a countertop mount. To my surprise, it showed photos of two other customers — all of us had the Square app on our phones. The register app uses GPS and other location services to know when these people are in the shop.

When the cashier returned, I said, “I’m David.” He said, “I know,” tapped the screen, and that was it. I’d paid just by saying my name.

Last month, Square upgraded the system to make it even juicier for you, the customer. Now merchants can offer first-visit discounts, 10th-visit rewards and other bonuses; these offers show up on your phone app in the list of nearby merchants.

This article has been revised to reflect the following correction:

Correction: July 19, 2012

An earlier version of this column rendered the name of a mobile payment company incorrectly. It is mPowa, not mPower.