Klarna Celebrates Return to Profitability and Explores New Revenue Opportunities

Swedish ‘buy now, pay later’ (BNPL) giant Klarna recently celebrated its return to profitability. After posting its first monthly net profit since August 2020, the fintech company gathered 4,000 employees in Stockholm for a celebratory event. Images on social media showed attendees in Klarna pink attire and bandanas, with some even dressed as Minions.

Klarna’s Journey to Profitability

Founded in 2005, Klarna’s primary profits have originated from its core payments product. The company earns revenue from partner merchants and late fees. Klarna’s U.S. launch eight years ago initially led to increased losses, but the company has now surpassed its American counterparts, Affirm and Afterpay. Klarna’s acceptance among the top 500 e-commerce merchants in the U.S. has been a significant factor in its recent success.

Facing Increased BNPL Competition

Despite its success, Klarna faces increasing competition from other companies, including tech giants like Apple and PayPal. The BNPL sector is expanding, with companies such as John Lewis launching their own BNPL products. Klarna has been working on developing additional high margin revenue streams to maintain its edge in the market and fulfill its vision of becoming “the world’s favourite way to shop.”

Affiliate Marketing: Klarna’s New Revenue Stream

One of the emerging revenue streams for Klarna is affiliate marketing, a practice that involves merchants paying third-party platforms to generate leads to their products. The company’s annual report revealed that Klarna’s “marketing revenue” more than doubled last year, with its “affiliate marketing revenue” reaching SEK 1.6bn ($144m) or 10% of total global revenue in Q4.

Klarna’s Efforts to Monetize Affiliate Marketing

In 2021, Klarna began focusing on how to monetize affiliate marketing, aiming to become a ‘discovery destination’ for sales. The company made seven acquisitions, including price comparison site PriceRunner and marketing companies Toplooks and Search Engine Marketing. These acquisitions allow users to search for products within the Klarna app, with the option to pay through Klarna. Merchants pay the company for improved visibility and priority in search results.

The Success of Klarna’s Marketing Strategy

Klarna’s marketing strategy’s success relies heavily on the usage of its app, which currently has 150 million global users. The company has attributed the ‘surging demand for the Klarna app’ as a primary driver of its U.S. growth. As of December 2022, the app had 30 million downloads and eight million monthly active users in the U.S.