Visa Trumps Square on Starbucks Tweet-a-Coffee Deal

Jack Dorsey and Howard Schultz signing the Square-Starbucks agreement, August 2012.

Jack Dorsey and Howard Schultz signing the Square-Starbucks agreement, August 2012.

Starbucks yesterday unveiled a Tweet-a-Coffee program with Visa — not with Square, its long-time partner.

Howard Schultz is even an investor in Square, yet Square does not figure in the Twitter-based marketing effort, Starbucks officials confirmed. Visa is also an investor in Square.

Starbucks officials declined to say why Visa and not Square is the chosen payments partner for its new promotion that allows consumers to gift a coffee via Twitter (which was launched by Square founder Jack Dorsey).

Schultz invested $25 million in Square in August 2012 at a $3.2 billion valuation of the payments company, according to Business Insider. As part of the deal, Schultz joined the Square board and Starbucks agreed to let its customers use Pay With Square for mobile payments. But yesterday Schultz unexpectedly stepped down from the board. Reuters reported that both companies maintain Schultz only planned to sit on the Square board for a year.

Square processes all of Starbucks’s credit and debit transactions. Starbucks generated $3.7 billion of total net revenue in the second quarter of 2013.

Starbucks officials declined to disclose terms of the Visa partnership agreement, but we surmise that Visa is compensating Starbucks to be a part of Tweet-a-Coffee.

Square officials did not respond to requests for comment.

The program works like this: a consumer needs a Starbucks account, a Twitter account and a credit card to use the service. Once registered, the consumer sends a tweet in the following format: @tweetacoffee TO @recipient. That recipient then gets a gift card with a promotion code that can be used to buy $5 worth of coffee at a Starbucks.

That credit card is a wrinkle to the program, which may have prevented Square’s involvement. Square does not issue credit cards, although some think the company should.

Regardless, the promotion exemplifies the bleeding edge of commerce on to Twitter. It’s not easy to create transactions via Twitter, but now that Starbucks has done it — as well as American Express — we expect more Twitter commerce to come.

 

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JJ is the Executive Editor & Publisher of Bank Innovation and CEO of Royal Media, its parent company. He can be reached at hornblass@gmail.com or 212-564-8972.

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