The Marketplace Boom   //   November 29, 2023

Why super apps have yet to take off in the U.S.

Despite the best efforts of multiple tech and e-commerce giants, no one company has yet to crack the code for building a successful super app in the U.S.

Super apps offer multiple services through a single, easy-to-use interface. In some markets like China, they have become multi-billion dollar businesses that are heavily embedded into everyday life. But in 2021, spurred on by bullish economic conditions and record venture capital financing, more U.S. tech companies started to dip their toes into the super app approach. They acquired new companies and services that would allow them to add capabilities to their apps, like returns processing, live shopping or travel booking. But now, as economic conditions have worsened, companies are starting to unravel some of these acquisitions, or pare back their super app ambitions.

In October, UPS acquired return logistics platform Happy Returns from PayPal for an undisclosed sum — just two years after PayPal bought Happy Returns, which it had previously invested in. But now, PayPal appears to be refocusing on its core payment processing business. And it’s not the only business choosing to get back to its core offerings this year. In July, Affirm made the decision to shut down Returnly, a returns business it had acquired for $300 million in 2021, and opted to strike a strategic partnership with Loop, another returns processor instead.

While these companies have retreated from loftier multi-use ambitions, there are still a few prominent players who have their sights set on building a super app in the U.S. Last year, Meta CEO Mark Zuckerberg expressed a super app-like vision for WhatsApp, the messaging app the company acquired in 2014. “The ultimate goal here is to make it so you can find, message, and buy from a business all in the same WhatsApp chat,” Zuckerberg said. And when Elon Musk bought Twitter, now X, he teased plans to turn it into an “everything app” that can become the Western equivalent of WeChat — though, the company has yet to integrate any payment or banking features that would make it closer to becoming a true super app.

While various U.S.-based apps have been able to offer a couple of these services, there hasn’t been any one consumer-facing app that comes close to fitting the true description of a super app. Analysts say that the U.S. — where no one app has yet to take up majority market in critical areas like payments — isn’t as conducive to encouraging the formation of super apps as other markets. But, that hasn’t stopped companies from trying. There remains a steady stream of e-commerce businesses looking to prove that their apps can be used for more than just one thing — even if, ultimately, they still look nothing like the super apps that have risen to prominence in Asia.

What’s driving the interest in super apps

Interest in emulating the super app approach the U.S. has waxed and waned over the years, largely dependent upon economic conditions and how well-capitalized a company is.

The Harvard Business Review defines a super app as “a single application, accessible by mobile device or web browser, that offers multiple diversified services for everyday personal or commercial life, relies on a common financial transaction platform, leverages intra-app data to tailor offerings, and is widely adopted.”

The term became more popular due to the rise of WeChat and Alipay in China — services with 1.2 billion and 711 million users, respectively, that have become embedded in the population’s daily life. Beyond messaging, people use WeChat for various tasks like video conferencing, video games and mobile payment, among other applications. Alipay, on the other hand, is an all-in-one financial app that supports debit, credit and transfer payments, while also offering services such as wealth management and loans.

Humphrey Ho, managing partner at Hylink Group Americas, said execution of multi-service apps in the U.S. tends to be focused on integrating features built by the acquired startup. While this may work for some logistics or backend solutions, Ho said “acquiring B-to-B SaaS apps to build a super app is a flawed strategy” for consumer-facing apps, as it’s “time-consuming and often futile.”

This is in contrast to a platform like WeChat, where users toggle between different independent services built in-house. “The success of many app ecosystems in Asia stems from their self-built nature,” Ho said. 

Build versus buy

When tech companies buy out service providers to expand their offerings, there is buzz around the possibility of expanding users and generating multiple revenue streams. When PayPal acquired Happy Returns in 2021, it was was looking for ways to engage with shoppers in more ways than just during the initial point of purchase. “Our technology and platform will help extend PayPal’s commerce platform beyond discovery and payments to the post-purchase experience,” Happy Returns’ co-founders David Sobie and Mark Geller said at the time.

But post-acquisition plans don’t always pan out. Other times, it can take years to integrate various services into a new app, and infrequent users might not be attuned to all the various changes.

Klarna is another example of a company that attempted to embrace a super app approach in 2021, going on an acquisition spree to integrate new capabilities into its buy now, pay later app. That year, Klarna bought virtual shopping startup Hero for $160 million, as well as influencer marketing platform APPRL, price-comparison service Pricerunner and AI-based travel booking platform Inspirock for undisclosed amounts.

Back in 2021, Klarna CMO David Sandström outlined a super app-like vision for Klarna in which the company would bundle together multiple features like live shopping and package tracking into one app. At the time, he said the super app path is a way for BNPL players “to create more reasons for brands to work with us.”

Klarna is still planning to realize that vision, Sandström said in an emailed statement. 

“Unlike the ‘super app’ trend we’re seeing among many companies nowadays, Klarna’s mission is to empower our 150 million global consumers by saving them time, money and financial worry and serving as their dedicated shopping assistant, while being a growth partner to our 500,000-plus retailers. Our continued progress in this direction is evident through the enhancements of our product offerings and strategic acquisitions.”

According to Klarna, many of the acquired startups have been integrated into its ecosystem. 

The Klarna Creator Platform, for example, is borne out of the APPRL technology. Earlier this month, Klarna announced an expansion of Creator Shops in the U.S. following a 5x year-over-year growth in this market. Klarna also now offers shoppable videos, an evolution of Hero, to consumers globally following testing in the U.S. According to the company, the tool helped increase the U.S. average viewer time by 60% and click-through rates by 25%. Meanwhile Pricerunner has been folded into the Klarna’s Search and Compare tool both in-store and online.

However, a company spokesperson confirmed there is a pause on the integration with Inspirock at the moment to focus on other areas, such as developing the Klarna travel offering with partners like Airbnb. Earlier this year, Reddit users noticed the Inspirock website — and its Klarna URL — are no longer available. 

Kevin Kennedy, analyst at global research firm Third Bridge, said that entering new areas is particularly challenging for fintech services that might not have the resources or talent expertise to operate them well.  

On the surface, there’s logic behind these acquisitions. “If you’re already using Affirm or any of these services as your primary check-out option, using it for returns would make sense,” Kennedy said. 

But tacking on a logistics business is a major undertaking, he said, and is difficult to try to do as well as giant players like Amazon. This explains why companies like Klarna and Affirm, which have been focusing on growth and profitability, did not build on their acquired businesses. 

For these companies, Kennedy said, when interest rates were low and capital was free-flowing, there was a sense that there was no limit for growth into different services. Now that there is an increasing emphasis on profitability, he added, “I think that narrative has clearly shifted.” Kennedy pointed to Affirm as a company investing heavily into building a marketplace for customer discovery. As such, Kennedy said trying to grow a retail-centric service like Returnly is costly and can take attention away from the core business. 

And with the example of the Happy Returns’ UPS buyout, Kennedy said “a logistics platform logically makes more sense for a logistics business to own than a fintech company like Paypal.”

Another hurdle when striving to build a multi-service app is competing to acquire people and get them to use your app, Kennedy said. This is due to the number of competing platforms in the U.S.’s free market., whereas countries like China have a state-backed all-in-one app like Wechat.

“I think a lot of people want a super app, but I don’t think the regulatory and operating and competitive environment in the U.S. is conducive to that,” Kennedy said. “Maybe it can exist in the U.S. market, but it will be geared for a specific group of people.”