Buy now, pay later company Klarna aims to ramp up its advertising business, and a recently announced partnership with mega-retailer Walmart could give it a significant boost.
The BNPL provider offered a glimpse of its advertising muscle when it filed for an initial public offering, disclosing for the first time that it earned $180 million from selling ad services to its merchant clients last year, which was equal to 6% of its overall 2024 annual revenue, according to the filing Friday with the Securities and Exchange Commission.
What’s more, Klarna said it sees a $475 billion global digital advertising market opportunity for those sales, suggesting it has barely scratched the surface.
The company’s new role as the exclusive provider of installment loans for Walmart customers will advance its effort to tap that opportunity. That’s partly because it will give Klarna access to reams of customer data, said Chuckie Reddy, a partner and head of growth for venture capital firm QED Investors.
”The data itself is going to be very valuable to build a dossier when pitching to merchants,” he said in an interview Tuesday.
Klarna will replace Affirm as Walmart's provider of BNPL services. The option to pay for goods and services installments through Klarna will be integrated into Walmart’s in-store and online checkouts in the coming weeks and “will be scaled to all Walmart channels by the holiday season,” a Klarna spokesperson said in an email Monday.
The Swedish BNPL firm’s revenue from advertising rocketed higher last year from just $13 million in 2020, the company said in its SEC filing Friday.
Klarna has “built a unique advertising solution, connecting engaged consumers to advertisers in a personalized, commerce-centric environment,” the company said. Klarna leverages data — including browsing, search and transaction histories — to help merchants reach potential customers with relevant ads, the filing said.
It’s not the only payments company mining that data to help merchants sell more to consumers. PayPal has also increased its efforts to use transaction data to enable merchants to better market their products and services. Last year, PayPal hired Mark Grether, formerly at Uber, to lead its new advertising platform.
The Walmart partnership gives the buy now, pay later company access to shoppers who spend hundreds of billions of dollars at the giant retailer every year.
Walmart is the largest retailer in the United States based on 2023 revenue, according to the National Retail Federation. The chain of superstores reported $681 billion in revenue, most of it from sales, for the fiscal year that ended Jan. 31.
All that spending amounts to troves of useful data for Klarna, Reddy said. “Merchants want to see that data,” he said.
In fact, the customers Klarna gets onto its platform and the data it collects from them is “probably more valuable than the actual revenue” it earns from Walmart shoppers, Reddy said.
