BNPL Firms Spend Big in Battle for Market Share
Top firms in the buy now, pay later (BNPL) space are fighting tooth and nail for market share in 2021, spending millions on aggressive ad buys in the hopes of besting the competition.
Digital ad spend from Affirm, Klarna, AfterPay, and PayPal as a collective group increased by 130% in the past year, totalling more than $52 million, according to new research by the advertising intelligence firm MediaRadar.
While consumers are eager to buy products upfront and pay for them in interest-free increments, it’s actually interest from retailers that’s behind much of the latest surge in the BNPL space. Affirm’s shares went up 20% last month after the company announced a partnership with Target ahead of the holiday shopping season. The company had previously struck a deal with Amazon to allow shoppers to split purchases of $50 or more into smaller monthly payments.
But Affirm’s competitors, like Klarna and AfterPay, aren’t far behind. Fintech firms like Square and PayPal are making headway in the BNPL space as well.
According to data from MediaRadar, Affirm’s ad spend grew more than that of any other lender in the space last year, surging more than 1,000% between 2020 and 2021. Klarna’s ad spend was up 557%. Klarna also expanded its advertising formats in 2021 to include traditional linear TV, although digital spend still accounted for 54% of the company’s total ad spend. Ad spending by the lender Afterpay increased by 68% year-over-year, and PayPal showed a 48% jump. Digital spending now accounts for PayPal’s largest advertising format, at 70%.
Looking at the data, MediaRadar CEO Todd Krizelman said he was surprised to see how quickly the major BNPL players had increased their ad spend over the last year.
“There was almost no marketing in the first six months of 2020. However, after a very successful Q4 2020, the companies kept spending in 2021,” he says.
Krizelman expects to see BNPL lenders scale dramatically in the fourth quarter of 2021 as competition escalates and consumers indicate even more willingness to adopt the alternative financing approach.
BNPL Firms Try to Establish a Name
“Klarna is trying to push their way into the world, establishing their name. They placed a single ad in the 2021 Super Bowl in January. Since then, however, almost all ad spend is digital. The digital strategy is squarely pursuing a younger Gen Z and millennial audience,” Krizelman says. “Ad spend is concentrated on YouTube, especially in the entertainment, gaming, comedy, music and lifestyle channels.”
Affirm is taking a multi-pronged approach to its advertising strategy, spending $4.3 million this year on targeted placements designed to win over merchants and marketing directly to consumers.
Krizelman says Afterpay appears to be taking a similar approach to Affirm, partnering with major retailers like Old Navy, GAP, Dillard’s, Carter’s, Bed Bath & Beyond, and Adidas and investing just under $3 million in advertising.
In a review of Afterpay’s creative messages, MediaRadar found that the company is much more concentrated on a young female audience than other firms in the BNPL space.
“All the firms focus on the benefits that they’re delivering to shoppers, which is the freedom to buy exactly what you want now, in the moment, but with the ability to delay payment,” Krizelman says. “Words like ‘Freedom’ and ‘Pay Better’ are examples of how this is positioned as a good decision. Affirm is the only firm that seems self-aware that this could be bad for your personal financial management. They frame Affirm as ‘investing in yourself, responsibly.’”
As we move further into the prime holiday shopping season, Krizelman expects to see a dramatic increase in ad investment from BNPL companies.
“In December of 2020, these companies placed $21.3 million in advertising. Through the year, we’ve seen increases in spend,” he says. “This December, we forecast ad placement will at least double.”
Stephanie Miles is a senior editor at Street Fight.