Square spends $365 million to own more of its merchants' business

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To expand beyond smartphone payment hardware, Square has to contend with a lot of digitally-savvy rivals. Its $365 million deal to buy Weebly, a San Francisco-based web design company, is a major weapon in its growing arsenal.

Square can turn Weebly's assets into a full-fledged omnichannel machine, a source of subscription income and a passport to millions of potential clients outside of the U.S.

David Paul Morris/Bloomberg

As payment acceptance technology loses its luster as a differentiator, Square has been busy branching out to own more of its merchant relationships. In rapid order, Square has piled on services that can branch off of payments, such as merchant credit, open development and food ordering and delivery. As it expanded in these areas, Square also began to offer P2P services for consumers, and bolstered its ability to lure a more diverse range of merchants by investing in advanced point of sale display technology.

Square has also collaborated with SAP to add business management tools and applied for a license to offer broader financial services to its clients. In its core business, Square is running into other companies playing the same expansion game, this pressuring Square to diversify even more. Square finds itself increasing in competition with Venmo, which is expanding into merchant payments; and Stripe, which supports transactions for online stores.

Once the Weebly deal closes during the second quarter, Square will be able to combine Weebly's expertise with its own mix of payments, store credit and delivery, powering a mix of sales, order processing and digital content, serving the "omnichannel" trend so desired by payment processors and merchant acquirers.

It also gives Square a substantial base of subscription revenue.

Weebly has 625,000 subscribers among its millions of customers for website hosting, design and marketing. And since 40% of Weebly's customers are outside the U.S., Square will be able to accelerate its international expansion.

Square does not plan to stop supporting third-party merchant service and technology solutions for existing clients, the company said in a release.