Simple: In Name Only

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Congrats to the Simple team on their sale to BBVA.

But truth be told, I never was a big fan of what they were doing. Maybe that’s too strong a statement. It’s not that I wasn’t a “fan,” it’s that I didn’t buy into all the hype, all the talk about the NeoBank being “disruptive.” Selling out to a big bank for $117 million doesn’t exactly strike me as qualifying as a banking industry disruptor.

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Coming on the heels of Facebook’s $19 (or 17) billion acquisition of WhatsApp, the Simple acquisition immediately drew comparisons of what the acquisition cost per customer was to the acquiring company.

Understandable, but completely misguided.

Cost per customer is a totally useless metric without taking into consideration: 1) Current revenue per customer; and 2) Future potential revenue per customer.

WhatsApp’s main revenue source is an annual subscription fee of $1 (after one free year of use). I’m not even sure if Simple charges a monthly fee to its customers, or if it relies on interchange fees for revenue.

In any case, Facebook has its own ideas for how they will further monetize the WhatsApp user base, and I have no idea what those ideas are, nor do I care.

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BBVA, on the other hand, was not simply paying ~$1200 per customer to acquire Simple’s customers. JJ Hornblass, on the BankInnovation site, speculates that:

“This is as much about the Simple team as it is about the Simple business. The need for talent that can think creatively about banking is starting to accelerate, for banks like BBVA and Capital One Financial Corp.”

My take: Sorry, JJ, but I disagree. BBVA paid for a brand that it would need years to build itself.

If BBVA wanted “talent  that can think creatively about banking” it could have hired kids right out of college. If actual banking industry experience (or knowledge) was a prerequisite, it could have acquired Moven for less than $117 million.

But that wouldn’t get BBVA the Simple brand.

As much as I don’t think of Simple as a disruptor, I do have to give it credit for striking a nerve with the segment of consumers it reached. Consumers really do want a simpler, more transparent banking industry.

I’m not so sure that Simple is truly that much more simpler, but if you tell consumers often enough that your toilet paper is softer than the other toilet paper brands out there, some people will actually start to believe you. Regardless of  whether or not you’re softer.

For BBVA to take the talent they could hire off the street and recreate the Simple brand, it would take them at least a few years, and probably $100 million. Maybe even per year.

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Then there is the matter of the customers that BBVA acquires with the Simple purchase. Who are those customers? My bet is that they’re young, highly educated, and if not high-earners today, have the potential to be. In other words, consumers who represent future revenue potential from a lending perspective.

Facebook paid $45 per WhatsApp customer to get $1 in annual revenue, and who knows what future revenue. BBVA paid ~$1200 per Simple customer for a somewhat-established brand, and an identifiable (albeit difficult to realize) future revenue stream.

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I’m hardly surprised by this acquisition. Back in October 2011, I predicted that a big bank would acquire Moven because they would realize that Moven is: “1) The ‘starter’ account they should have created for entry-level customers, and 2) A platform and business model upon which they can migrate their stale and tired business model.”

Right idea, wrong NeoBank.

I don’t know what BBVA’s plan for Simple is. I hope they keep the brand. As I’ve stated, I think that’s what they’re paying for.

Then again, that’s what I thought when Intuit acquired Mint a few years back. Thought they would get rid of the Financeworks brand, and replace it with Mint. Yeah, well, that didn’t happen (but maybe it should have).

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Way back when, Simple said “We’re not a bank.” It also told people that it was a “simpler bank that is easy to use, that treats you with respect.” So it wasn’t too clear about what it was and wasn’t. Personally, I could never figure it out. No matter. They made nice money for a few years’ worth of work. For that, I congratulate them.

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