Shopify(NYSE: SHOP) is a software company serving e-commerce businesses. And it's one of the most important players in the world. Over just the last four quarters, its software has facilitated more than $270 billion in gross merchandise volume -- the dollar value of all transactions combined.
That certainly gives Shopify a large slice of the e-commerce software pie. And as competitive as business can be, one would think that Shopify has ascended with a ruthless push to get ahead of its rivals. But in reality, the company has a long history of seeking out partnerships whenever possible, even if it's with direct competitors.
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It's somewhat counterintuitive. But Shopify's management believes that the best way to grow its business is by offering its customers as many options as possible. And to offer more options than it could on its own, it finds ways to partner.
This collaborative spirit is still thriving at Shopify. Here are three partnerships the company has forged just in recent months.
1. Roblox
Roblox(NYSE: RBLX) is a video game platform, but not like the games I grew up with in the 1980s. Rather, games tend to be more interactive, social experiences. And with nearly 90 million daily active users, it's certainly popular.
What's fascinating with Roblox's business model is that games are created by third-party developers. Roblox is free to play. But certain game elements can be purchased for its in-game currency, providing an opportunity for developers to make some money.
Now Roblox is upping the opportunities for its developer community by partnering with Shopify. Just announced in September and launching in 2025, developers will be able to sell physical products with integrations to Shopify.
For Shopify, this is really a no-brainer partnership. Roblox isn't a competitor at all. But it still will provide a new use case and a potentially expanded audience for the e-commerce player.
2. Alphabet
In 2006, tech giant Alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL) -- then Google -- acquired upstart video-sharing platform YouTube. Now YouTube is a major part of the business. And in August, it expanded on its existing partnership with Shopify.
In 2022, YouTube had already made it possible for content creators to link their Shopify sites with their YouTube channels. But now Shopify Plus and Advanced merchants can become YouTube affiliates, making it easier for content creators to highlight products.
Shopify Plus is one of the subscription tiers that Shopify's customers can select. And these customers will certainly appreciate the ability to better get in front of YouTube's audience. The integration between video and commerce is a secular trend that's picking up steam. And it's not surprising to see Shopify getting on the right side of the trend.
3. PayPal
Roblox isn't close to being a Shopify competitor. YouTube has its own commerce arm so it's a little closer of a rival. But financial technology (fintech) pioneer PayPal(NASDAQ: PYPL) is much more of a direct competitor to Shopify considering both companies have merchant customers and both process payments. But both businesses have a history of looking for ways to collaborate. Consequently, Shopify and PayPal are frenemies.
In September, they became even closer frenemies. Shopify divides its business into two main parts: subscription services and merchant services. Merchant services is the larger business of the two, with Shopify Payments comprising a major part. With its expanded partnership, branded PayPal checkout will be an additional option in the Shopify checkout process.
For PayPal, it's possible (if not likely) that it will only be selected a fraction of the time within Shopify Payments. But as big as Shopify is, even being selected occasionally could be beneficial. And for Shopify, it's simply trying to please as many customers as possible by not being restrictive with the options it provides.
What's the big takeaway?
Are any of these new partnerships game changers for Shopify? Not necessarily.
Which of these partnerships is the biggest deal? I believe it's too early to say whether the biggest deal is with Roblox, YouTube, or PayPal.
The takeaway is far more simplistic for those thinking about investing in Shopify stock. The stock is up more than 4,000% since it went public in 2015. It's up thanks to sensational growth. And a big part of its growth story is that its management team wasn't afraid to develop alliances across the business world.
This approach has served Shopify well in the past. So investors should be optimistic about the future considering the company continues to find partners, as evidenced by recent deals with Roblox, Alphabet's YouTube, and PayPal.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Jon Quast has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, PayPal, Roblox, and Shopify. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short December 2024 $70 calls on PayPal. The Motley Fool has a disclosure policy.
