Klarna solves profitability puzzle through millions in ads business

Swedish buy-now-pay-later giant Klarna revealed substantial growth in its advertising business when it filed for an initial public offering with the Securities and Exchange Commission on March 14, 2025. The company disclosed advertising revenue of $180 million for 2024, representing dramatic expansion from just $13 million in 2020.

According to the SEC filing, Klarna's advertising revenue equaled 6% of its overall 2024 annual revenue of $2.8 billion. The filing detailed how the company has "built a unique advertising solution, connecting engaged consumers to advertisers in a personalized, commerce-centric environment." Klarna leverages browsing, search and transaction histories to help merchants reach potential customers with relevant advertisements.

The advertising business operates through three primary solutions. Sponsored search allows merchants to pay for premium placement of their products in consumers' search results. The affiliate program enables merchants to partner with Klarna as a premium publisher to place shoppable inventory in front of high-intent consumers, including dedicated shelf space in consumer home feeds. Brand ads are delivered through a programmatic advertising ecosystem where Klarna partners with third-party providers that connect the company to advertisers.

According to the filing, Klarna generates advertising revenue from fees collected from merchants using these advertising solutions. Sponsored search and brand ads solutions typically charge using cost-per-click and cost-per-mille fee rates respectively. Affiliate program fees are based on cost-per-action, cost-per-click rates, or flat campaign fees.

The company's advertising growth trajectory accelerated significantly following the November 13, 2023, global rollout of its Ads Manager platform. Initially launched in the United States, Ads Manager expanded to the United Kingdom and Sweden, offering retailers a self-service advertising platform to engage with Klarna's high-intent shopper audience. David Sandstrom, Chief Marketing Officer at Klarna, stated at the time that the platform continues to "transform the company beyond BNPL into a growth partner and retail media network within the industry."

Klarna's advertising infrastructure benefits from its extensive user base of 150 million shoppers globally, including 37 million in the United States alone. The company processes over 3 million transactions daily, creating substantial first-party data for targeting capabilities. According to marketing materials, consumers using Klarna demonstrate 23% higher average order value and 45% higher purchase frequency compared to traditional payment methods.

Comprehensive advertising solutions portfolio

Klarna's advertising ecosystem encompasses three distinct solution categories that leverage the company's unique position at the intersection of payments and commerce. The sponsored search solution enables merchants to secure premium placement of their products within consumer search results, capitalizing on high-intent shopping moments when users actively seek specific items or categories.

The affiliate program transforms Klarna into a premium publisher for merchant partners, offering dedicated shelf space within consumer home feeds. This program provides merchants with shoppable inventory placements that reach Klarna's engaged user base, creating direct pathways from discovery to purchase. According to the SEC filing, merchants utilizing the affiliate program can access "a full carousel in a consumer's home feed for a merchant to promote various products."

Brand ads represent Klarna's most sophisticated advertising offering, delivered through a programmatic ecosystem that connects merchants with third-party advertising providers. This solution provides access to Klarna's complete ad inventory and consumer audience data, enabling awareness and traffic generation campaigns that extend beyond the company's existing merchant network.

The advertising platform offers multiple ad formats designed to reach consumers at different stages of their purchase journey. Product cards feature brands or products in prominent app placements, while native banners appear in transaction details pages and marketing emails. IAB standard banner formats enable scale across various app locations, and featured store placements provide prominent positioning in the app's home feed. Post-purchase or payment offers present targeted messaging to engaged shoppers immediately after transactions.

Klarna's partnership with Criteo, announced as part of its advertising expansion, demonstrates the technical sophistication of its programmatic capabilities. According to a case study, Criteo demand clients experienced 3x higher conversion rates on Klarna inventory compared to other app inventories, with 2x higher click-through rates versus industry averages. The partnership achieved an 81% bid rate, indicating strong alignment between Klarna's value proposition and advertiser needs.

The advertising business expansion gained significant momentum through strategic merchant partnerships. Walmart selected Klarna as its exclusive provider of installment loans in March 2025, replacing Affirm in this role. The integration with Walmart's in-store and online checkouts provides Klarna access to extensive customer data that enhances its advertising targeting capabilities. Chuckie Reddy, partner and head of growth for venture capital firm QED Investors, noted that "the data itself is going to be very valuable to build a dossier when pitching to merchants."

Technical implementation of Klarna's advertising solutions involves sophisticated programmatic infrastructure. The company partners with advertising supply-side platforms to scale beyond its current merchant reach, offering access to ad inventory and consumer audiences. This programmatic framework enables unified campaign tracking, performance optimization, and result measurement across multiple advertising channels.

According to the SEC filing, Klarna recognizes a "$475 billion global digital advertising market opportunity" for its advertising solutions, suggesting substantial room for continued expansion. The company's positioning as both a payment provider and retail media network creates unique monetization opportunities through its direct relationship with consumers and merchants.

The advertising business faces competitive challenges from established players including Amazon, Walmart, and major internet technology companies. According to the filing, these competitors often have "larger financial or operational resources or longer operating history in the advertising industry." Some competitors could leverage their market positions to make changes to browsers, mobile operating systems, or platforms that could impact Klarna's advertising effectiveness.

Regulatory considerations may affect future advertising growth. The filing notes that changes to advertising policies, data privacy practices, contractual obligations, and applicable regulations may adversely affect the advertising solutions Klarna can provide to merchants. The company has previously faced regulatory enforcement action due to breaches of marketing or financial promotions rules.

Klarna's advertising revenue growth comes as the broader buy-now-pay-later industry faces regulatory scrutiny. FICO announced in 2024 that BNPL loans would be added to credit scores starting fall 2024, potentially affecting the psychological appeal that has driven consumer adoption of these payment methods.

The advertising business represents a crucial pathway to profitability for Klarna as the company seeks to diversify beyond its core buy-now-pay-later operations. Unlike BNPL transactions that generate revenue through merchant fees while carrying credit risk, advertising provides high-margin income with minimal operational costs once the platform infrastructure is established.

According to the SEC filing, Klarna's credit losses reached $495 million in 2024, representing 18% of total revenue. This substantial expense category highlights the financial challenges inherent in lending operations, where the company must provision for customers who fail to repay their installment obligations. Advertising revenue offers a fundamentally different economic model that generates income without assuming credit risk or requiring capital deployment for loan origination.

The scalability potential of Klarna's advertising business becomes apparent when considering comparable companies in the retail media space. If Klarna achieved advertising monetization of just $10 per user annually, matching a fraction of what platforms like Pinterest or Snapchat generate, the company would add over $1 billion in high-margin revenue across its 150 million global user base. This revenue would flow directly to operating income without the credit loss provisions that burden the BNPL business model.

Klarna's advertising advantages stem from its unique position in the purchase funnel. Traditional advertising platforms must infer purchase intent through browsing behavior and demographic targeting, while Klarna captures actual transaction data at the moment of purchase. This first-party data advantage enables superior targeting precision and measurement capabilities that command premium pricing from advertisers seeking high-converting audiences.

The company's dual role as payment processor and shopping destination creates multiple monetization opportunities within each consumer journey. Klarna can display advertisements during the payment process, within transaction confirmations, and through ongoing app engagement as users manage their installment payments and discover new products. This sustained engagement contrasts with single-transaction payment providers that have limited ongoing consumer touchpoints.

Market analyst perspectives on advertising strategy

Financial content creator Michael Sikand analyzed Klarna's advertising potential in a detailed September 2025 video examination of the company's IPO prospects. According to his analysis, "CLA has grown their ads revenue from 13 million in 2020 to 180 million in 2024, and they made it clear to investors they want to focus on this more due to the higher margins of that business model."

Sikand emphasized the strategic importance of Klarna's advertising approach, noting that "maybe CLA's interest free payments were just the Trojan horse to a trove of consumer data that can be sold to the biggest brands." His analysis highlighted the monetization potential, stating that if "CLA could get its ad monetization to even $10 per user annually, a fraction of what Pinterest or Snap generate, that alone would add over a billion in high margin revenue on its 110 million active users."

The analyst's assessment underscored how Klarna's unique position differs from traditional advertising platforms. According to his evaluation, "with 100 million active users and deep purchase data, CLA knows what you buy, when you buy, and what you're most likely to buy next." This first-party data advantage represents a significant competitive moat in the digital advertising landscape.

Sikand's analysis also addressed the broader implications for Klarna's profitability strategy. He noted that the company's "CLA shopping app is now where millions of consumers are beginning their purchase process with 3 million transactions processed per day," positioning advertising as a natural extension of the platform's core commerce functionality.

The company's IPO filing seeks a valuation of approximately $14 billion, significantly below its peak valuation of $46 billion but above the $6.7 billion valuation from 2022. The advertising business growth demonstrates Klarna's evolution from a simple payment provider into a comprehensive commerce platform with multiple revenue streams.

According to financial disclosures, Klarna's total revenue reached $2.8 billion in 2024, up 24% year-over-year, while gross merchandise value rose to $105 billion. The company reported an annual profit of $21 million after years of losses, though this figure was bolstered by one-time gains including the sale of Klarna's checkout business.

For the marketing community, Klarna's advertising success illustrates the potential for fintech companies to leverage payment data for advertising monetization. The company's ability to reach consumers at the point of purchase creates valuable inventory for retailers seeking to influence buying decisions. The integration of payment processing with advertising delivery represents a significant development in commerce media, as noted by industry observers at PPC Land, where developments in programmatic advertising and payment technology convergence have been closely monitored.

The technical sophistication of Klarna's advertising platform, combined with its extensive first-party data collection, positions the company to compete effectively in the retail media landscape. The success of partnerships like the Criteo integration demonstrates how payment companies can create valuable advertising products through programmatic technology and audience targeting capabilities.

Timeline

• 2005: Sebastian Shamyakovski, Nicholas Adelberg, and Victor Jacobson establish Klarna in Sweden with angel investment from Jane Wahl
• 2010: Klarna launches Pay in Full product, expanding beyond Pay Later offerings
• 2010: Company expands to Nordics, Germany and Netherlands markets
• 2012: Klarna enters Austrian market
• 2014: Expansion to Switzerland and United Kingdom
• 2016: Operations established in nine European markets
• 2017: Klarna begins building disruptive brand to streamline consumer financial lives
• 2018: Launch of Klarna card and mobile app for purchase tracking and shipment management
• 2019: Strategic expansion to United States and meaningful scaling of advertising solutions begins
• 2019-2022: Expansion into 12 additional global markets
• 2020: Klarna advertising revenue reaches $13 million
• April 2022: Acquisition of PriceRunner Group AB for $496 million to enhance price comparison capabilities
• 2023: Development of AI assistant powered by OpenAI technology
• 2023: Operating losses begin declining with positive transaction margin dollars in United States
• July 2023: Klarna Media Placements documentation establishes campaign requirements and timelines
• November 13, 2023: Global rollout of Ads Manager platform to UK and Sweden following US success
• 2024: Introduction of Klarna Balance for seamless Pay in Full and Pay Later without bank connections
• 2024: Klarna achieves $180 million in advertising revenue, representing 6% of total revenue
• May 22, 2024: PubMatic partnership announced for programmatic advertising scaling using Convert platform
• March 14, 2025: Klarna files SEC registration for IPO seeking $14 billion valuation
• March 2025: Walmart partnership announcement replaces Affirm as exclusive BNPL provider
• September 2, 2025: Official IPO launch announcement with price range of $35-$37 per share on NYSE under symbol "KLAR"
• Related: Google introduces Target CPC bidding for Demand Gen campaigns expanding click-focused optimization
• Related: Ad Creative ID Framework gains industry support for standardized video advertising

Summary

Who: Klarna, the Swedish buy-now-pay-later company led by CEO Sebastian Shamyakovski, disclosed advertising revenue growth in its IPO filing to the Securities and Exchange Commission.

What: Klarna reported $180 million in advertising revenue for 2024, growing from $13 million in 2020, through sponsored search, affiliate programs, and brand advertising solutions leveraging first-party consumer data.

When: The disclosure occurred March 14, 2025, in Klarna's SEC registration filing for its initial public offering, with the advertising business experiencing significant acceleration since the November 2023 Ads Manager rollout.

Where: The advertising business operates globally across Klarna's platform serving 150 million shoppers, including 37 million in the United States, with particular strength in programmatic advertising partnerships.

Why: Klarna developed its advertising business to diversify revenue streams beyond buy-now-pay-later payments, targeting the $475 billion global digital advertising market opportunity while leveraging its extensive first-party consumer data and high-intent shopping audience for merchant monetization.