Harley Finkelstein: I’ll take that call. Look, in both — Shopify Markets is getting a lot of traction. In Q1 alone, around 100,000 merchants use either Markets or Markets Pro feature to make a cross-border sale. We launched Markets Pro into early access in September. We see more and more merchants that are adopting it now. But if you think about the business models of our merchants, U.S. merchants on average are selling to 14 countries. And so going back to your comment made earlier about Shopify being the essential retail operating system for our merchants, if we want to be the center of their business, which we are, we need to enable them to sell across every single geography. And obviously, there are some geographies that they have not sold to yet.
Making that easier is really, really important. In the case of Markets Pro, what’s really interesting is that it really introduces this idea like a merchant of record solution. So you think — you have things like tax and duty compliance, but you also were able to provide, obviously, compliant with local laws, chargeback protection. And then if they want to go sort of one step further, of course, they can always go and leverage globally as well. But we saw — but in last year, we saw about $28 billion in cross-border sales. In Q1 of this year, we saw, as you mentioned, 15% of total GMV. And so we think the international — the ability to help our merchants sell internationally easier with greater speed and efficiency is going to be very important.
But also, remember that it also allows us to bring on new merchants from new geographies. Obviously, the majority of our merchants are still in our core geographies. But every time we make it easier to sell across the entire globe with all those features that I just mentioned, more and more merchants join Shopify and that also is a huge benefit to both these products.
Carrie Gillard: Our next question comes from Matthew Pfau at William Blair.
Matthew Pfau: I wanted to ask one on the Audiences product. It seems like it’s already helping you out in terms of driving more sales on the platform as well as driving some upgrades. But any other thoughts on how do you additionally monetize this product longer term?
Harley Finkelstein: Yes. Look, I mean, Audiences, we continue to improve Audiences, more merchants, improving the algorithms. It’s been a year since the launch. We’re seeing return on ad spend nearly double, and it’s becoming a driver for upgrades, as I mentioned. Just over a week after upgrades, we see merchants churning on Audiences. We’re also adding new marketing platform partners. So we had Facebook and Instagram. We added Google in Q4. We just added Pinterest in Q1. And so we really are excited. I mean average — like ensuring that our merchants are able to get the highest return on ad spend possible and — is something that not only they really obviously want and require, but it’s only something that Shopify can do given our leverage because we have 10% of our e-commerce is done — in the U.S. is done on Shopify.
That is something very specific to Shopify. In terms of the monetization, Audiences is currently monetized indirectly via Shopify Payments. We will revisit the monetization levers once we make that extreme — the machine learning algorithm even more effective once we have to use more product market fit. But you will see more and more features and more functionality rollouts around audiences in the coming quarters. But again, as I said on my prepared remarks, it’s an early product that is seeing incredible traction. And I think it’s beloved by the people that use it. So it’s a very exciting area of our business, and monetization will come in the future directly.
Carrie Gillard: Our next question comes from Bhavin Shah at Deutsche Bank.
Bhavin Shah : Just on the 23% reduction in workforce, can you give us a sense of how much of that is related to logistics? Maybe those outside of logistics, what areas are most impacted?
Jeff Hoffmeister: Yes. We have not talked about specifically how many of the employees are related to logistics. I would say, as it relates to the areas which have been impacted, this is something which unfortunately has impacted our colleagues across all geographies and all levels within the organization. Tobi did make some comments in his letter regarding how we think about crafting ourselves for our future and so I would point you back to that. But this is, unfortunately, something which hits us at all perspectives. .
Harley Finkelstein: Let me just add to that. I mean let me say the thing. This is a very difficult day for any leader, any company to go through. I mean these are not the type of things that you want to do. But these are the things — and often, the easy thing and the right thing are not the same thing. In this case, the right thing and the hard thing are the same thing. But what we are building here is a more fit-for-purpose Shopify that is going to be centered on our main mission, our main quest. We’re going to have less scope creep. We’re going to have fewer meetings. We’re going to have more shipping great features to our merchants. We’re going to create more balance around managers and crafters and builders, which we think will be a lot healthier.
But this is going to set us up to take advantage of the opportunity we see in the future. The pace of change is unlike anything I think any of us have ever seen. And this new shape of Shopify will help us to achieve and execute on what is incredibly ambitious mission. Now it doesn’t make that any easier, but — because it is a tough day for our company, but that’s the reason why we’re doing this.
Carrie Gillard: Our next question comes from Andrew Boone at JMP Securities.
Andrew Boone: I wanted to go to enterprise. Can you talk a little bit about greater components adoption and what you’re seeing near term in terms of merchants reacting to it? Is it driving more merchant adoption in terms of enterprise? Or is it more the plus cycle upgrade where merchants are taking all of your products?
Harley Finkelstein: Thanks, Andrew. So we announced commerce components in January. We announced it on at the National Retail Federation conference. But really, the idea of this is that we needed something that was sort of a modern composable commerce stack. We’ve had incredible success with Shopify Plus. I mean, you — obviously, you’ve heard me talk about all the great names that joined quarter after quarter, some of the most important brands and some of the most iconic brands in the planet using Shopify Plus. But there are other types of retailers, businesses who want something a lot more modular and composable. They want our storefront and their checkout, but they may want to use a different inventory system or they want to use their own ERP system, but they want to use us for omnichannel and data and compliance as well as checkout.
So what we’re trying to do is make it really easy. Effectively, what we’re trying to do is make it so that not using Shopify as an enterprise modern, thoughtful brand that wants to be around for the next couple of decades is a bad idea. And while Shopify Plus provided this incredible robust enterprise solution, some retailers, some brands wanted to take different pieces of Shopify and combine it with their own in-house systems. This allows them to do so. So we’re getting to a point now where there’s fewer and fewer reasons why someone would not use Shopify to run a very large modern enterprise. And the results are already proving to be quite amazing. We’re seeing more of these brands who historically never really want to talk to Shopify that are now saying, actually, we now want to have those conversations.
And I think it’s also shifting the enterprise perception of Shopify. So the pipeline is building. We’re adding more and more of those components. There’s now more than 30 modular components that merchants can use or integrate with from Shopify and they can integrate with all their third-party services. But this allows us to get a larger piece of the enterprise. And remember, what we’re providing them with is the same software, the same functionality infrastructure that we have been building for our own use over the last almost 20 years now that powers 10% of all U.S. e-commerce. So it’s a really good product for us, but it allows us to access a different type of enterprise customer.
Carrie Gillard: And our last question will come from Dan Chan at TD Securities. Sorry, it looks like he just dropped out of the queue. Our last question instead will come from Ken Wong at Oppenheimer.
Ken Wong: Just wanted to — as we try to fine-tune our models here, just wondering, as we think about the back half, any help in terms of trying to calibrate what the SFN contribution to growth is, to the extent that we need to trim that down after it closes in Q2?
