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PayPal Inc. this week struck a deal that offers the San Jose, Calif.-based processor the potential to reach TV viewers in more than 80 million U.S. households. The deal, with San Francisco-based commerce-platform vendor Delivery Agent Inc., furthers PayPal’s recent push into the nascent market for so-called T-Commerce transactions, or purchases of products seen by consumers while watching TV.
As part of the deal, which will go live some time in the third quarter, PayPal will also help market Delivery Agent’s services to the large merchants for which it processes both e-commerce and point-of-sale transactions.
Twelve-year-old Delivery Agent, which works with a constellation of TV and entertainment brands, including Comcast Corp., AT&T U-verse, Dish Network, HBO, and Direct TV, provides technology that allows TV viewers to use their remote control or a smart phone to buy merchandise or receive coupons related to programs. All told, the company’s platform reaches 85 million U.S. households, says Mike Fitzsimmons, Delivery Agent’s chief executive. Newer TVs come with a built-in Internet connection, while older ones can link up using a set-top box.
The company has been handing off card transactions to payment processors, but the inefficiency of entering payment details has been a problem, Fitzsimmons says.
“We were looking at how to reduce friction in checkout,” he tells Digital Transactions News. “It takes 10 to 12 minutes using a remote.” With PayPal, users’ accounts will be integrated into Delivery Agent’s platform, allowing transactions to occur with the entry of a mobile number and a PIN for authentication. “PayPal is uniquely positioned to help us,” says Fitzsimmons.
PayPal will earn transaction fees on each payment, while Delivery Agent will take a separate, unspecified fee from the marketer, Fitzsimmons says. PayPal would not comment on the deal with Delivery Agent beyond a press release issued this week announcing the arrangement.
The transaction potential for PayPal could be huge. “PayPal is pretty good at going after niches that have pretty good volume,” notes George Peabody, a senior analyst at Glenbrook Partners, a Menlo Park, Calif.-based payments consultancy. “Since TV is in the process of becoming more interactive, [this deal] makes sense for PayPal.”
Simplifying checkout for TV viewers will be critical, he adds. “Everything about payments these days is how do you embed it in a customer-experience flow,” he says.
Research released this week by Delivery Agent appears to bolster the case for T-Commerce. For example, some 82% of consumers surveyed said they would be interested in buying products they see in, or that are somehow tied to, shows they are watching. Comedies and dramas are the shows consumers are most likely to buy from, followed by movies and reality shows.
When asked about payment preferences for T-Commerce, 53% of consumers named credit cards, followed by PayPal (29%), Amazon Checkout (11%), and Bill Me Later (7%). PayPal and Bill Me Later are both owned by online auction giant eBay Inc.
This is not PayPal’s first T-Commerce venture. A year ago, it announced a deal under which it would process transactions for cable operator Comcast and TV services provider TiVo Inc. And late in 2010 it said it was working with a Plano, Texas TV-technology provider called FourthWall Media to develop a so-called buy button that would allow viewers to purchase products using their remote.
At the same time, Fitzsimmons says Delivery Agent is open to working with other online wallets. “We’re very open-minded,” he says. “Where we can achieve scale, we will quite happily work with anyone who can add value and take friction out of the checkout process.”
