Sunday , July 5, 2020

Stepping Further into E-Commerce, PayPal Pays $4 Billion for Honey Shopping Assistant

PayPal Holdings Inc. is betting big on its strategy of boosting its e-commerce presence with its approximately $4 billion acquisition of Honey Science Corp., a technology platform that helps consumers find offers and deals on popular e-commerce sites.

Announced Wednesday afternoon, the deal envisions Honey tapping into the more than 275 million active consumer accounts of PayPal and its Venmo peer-to-peer payment service to drive adoption. San Jose, Calif.-based PayPal also expects to source offers from its network of 24 million merchant accounts. 

Honey’s brand will be retained, and its cofounders, George Ruan and Ryan Hudson, will continue to lead the company from its Los Angeles headquarters.

Honey cofounders Ryan Hudson (left) and George Ryan.

Honey is a browser extension that presents offers from across approximately 30,000 online retailers. When shopping, the consumer can click the Honey extension button to see available offers. Honey says it makes commissions from participating merchants, something known as affiliate marketing. Honey also offers a rewards program for its users.

“The combination of Honey’s complementary consumer products with our platform will significantly enhance our ability to drive engagement and play a more meaningful role in the daily lives of our consumers,” Dan Schulman, PayPal president and chief executive, said in a statement. “As a partner of choice for our merchants, this is another way that we can help them build and strengthen their customer relationships, provide personalized offers, and drive incremental sales.”

The deal, PayPal’s largest ever, is expected to close in the first quarter of 2020.

PayPal has been on a tear to extend itself deeper into the shopping experience. Retail and cobranded credit card issuer Synchrony Financial will issue a Venmo credit card in hopes of generating more revenue from the P2P payment service. PayPal added instant-transfer capabilities and offers “smart buttons” as checkout options for merchants. 

At least one analyst expects the Honey acquisition to yield benefits to PayPal on the consumer side.

“While Honey is a two-sided network and offers services to consumers and merchants, we feel the largest synergies will be on the consumer side of PayPal’s business,” Robert Napoli, analyst at Chicago-based William Blair & Co. LLC, says in a research note. “A significant use of Honey is as a tool that helps consumers buy with confidence and helps consumers save money, and thus it should help drive consumer engagement.”

Honey’s merchant partners include Walmart Inc., Kohl’s Inc., Macy’s Inc., and Dell, among others, Napoli says.  

“The Honey assets should help improve customer engagement and drive more volume. Management plans to integrate the capabilities broadly into PayPal within the next 6-12 months after close,” Napoli adds. “We believe Honey will be very attractive to Venmo users in particular. A high percentage of Honey users are millennials and 79% are currently women.”

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