Paypal’s $4 Billion Honey Acquisition Shows Data Is The New Oil

Paypal’s $4 Billion Honey Acquisition Shows Data Is The New Oil

PayPal, the world’s biggest e-payments provider, has just spent $4 billion, its largest acquisition to date, on a browser extension – Honey. Honey offers a Google Chrome browser extension which tracks prices between different online sellers of the same products and automatically applies any available coupons or offers when they make a purchase. Its key selling point is to ensure that online buyers always get the best deal available on the market at any given time.

With the real tech giants such as Google and Apple stepping up their efforts in the e-payments market through Google Pay and Apple Pay, PayPal is acutely aware that if it hopes to retain its strong market share it needs to find new ways to tighten its ties to customers. Without entering a price war, which it can’t practically win when the competition has the deepest pockets in the world, the only way to achieve that is through becoming more useful to users – both consumers and merchants. Honey will provide PayPal with a rich seam of data and insights into e-commerce behaviour.

Honey monetises by charging merchants a commission when one of its users completes a sale after using its tools, including the browser extension. It currently has a user base of around 17 million but Paypal hopes to extend that to many of the 300 million users of PayPal and person-to-person payments network Venmo. With 24 million merchants currently using PayPal compared to the 30,000 that are part of Honey’s network, there is also huge potential to improve the service there.

Dan Schulman, PayPal’s CEO commented on the deal:

“This acquisition has the potential to be transformative for us. We think this moves us up in the entire shopping process rather than limiting PayPal’s connection to users to the checkout page of ecommerce sites”.

He further underlined the motivation of the acquisition as the opportunity for PayPal to deepen its relationship with consumers, adding:

“We think this starts to position us with merchants that combines shopping, offers, payments together in integrated solutions.”

Honey has raised only $32m in investment, which by Silicon Valley standards of VC-backed companies is relatively small. Its revenues grew by more than 100% to $100m over 2018, allowing it to move into profit. PayPal will fund the acquisition from its existing $5.5. billion in cash reserves. Its share price dropped 2% to about $102 each in after-market trading following the announcement, indicating that investors may not be completely convinced on the cost of the deal.

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