PayPal is paying $4 billion — its biggest acquisition yet — to buy Honey Science Corp.’s deal-search tool in a bid to put PayPal and Venmo ahead of any competing payment options.
By attaching to Honey and its base of 17 million mostly young, female consumers who use the platform to find the best price on e-commerce deals, PayPal also is aiming to get closer to merchants with customized offers it plans to seed to PayPal and Venmo users.
“We think this moves us up in the entire shopping process,” PayPal CEO Dan Schulman told investors on Wednesday during a conference call announcing the mostly cash deal, which is set to close early next year.
Honey already works with about 30,000 merchants to promote deals users track via a browser extension and a mobile app. Participating retailers include large merchants like Macy’s, Sephora and Expedia plus marketplaces like eBay and Etsy. Honey also serves some local sellers like pizza stores.
Schulman plans to work more closely with merchants to expand the range of Honey's offers and create a funnel channeling more customized and tailored deals to PayPal and Venmo users.
“Instead of just being at the checkout page, we can now actually move up [the shopping path], because 40% of all e-commerce is done through some trigger event — a personalized offer or a deal someone sees,” Schulman said.
The move also seems like an ideal fit with Venmo’s millennial base, creating a path beyond P2P to shopping and commerce. PayPal has tried to create this path in the past as a way to bring in revenue from Venmo users, but
“The Honey deal could prove to be a catalyst for Venmo to be a viral marketing arm, by providing it with merchant offer inventory it hasn’t had before,” said Richard Crone, a principal with Crone Consulting LLC.
One potential challenge for PayPal’s vision is integration, Crone suggested.
“There will be a lot of work to integrate Honey with PayPal with Venmo and its other offerings, but what this deal really does it creates a blurring effect between online and in-store, which is essentially what Amazon has done with its online marketplace and Amazon Go, and PayPal is in the sweet spot enabling the consumer to navigate between their shopping journey, the merchant and the deals,” Crone said.
Users add Honey to their browser or download the app to browse e-commerce sites. Honey automatically flags deals and notifies users when the price drops on an item they’re watching on “Droplists” they create.
PayPal explored buying other deal-scanning companies before deciding on Honey, though Schulman didn’t name them. Retail-Me-Not is one of several sites that look for the best price or discount on an item.
“Most of the other [deal-scanning] companies don’t have a consumer connection, but Honey goes right to the consumer, who creates demand lists and constantly checks the app for deals,” Schulman said.
Honey, launched in 2012 in Los Angeles, had revenue of $100 million last year and is turning a profit with a rapid growth rate; the deal will be fully accretive to PayPal’s profits next year, PayPal executives told analysts.
Honey co-founders George Ruan and Ryan Hudson will continue to lead Honey from its existing headquarters, reporting to PayPal senior vice president John Kunze, PayPal said.
