PayPal opened its wallet and will pay what many think is a premium price for online shopping platform Honey. The LA-based tech company currently has thin profits on about $100 million in annual revenue. But as PayPal closes in on a base of 300 million users, it needs more options than just payments to add value for its customers.
Honey enhances online shopper value with merchant savings offers and loyalty rewards. Integrated features engage consumers and encourage long-term relationships. Providing a seamless payment experience, which is a PayPal strength, is a necessary part of the shopping experience as well. How sweet this deal for Honey turns out to be for PayPal remains to be seen.
A Motley Fool article, excerpted below, discusses more on the topic:
PayPal just made its largest acquisition ever. It’s buying Honey, an online shopping and rewards platform, for about $4 billion.
Honey’s browser plugin automatically tests promotion codes on merchant websites at checkout to make sure shoppers aren’t missing out on savings. It also partners with merchants to offer exclusive savings and gives shoppers cash-back rewards for using it, among other features. It counts 17 million active users.
Management outlined an important goal for the company in its press release announcing the acquisition. “Honey will enable PayPal to reach consumers at the beginning of their shopping journeys.” PayPal wants to move beyond an afterthought in the online shopping experience to become the place consumers go to when they’re looking to discover new products and deals.
PayPal will quickly grow Honey’s user base. That gives the company more leverage in drawing in more merchants to its platform and negotiating exclusive promotions and higher cash-back rates. That could create a virtuous cycle, drawing in more users to the discovery platform and further incentivizing them to use PayPal/Honey at checkout.
Overview by Raymond Pucci, Director, Merchant Services at Mercator Advisory Group
