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PayPal To Acquire LA-Based Startup Honey


A few days ago, payment processing platform PayPal (say that five times fast…) announced they would be acquiring Honey, a Google Chrome extension used for finding discounts while shopping online. While most headlines boast about the numerical value of the acquisition — a whopping $4B — I’m more interested in the reasoning for the company purchase.

Honey is an LA-based startup focusing on making the online shopping experience better for the consumer. You can download their service as a Google Chrome extension, and then it automatically gets put to use when surfing the web. When you go on Amazon for example and pull up a product’s webpage, Honey will automatically search the web for better deals on the same item — easy as that. President and CEO of PayPal Dan Schulman says, “Honey is amongst the most transformative acquisitions in PayPal's history. It provides a broad portfolio of services to simplify the consumer shopping experience, while at the same time making it more affordable and rewarding. 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.” Providing a complementary service to PayPal’s current payment processing platform, Honey may be able to augment other PayPal subsidiaries such as Venmo. Additionally, with 17M current users, Honey will add even more customers to PayPal’s current 300M user count — this is a big deal.

With more commerce shifting to the internet, Honey acquires more users. With more users from the acquisition, PayPal will have more data, and with more data, PayPal will be able to better serve their customer base — by knowing their buying patterns and preferences, offerings can be better catered to each individual user. Since we do not have the same experience shopping online as we do in a store, I see this is a strong reason why PayPal would want to acquire Honey — to get themselves in front of the customer earlier, rather than just at the checkout page where they have to compete against the likes of credit card companies and Apple Pay. With more companies entering the financial technology (fintech) world (most notably Facebook, Apple, and Google) PayPal will likely use this acquisition to better compete.

In the competition for fintech industry domination, I see the move away from checkout to be a big one. PayPal would now focusing its efforts on customer product discovery and search, giving them an edge ahead of their payment processing competitors. Co-founder of Honey says, “Combining PayPal’s assets and reach with our technology, we can build powerful new online shopping experiences for consumers and merchants. We’ll have the ability to help millions of retailers efficiently reach consumers with offers that deliver more and more value to Honey members.” With the deal expected to close early next year, I can’t wait to see what synergies these two brands bring to each other.

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