Enough with pinning in slow motion. PayPal PYPL -4.91%
Holdings may be hoping this can inspire Pinterest‘s
users to start spending real money.
The payments giant is in the early stages of talks to acquire the social media company, according to the Wall Street Journal. A deal would represent the biggest new bet yet for PayPal, and recognition that Pinterest’s best potential may be in someone else’s hands.
PayPal is aiming far beyond payments as it is heading towards its outlook of 750 million active users by 2025. This includes a host of credits and other financial tools aimed at attracting users and further monetizing them, ranging from bill paying to crypto. But it also aims to move up the ranks in the consumer’s decision to spend in the first place.
Having a role in that buying decision is an important income opportunity. Not only will this potentially increase payment volumes, but merchants will also pay to access this funnel. Pinterest, whose users notoriously come to its image-sharing platform with intent to buy, earns money primarily through ads for relevant products. Together, the hope may be that PayPal’s âsuper appâ would play a key role in many aspects of the shopping experience.
In the advertising arena, Pinterest never had the hope of competing closely with Facebook for algorithmic targeting. And while he has plans to finally pilot transparent online transactions by the end of this year, he has yet to find a business formula that gives him an edge.
Maybe PayPal can help her unlock that formula, which makes it both easier and more compelling to buy things that Pinterest users find inspiring. Pinterest had over 450 million monthly active users in the second quarter, but it hasn’t been able to monetize many of them, especially those outside of the United States.
PayPal could find opportunities in Pinterest’s most lucrative user base. In 2019, Pinterest said in its initial public offering brief that two-thirds of its total monthly active users were women and that eight in 10 American mothers used its platform. Particularly in the United States, however, the platform has struggled to attract demographics outside of this niche. A recent Morgan Stanley survey suggested that a subset of young male users had little interest in what Pinterest had to offer.
Some investors might think this potential deal is reminiscent of PayPal’s previous combination with eBay. Being tied to a merchant platform arguably limited PayPal’s opportunities in several ways, and it has since benefited enormously from being a payments Switzerland. But PayPal would likely view Pinterest as a discovery platform to direct users to its long list of merchant partners rather than a competing end destination. There is the question of what, if anything, should happen to Pinterest’s ongoing partnership with Shopify.,
which in some ways is a rival to PayPal in competing for merchant business, even including its own payment button.
Shares of Pinterest rose 13% on Wednesday when the potential deal was announced, while those of PayPal fell 5%. Bloomberg reported on Wednesday that the companies had discussed a potential price of around $ 70 per share, citing people with knowledge of the matter. That would value Pinterest at around $ 45 billion, according to the report, including Class B shares, a premium over its current market value of $ 35.8 billion fully diluted.
At its peak earlier this year, Pinterest raked in well above a market value of $ 55 billion, as homebound users swarmed the platform amid the depths of Covid-19. However, many of those users have since left the platform, questioning Pinterest’s ability to grow significantly on its own.
The bottom line is that PayPal would benefit from people using its app for more things, while Pinterest needs to find a way to get more users to pay. Sometimes what is most inspiring is actually what is essential.
Stock selection ranking heard
Write to Telis Demos at firstname.lastname@example.org and Laura Forman at email@example.com
Copyright Â© 2021 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8