PayPal Paying $4B For Honey's 17M, Younger-Skewing Users

Attracted by 17 million bargain-hunting users, PayPal Holdings announced yesterday it has put Los Angeles-based Honey Science Corp. in its shopping cart and expects to pay about $4 billion at checkout in the first quarter of 2020.

“Honey operates as both a web browser add-on and a mobile app, offering consumers discount codes to roughly 30,000 online retailers. It's a competitor to sites like RetailMeNot that collect promo codes and aggregate them for consumers. Honey differentiates itself by automatically inputting all eligible promo codes for shoppers during checkout and uses the code with the biggest discount,” Ahiza Garcia reports  for CNN Business.



“The purchase -- the biggest in PayPal’s history -- will bring the company a new source of data and insights into online shopping behavior, paving the way for it to reach deeper into online purchases and offer a wider range of services to consumers and merchants,” writes  Richard Waters for Financial Times.

“The acquisition comes as the online payments company faces a new wave of competition from internet giants such as Apple and Google, leading it to search for new ways to cement its ties with customers and become more useful to merchants,” Water continues. 

“The acquisition, which is PayPal’s largest to date, will give the payments giant a foothold earlier in the customer’s shopping journey. Instead of only competing on the checkout page against credit cards or Apple Pay, for example, PayPal will leap ahead to become a part of the deal discovery process, as well,” Sarah Perez writes for TechCr unch.

“Currently, Honey’s … users take advantage of its suite of money-saving tools to track prices, get alerts, make lists, browse offers and participate in an Ebates-like rewards program called Honey Gold. Its users tend to be younger, millennial shoppers, both male and female,” Perez adds.

“In my experience, though, the codes Honey finds don’t always work -- Best Buy’s online store didn’t take a Honey-found coupon for an order I created for a Nintendo Switch, for example -- but it’s a useful service to at least help you check for coupon codes before you buy something,” observes   Jay Peters for The Verge.

“Honey can also track prices of an individual item and notify you when it drops below a certain threshold. Honey also offers a rewards program, Honey Gold, which gives you ‘Gold’ for using Honey while you’re shopping that can be redeemed for gift cards. PayPal-owned Venmo just launched a similar rewards program for its physical debit card,” Peters continues.

“Founded in 2012 by George Ruan and Ryan Hudson, the Los Angeles-based company has been largely been under the radar. It started with a browser extension and later expanded into price tracking and mobile. The company had previously raised $55 million in venture capital funding from investors like Citi Ventures and Anthos Capital,” writes  Biz Carson for Forbes.

In addition, several small Los Angeles-area investors are set to make a killing if the deal, which is subject to regulatory approvals, goes through, Katie Roof and Yuliya Chernova write for The Wall Street Journal

“Santa Monica-based seed-stage firm Mucker Capital, for example, is expected to receive proceeds of $280 million from the $3 million it invested in Honey, according to [a] person familiar with the investment,” they write.

“Honey had over $100 million in revenue last year, said PayPal chief executive Dan Schulman on an investor call  Wednesday. Honey expects to generate $250 million to $300 million in revenue in 2019, according to another person familiar with the matter. PayPal declined to comment,” Roof and Chernova report.

Honey will remain in Los Angeles under Hudson’s and Ruan’s direction and the Honey team will become part of PayPal’s global consumer product and technology organization, reporting to Senior Vice President John Kunze.

PayPal and Venmo have more than 275 million active consumer accounts.

“PayPal has been bullish lately, with [CEO Dan] Schulman pointing to better-than-expected Q3 2019 numbers and strong spending by its customers to downplay talk of a near-term recession,” Tom McKay writes  for Gizmodo.

“While acknowledging that issues like Brexit, the U.S.-China trade war, and the ongoing impeachment proceedings against Donald Trump could ‘break any one of number of different ways,’ CNBC reported, Schulman said in a recent interview that ‘From our perspective, we see a pretty strong secular growth. People have been predicting a recession for some time, but we’re not seeing it in any of our numbers,’” McKay continues.

Whether you can take that to the bank -- er, online payment system  -- or not remains to be seen.

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