PayPal/Pinterest: stick a pin in it
PayPal is sticking a pin in Pinterest, the social media platform of scrapbookers and mood board enthusiasts. The US digital payments giant has offered to buy it for about $45bn.
The price may be high, but the duo sit well together. PayPal has been talking up “superapp” plans for months, readying investors for the segue. Like China’s WeChat and Alipay in Asia, PayPal wants to create an ecosystem that bundles financial services with social media and commerce. Hence recent acquisitions such as online coupon start-up Honey Science, bought for $4bn in 2019, and this year’s $2.7bn purchase of Japanese buy-now-pay-later group Paidy.
The missing piece was a social network that would serve as a gateway to consumers. Pinterest offers this in spades. The app has about 450m monthly active users, mostly women. They come looking for images of things they are interested in or might want to buy. This makes Pinterest valuable real estate in the fight to secure access to the “purchasing funnel”.
Pinterest has added features that make it easier for users to buy items that they have pinned, or liked. But the bulk of the $1.7bn in revenue it pulled in last year came from selling ads rather than through ecommerce. Growth also risks slowing after the pandemic-fuelled boom.
PayPal is banking on being able to help Pinterest unlock its potential. The mooted price represents a 26 per cent premium to Pinterest’s Tuesday closing price. It values Pinterest very highly at 43 times forward editda, compared with handmade goods marketplace Etsy’s 38 times.
PayPal shares, up 21 per cent over the past 12 months, make for good currency. Buying Pinterest would give it access to troves of consumer data and potential new business as the main payment processor for Pinterest users.
But creating a fully integrated social commerce website is easier said than done. Allegations of gender discrimination at Pinterest and the recent departure of co-founder and design chief Evan Sharp will not help. PayPal investors are right to wonder if $45bn would not be better spent elsewhere.
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