PayPal ventures into ad business leveraging shopper data

PayPal is set to launch an advertising network leveraging its extensive user data, as reported by the Wall Street Journal on Tuesday. This initiative aims to capitalize on the purchasing and spending patterns of its millions of users.

The digital payments giant, known for its popular platforms like PayPal and the socially-integrated Venmo app, plans to build this ad sales business around the substantial data it collects from tracking user transactions. To spearhead this new venture, PayPal has appointed Mark Grether, formerly of Uber’s advertising division, as the senior vice president and general manager of the newly established PayPal Ads division. Grether’s responsibilities will include developing innovative ad formats, overseeing sales operations, and expanding the team.

Earlier this year, PayPal introduced its first advertising product, Advanced Offers. This tool utilizes artificial intelligence and PayPal’s data to enable merchants to target users with personalized discounts and promotions. The unique selling point of Advanced Offers is that advertisers are only charged when consumers make a purchase. Initial tests with online marketplaces like eBay and Zazzle have shown promising results.

Expanding its vision, PayPal now aims to attract non-endemic advertisers—companies that do not sell products or services through PayPal. These advertisers could use PayPal’s data to target consumers with ads displayed on other platforms, such as websites and connected TV sets. According to PayPal’s recent earnings report, the company processed 6.5 billion payments from approximately 400 million customers in the first quarter, showcasing the vast potential of its user data for targeted advertising.

Grether emphasized the advantage of PayPal’s comprehensive consumer data. “If you’re someone who’s buying products on the web, we know who is buying the products where, and we can leverage the data,” he said. This includes data from real-world transactions made with the PayPal credit card.

While shoppers will be automatically included in this new ad network, they will have the option to opt out. In addition to data-driven ads, PayPal has started running untargeted merchant offers on Venmo. However, the company is cautious about overwhelming Venmo’s younger user base, who view the app as a social media platform, with excessive promotions.

The move aligns with a broader industry trend where companies leverage existing customer data to create targeted advertising networks. PayPal’s rich transactional data could allow it to command higher ad rates compared to traditional retail ad networks. This detailed consumer data can help advertisers target specific demographics, such as affluent consumers or frequent business travelers, providing a more precise advertising approach.

Despite this potential, financial services companies like PayPal need substantial growth in ad sales to impact their bottom lines significantly due to the higher profit margins of their core businesses. PayPal’s entry into the advertising market follows JP Morgan Chase’s recent announcement to allow advertisers to target users based on their transactional histories, indicating a growing trend among financial institutions to diversify into ad sales.

PayPal’s foray into the ad business comes at a critical time as the company seeks to rebound from recent challenges. Following the pandemic boom, PayPal has faced declining fortunes, prompting a 9% reduction in its global workforce in January. Despite a dip in stock value and cautious profit growth forecasts, PayPal reported a profit rise in the first quarter and has since raised its outlook for the year.