POV: PayPal to Buy Pinterest?

Background:

It is being reported that payments company PayPal is interested in acquiring visual social and shopping network Pinterest in an all-stock deal that would value Pinterest at $39bn and make it the largest acquisition of the year and the largest acquisition of a social media company – beating the $26.2bn paid by Microsoft for LinkedIn in 2016.

Details and Implications:

Bloomberg first broke the news that talks had been taking place between the two companies, according to people with knowledge of the matter, and that the companies had discussed a sale price of about $70 a share, valuing Pinterest at about $45bn and representing a premium of 26% to Pinterest’s closing share price last Tuesday.

Pinterest has been a hugely strong performer since its IPO in April 2019, with its stock almost trebling in price and alongside other social media platforms, benefitting from the change in consumer behaviour due to the global pandemic and growing its user base to around 450m users. After beginning life as a visual social media platform, Pinterest has found success by reinventing itself as a shop window and visual search engine, signing a deal with Shopify last year to accelerate its commerce ambitions.

However, Pinterest’s last set of results fell short of expectations, leading to a drop in the share price and it has also faced executive issues, with co-founder Evan Sharp announcing that he is stepping down from his role with the company. At the same time, PayPal has seen its stock price grow more than 150% since its low in March 2020 and it is looking to use this strong position to fuel its ‘super app’ strategy, for which is debuted its App in September, turning the payment company into a platform more akin to China’s mega App WeChat with services including direct deposit, bill payment, digital wallets, peer-to-peer payments, shopping tools – via its acquisition of Honey, crypto currency services and more.

PayPal’s move for Pinterest would be a significant step in turbo boosting its platform ecosystem strategy, adding millions of users and a significant social element to PayPal’s existing payment and financial ecosystem of services. The combination would aim to create a ‘must use’ suite of services as multiple players battle for share of phone and share of wallet as digital commerce continues to rise.

Summary:

PayPal has ambitious plans and its reported move for Pinterest would certainly back up the noise with action if it comes to pass. Fusing a social network of almost 500m people to a 400m strong financial community could have seriously beneficial multiplication effects for PayPal’s strategy to develop a platform ecosystem. Global digital social platforms are the new countries where people live their lives and this deal would create another giant one, giving brands another billion strong social partner alongside Facebook (3.5bn), TikTok (2bn) and Tencent (1.2bn)…before you even count Google or Amazon…to use to connect with and to sell to their audiences.

Further Reading:

Bloomberg | The Guardian | Reuters | FT