PayPal’s advertising business

PayPal announced this week that it has hired the former head of Uber’s advertising unit to lead a new PayPal Ads division. From the WSJ:

PayPal has hired Mark Grether, who formerly led Uber’s advertising business, to lead the effort as senior vice president and general manager of its newly-created PayPal Ads division. In his new role, he will be responsible for developing new ad formats, overseeing sales and hiring staff to fill out the division, he said … PayPal in January introduced Advanced Offers, its first ad product, which uses AI and the company’s data to help merchants target PayPal users with discounts and other personalized promotions … Advanced Offers only charges advertisers when consumers make a purchase. Online marketplaces eBay and Zazzle have begun testing it, according to a PayPal spokesman … But PayPal now aims to sell ads not only to its own customers, but to so-called non-endemic advertisers, or those that don’t sell products or services through PayPal. Those companies might use PayPal data to target consumers with ads that could be displayed elsewhere, for instance, on other websites or connected TV sets.

There are a few notable aspects to this news:

• In-app advertising is a fairly nascent business at Uber, and the previous GM effectively built it from the ground up in his three years there. Uber’s advertising business, in total, reached a $900MM run rate in Q4 2023, per its Q1 2024 earnings call;
• PayPal’s Advanced Offers business is similar to what Chase revealed in April, which replaced the offers and promotions product that had previously been powered by Cardlytics. But expanding PayPal’s product outside of PayPal retailers obviously enlarges the opportunity meaningfully;
• PayPal and Uber are fundamentally different businesses that emit and utilize wholly, qualitatively distinct data sets.

In a LinkedIn post announcing his appointment, the new GM of PayPal’s Advertising business reveals that PayPal’s service features nearly 400MM active accounts, with “about a quarter of the world’s $6 trillion in digital commerce” being processed by PayPal annually.

Chase’s venture into advertising serves as a relevant prototype for PayPal’s strategy. In Chase and the consumer finance advertising opportunity, I write:

Chase’s new advertising product not only supports the Everything is an Ad Network thesis, it may be the most distilled example of it … But unlike, for example, Uber, DoorDash, and Ulta Beauty, which all launched retail media networks since the introduction of ATT, Chase’s first-party data isn’t scoped to a singular commercial use case. Chase has visibility into the entirety of its customers’ commercial lives … The advertising opportunity for consumer finance is compelling. Very few companies can compete with the scale and breadth of scope of user purchase data that banks and credit cards possess. I’d imagine that other banks and payment platforms — like PayPal, which was rumored to be in acquisition talks with Pinterest in 2021 — will follow suit.

PayPal’s course into advertising isn’t surprising — as I wrote when Chase introduced an advertising business, PayPal’s entry felt inevitable. While details of PayPal’s advertising product are sparse, introducing ad units to Venmo and the PayPal app and website seems straightforward as a fairly minimal effort that would mimic Uber’s approach.

This is where the stark contrast between Uber’s and PayPal’s businesses highlights the pervasiveness of the Everything is an Ad Network thesis. While different businesses’ first-party data sets may possess varying degrees of efficacy for targeting, almost any first-party data provides some value. This has allowed a vast number of companies to build meaningful advertising businesses in the new privacy landscape.