Although a rumored PayPal acquisition of Pinterest isn’t happening, the potential deal indicates the fintech giant could be more heavily focused going forward on the social commerce space, which involves consumer purchases made on social media platforms.
Social commerce is something Pinterest has been focused on since pivoting from an image search site where users go to find style, wedding and decor inspiration. PayPal, meanwhile, wants to build out its already extensive financial ecosystem.
While that deal didn’t pan out, there are other deals, including potential partnerships or smaller acquisitions, that could make sense for PayPal to pursue. Let’s take a look.
If PayPal had pursued a purchase of Pinterest, it would presumably have done so to power transactions. (Shares of PayPal fell sharply after multiple media outlets reported late last month that it was pursuing Pinterest in a deal that could be valued at up to $45 billion. Shares rebounded after PayPal said it wouldn’t pursue a deal at this time.)
The Pinterest transaction likely had to do with PayPal’s desire to take control of the whole purchasing process, according to an analyst with Wedbush Securities, Moshe Katri. It would have made PayPal very active, probably “stickier” and ultimately generate more volume on the platform, which serves both consumers and merchants.
“The thought here is ultimately you should be able to connect between the 32 million merchants and over 400 million consumers in a shopping sort of function or an improved experience,” Katri said in an interview. “And a shopping function helps integrate these platforms in a network within PayPal.”
But PayPal didn’t necessarily need Pinterest to accomplish its perceived goal of being a one-stop financial product, according to Katri. The company acquired online coupon company Honey in 2019, in a purchase that helped PayPal better understand consumers’ shopping behaviors. Pinterest could have helped PayPal get deeper into that function in different shopping categories.
“It helps expand the ecosystem, if you think about it,” Katri said. “Square is also in the same category. Both companies are trying to monetize the ecosystem among consumers and merchants.”
But, even without making a multibillion-dollar purchase, PayPal could still become the transaction tool for Pinterest, according to Scott Kessler, vice president and global lead for technology, media, and telecom at Third Bridge. It could do that by partnering with Pinterest, rather than buying it.
The two companies that lead in social commerce are Meta (Facebook) and Pinterest, according to Kessler. Meta’s Instagram is a leader in social commerce because of its large user base and dominance among social media platforms coupled with shopping features, and Pinterest has reoriented itself to focus on commerce as well.