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| PayPal plans to buy Pinterest for $45 billion |
PayPal has offered to acquire Pinterest for $45 billion, a combination that could herald the emergence of more fintech and social media in e-commerce.
It's the largest acquisition by a social media company, surpassing Microsoft's $26.2 billion acquisition of LinkedIn in 2016.
As more and more online shoppers buy the products they see on social media, negotiating a deal ensues.
They often follow influencers on platforms like Instagram and Tik Tok. The acquisition of Pinterest enables PayPal to develop its e-commerce and diversify its revenue through advertising revenue.
The online payment provider hopes to negotiate successfully and announce the deal when it releases its quarterly results on November 8.
This integration is very beneficial for PayPal's ongoing monetization plans for both merchant and consumer platforms, especially when the social commerce platform Pinterest with Honey's AI is integrated into the target PayPal app.
As more people use its service to shop and pay bills online, the payments giant is one of the biggest winners in the coronavirus pandemic. The stock price is up about 36% in the past 12 months and the market capitalization is around $320 billion.
Pinterest was valued at around $13 billion when it went public in 2019. With lockdown restrictions keeping people at home, so too have users looking for ideas for crafts and projects.
As the blockade eases, Pinterest is warning that user growth is slowing, especially in the US, its largest market. He said the expected revenue growth is mainly due to deeper interaction with existing users rather than new user registrations.
PayPal wants to improve e-commerce products
PayPal's offer represents an additional 26% charge over Pinterest's closing price of $55.58 and corresponds to 62 times the social media company's EBITDA over the past 12 months.
By this standard, Microsoft paid 79 times LinkedIn's revenue in a pure cash transaction. However, Pinterest has made PayPal shares available to its shareholders.
Over the past few years, the payments giant has been trying to improve its e-commerce products through acquisitions.
Online coupon finder Honey was acquired for $4 billion in 2019. It was also acquired by Japanese company Payy earlier this year for $2.7 billion. In May, the company acquired Happy Returns, a returns service provider.
Social media platforms are trying to get consumers to buy directly from their platforms. For example, TikTok is testing a way to buy products directly through its app.
Tik Tok has teamed up with e-commerce giant Shopify. It launched in August and allowed retail brands to link their product listings to the app.
The PayPal-Pinterest deal underscores the ability of social media and other fintech companies to join forces to conquer segments of the e-commerce market.
Social commerce is growing in the United States, but no one has won it yet. Thus, PayPal is not in competition with Amazon, but is based on a different shopping model.