How the PayPal Honey deal could reshape ecommerce

has struck gold. In a mostly cash move announced last week, the company will spend about $4 billion to buy Honey Science Corporation, the -finding browser extension and app, which currently has 17 million monthly users and more than 30,000 merchant websites.

Analytically speaking, it's a magical move. In fact, it's probably one of the best deals either could have made, and there was no better buyer or acquirer for Honey than PayPal, which brings its own 24 million merchants and 275 million users to the deal.

For those who didn't know Honey, which was hardly a household name, here is why its $4B dollar price tag is warranted: Honey started as a browser extension that tracked promo codes, but has since grown into a tool that also tracks pricing history, alerts users about price drops on items in their wish lists, and offers rebates or rewards through its “Honey Gold” program. Its growth in the past year has been remarkable. It's grown from 10 million members (who saved $800 million through the service) in 2018 to 17 million members today and $1 billion in savings to date, according to company estimates. Honey takes the principles of what Kayak did for travel and does the same for shoppers.

It's all about the customer journey

The holy trinity in the customer journey are identity, behavior, and intent.

It starts with the data. Until now, PayPal has one of the best data sets of customer identity, but it only had data at the end of a customer's journey online. It had no lead funnel; no intent or rich behavior data, meaning it didn't have access to a customer's intent to purchase or to what customers were searching or researching online.

Essentially, PayPal had the identity (it knows who you are), and it had the behavior (it knows your behavior when you make a purchase). Now, with intent data, it can also predict what's likely to come next.

PayPal now has a powerful two-sided platform for customer engagement, like Amazon or Facebook, that takes the company beyond the transactional relationship to get the best deals for its customers and engage with them. And it can do this in a personalized way. From a customer experience (CX) perspective, there's now a single gateway approach. If the customer is logged into PayPal and has the Honey browsing extension activated, PayPal has complete visibility.

How PayPal and Honey can benefit each other

There are numerous ways PayPal can integrate Honey into its business. It could charge its 24 million merchants for the additional service of having Honey as a coupon aggregator, though I don't think that's the best option. It would be more successful offering this as a “freemium” option for quicker merchant adoption. Consumers who have historically relied on Amazon can now buy directly from their favorite brands and merchants by seeking deals directly and can add to a master cart maintained by PayPal vs. Amazon, Apple Pay or another e-commerce aggregator.

Another way PayPal could integrate Honey is by doing something similar to what Walmart did with its now-discontinued Savings Catcher feature offer the customer a full refund if they find a better price on the same product from a different merchant.

Finally, PayPal could offer location-based merchant recommendations or advertising coupons on deals based on customer relevancy, which could lead to ad revenue from merchants

PayPal can also now connect intent data to abandoned shopping cart situations, effectively creating the mother of all cart-abandonment tools. Shopping cart abandonment is a problem every vendor tries to fix, and it's taking off as a critical part of customer engagement. The PayPal Honey acquisition creates the most powerful solution yet.

Meanwhile, Honey gets access to PayPal's 275 million users.

And, the industry at large? It gets an important lesson: Amazon can be challenged.

Amazon isn't invincible

We live in the era of customer relevance, and PayPal's acquisition of Honey shows that Amazon isn't always the most cost-effective choice for purchasing online. With couponing apps, consumers can research and compare deals, giving other retailers a better chance to win out over Amazon, especially if the buyer already has an affinity for their brand. PayPal will now own the entire customer journey engaging the customer depending on the particular deal and coupon and can significantly disrupt that journey by enabling a two-sided platform of merchants and deals for existing PayPal customers.

In short, the move has far-reaching ramifications across the e-commerce industry, chiefly by capturing and harnessing customers' intent data. It positions PayPal as a power player and demonstrates that there's room for more players than just Amazon, after all.

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