M&A deal of the month: PayPal acquires Honey Science

M&A deal of the month: PayPal acquires Honey Science

Volker Schloenvoigt
December 2, 2019

Last month, PayPal announced its largest acquisition ever. It spent $4bn on Honey Science, a US company that plays in the loyalty and promotion space, and generated revenues of $100m in 2018. Honey claims to have 17m active monthly users with 70% of them US-based. For those less familiar with Honey’s offerings, it is basically about finding and applying discount codes to products that consumers want to buy online. There are two main products: firstly a browser extension that tracks shoppers as they use the web and look for products (just before checking out, Honey would then alert consumers of any available discount code and apply to the sale price), and secondly a more consumer-driven shopping list (incl. maximum price settings) with Honey sending alerts when a retailer matches those pre-set shopping criteria. Today, Honey generates revenues by charging participating merchants – and there are 30,000 of them – a commission when a purchase is complete.

On various other deals during the last 12 months, we highlighted the rationale of having access to data and there is certainly an element of that in this deal as well. Honey does throw computing power at automating and analysing price-tracking and coupon aggregation and obviously has highly valuable insights into consumer behaviour and general shopping data. All this could be monetised although Honey does not sell any user data at the moment. The real benefit of this acquisition is more in the context of platform economics and increased user engagement.

If these personalised coupons and offers are integrated with PayPal, it might urge PayPal users to access their account more often. It makes the PayPal platform more valuable. Furthermore, PayPal bought Venmo, one of the leading mobile p2p solutions in 2013 as part of a deal to acquire Braintree. According to PayPal leadership, the dominant user base of Venmo – female millennials – matches Honey’s core user group. Again, there are interesting and potentially significant opportunities to integrate and provide a stronger proposition.

This deal recognises the general industry trends of creating ecosystems where end-users have a wide range of different functionalities and propositions at hand. By providing its 280m account holders with an automated, efficient and cost-saving shopping feature, PayPal will increase user interaction considerably and become even more relevant in the growing e-commerce universe.

The content of this article does not reflect the official opinion of Edgar, Dunn & Company. The information and views expressed in this publication belong solely to the author(s).

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