Chasing the social shopping dream

Social commerce has been a dream as long as social networks have existed. And even before, really: Online shopping influenced by celebrities was a key selling point of Time Warner's Full Service Network, an experimental interactive TV service that rose and fell at the dawn of the internet age.

The latest to chase this vision is PayPal CEO Dan Schulman. In January, he paid $4 billion for Honey, a price-tracking tool that got his payments company deeper into shopping discovery.

PayPal now appears poised to deepen its social commerce bet: Bloomberg and others reported Wednesday that PayPal was in late-stage talks to acquire Pinterest for almost $40 billion.

• Pinterest stock soared 12% in a wild day of trading that saw share trading halted twice.
• PayPal shares dropped almost 5%, suggesting investors weren't fans of the rumored deal.
• A Pinterest spokesperson declined to comment, and PayPal representatives didn't respond to a request for comment.

It certainly needs to respond to the threat of Shopify. Shopify builds storefronts for retailers and also helps them sell socially on Facebook and Instagram.

• PayPal is a payment option on Shopify. But that's a weak strategic position, with Shopify pushing Shop Pay on merchants and customers.
• Shopify's deal with Affirm for "buy now, pay later" shows PayPal's vulnerability. That's a huge number of merchants and consumers PayPal will have a hard time tapping for "Pay in 4" purchases.
• PayPal has admitted it didn't focus enough on retailers. "The one area that we got a little bit away from was the merchant side," Greg Lisiewski, who's in charge of PayPal's pay-later services, recently told Protocol.

Yet the hype around social commerce has led to a lot of disappointment. Facebook in particular pushed the idea of social commerce early on, without much to show for it.

• Most social networks are for chatting, not commerce, which means conversion rates are low, advertising is expensive, and financial results are disappointing.
• Two social networks have proved to be exceptions to this rule: Instagram, with its emphasis on sharing lifestyle-oriented visuals, and Pinterest, whose pinners typically use it to bookmark things they want to buy.
• Pinterest is also one of the few purchasable options for PayPal. Shopify is too expensive at a market cap of $185 billion and Etsy's too, well, twee.

And Pinterest and PayPal have tried to partner before. It ... didn't go well.

• Buyable Pins, announced in 2015 at an event in Pinterest's San Francisco headquarters, was an attempt to get shoppers to buy items directly on Pinterest without leaving the site. PayPal's Braintree and Stripe were partners.
• As I reported at the time, Pinterest negotiated an unusual arrangement with PayPal and Stripe. Pinterest didn't process transactions itself. Instead, it passed card numbers on to retailers' existing processors.
• Pinterest said it hoped to make money by featuring Buyable Pins in ads it sold.
• In 2018, Pinterest quietly abandoned Buyable Pins.

Still, PayPal could integrate purchasing more deeply if it owned Pinterest. One thing PayPal believes it's particularly good at is the checkout experience; it has decades of experience in optimizing the buy button.

• Pinterest could use some help in the product department. Under founder-CEO Ben Silbermann, it's been notoriously slow and cautious, and focused on the experience of consumers, not retailers or advertisers.
• PayPal hasn't had the best reputation as a product innovator, either. But that seems to be changing under Schulman, with renewed focus on turning it from a payments service into a super app.
• It's fascinating to think about what Pinterest's designers and PayPal's payment engineers might come up with together.

Deals fall apart, and this one might, too. What's certain is that PayPal needs to get deeper into shopping, and Pinterest needs to find a strategy for competing with the likes of Amazon, Google and Facebook.

— Owen Thomas (email | twitter)

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Target critical skill gaps and close them with engaging and personalized employee learning. Empower your people with ProEdge, the single solution that can upskill entire organizations and help keep them ahead of the ever-changing demands of the digital world.

Learn more