PayPal follows Chase & Revolut in advertising foray, ushering in new era of media networks

The payments processing platform will use its stores of consumer data – acquired from years of tracking user purchases and shopping behaviors and from the transactions it records via its subsidiary Venmo – to build its new media network.

And it will not be short on data: during the first quarter of this year, PayPal processed 6.5m transactions and serviced 427 million customers, according to its latest financial earnings report.

“Commerce and advertising are deeply connected, and we believe that the advertising platform we are building at PayPal will become a must-use marketing channel for merchants big and small,” said Diego Scotti, executive vice-president and general manager of PayPal’s consumer group and global marketing and communications.

Recent developments at the financial services company have indicated its intentions to move into advertising. In January, it debuted Advanced Offers for merchants, which pairs PayPal data with AI to reach target users with special discounts and offers. Interestingly, merchants only pay for Advanced Offers if they result in a purchase from a consumer. Marketplaces Zazzle and eBay are currently testing the tool, according to a report from the Wall Street Journal.

The ‘only pay for ads that convert’ model of Advanced Offers “will likely be attractive for advertisers and help PayPal reach significant advertiser scale quickly,” says Ben Riggle, North America managing director of Channable, an e-commerce marketing platform.

Plus, this approach is sure to serve as a boon for revenue generation, because the company “can now participate in two parts of a sale,” Riggle explains, “by collecting advertising revenue and then collecting payment transaction revenue – which could be a profitable flywheel as the advertising business scales.”

PayPal’s new advertising business will be spearheaded by veteran ad exec Mark Grether, who joins the company this week from Uber. John Anderson, who previously headed up the product and payments team at Plaid, will help Grether build the business.

The new retail media networks?

PayPal is just the latest in a string of financial services and fintech companies entering the advertising business. Just last month, Chase unveiled a new ad business that will use its payment data to serve targeted ads across its digital platforms. Revolut, a UK-based fintech firm, meanwhile, is exploring opportunities to share its customer data with advertising partners while its application for a UK banking license remains in purgatory.

So, what explains the trend? As data signals disappear on the open web in the face of increasingly stringent consumer privacy legislation and third-party cookie deprecation, digital advertisers are losing the ability to track and target individual users. In short, addressable audiences and opportunities for effective personalization are shrinking – making hubs of first-party data, like the media networks operated by retail giants Amazon and Walmart and travel titans like Marriot and Expedia (which launched its media network just this month) – more valuable than ever. Much like retailers and travel companies, financial services organizations collect and store a vast amount of consumer data. For a PayPal or a Chase, then, turning that data into an ads business – a surefire revenue stream – is becoming an obvious move.

And financial services companies are possibly better positioned than other kinds of media networks to maximize value for advertisers, as they’re able to deliver a unique combination of high-intent and lower-funnel traffic. This kind of traffic “is particularly valuable, as it allows for a more diverse pool of advertisers to participate,” says Channable’s Riggle. “So PayPal is uniquely positioned to provide the data that allows for more impactful targeting for advertisers as well as access to the scale that makes optimizing against a platform worthwhile for those advertisers.”

The idea is echoed by other media experts. “Companies like Chase, PayPal, Revolut and surely more to come have incredibly deep and broad views of customer retail and commerce behaviors due to their position down-funnel after the actual purchase,” says Edik Mitelman, general manager of privacy cloud at analytics firm AppsFlyer.

Plus, depending on the model, advertisers may be able to use financial services’ ad networks for both onsite advertising (across the financial organization’s site and app, for instance), as well as offsite advertising within search, social or other digital environments. PayPal, it appears, is developing a more flexible model that will support both on- and off-site.

The scale and reach of a financial services ad network like PayPal’s is likely to outperform that of a retail media network, too, some experts say. “It’s completely cross-market. People use PayPal across multiple retailers and, therefore, PayPal will, in theory, be able to offer advertisers insights across retailers, cross-leisure, cross-entertainment and so on,” says Sean Crawford, managing director of New York-based retail marketing agency Threefold. “This is powerful. No existing retail media network can offer that scale, so PayPal instantly has a unique selling proposition and right to win in a crowded market.”

What’s more, the campaign measurement insights that financial services firms can deliver maybe even more valuable than the targeting capabilities. “With the impending demise of cookies, ever-changing consumption of media habits and an always-on shopper, brands need this first-party data to refine their audience building, media targeting and most crucially of all, to understand the performance of their media investments through closed-loop reporting,” Crawford says.

Perceptions of privacy will hold sway

Of course, PayPal’s path to ad riches is not guaranteed to be free of obstacles.

For one, demand for more stringent corporate data privacy practices is growing among both consumers and lawmakers. And even if the company is in full compliance with data privacy regulations, using consumers’ personal financial information to serve targeted ads to them may not sit well with everyone.

“[Privacy is] definitely a concern, as financial services are dealing with higher-stakes data,” says Michael Goldstein, head of communications strategy at DDB North America. “One can imagine that a consumer is OK with an ad network knowing what they purchased last week, but maybe not so OK with an ad network knowing their income, savings and debt.

PayPal customers will be automatically opted into data collection but will have the option to opt-out, according to the Wall Street Journal’s report. A company spokesperson also told The Verge that PayPal “will build transparent, easy-to-use privacy controls,” but caveated that the advertising platform is still in the “early stages” of development.

Whether the proliferation of financial services ad networks will usher in new regulatory scrutiny around consumer privacy remains to be seen.

Nonetheless, consumer perception of privacy will remain crucial in financial services companies’ forays into advertising. “There likely won’t be true data privacy issues in the sense of anything that would run against the law,” says Riggle, “but perceived data privacy issues could cause a PR issue for PayPal if not handled correctly.”

Another, more amorphous challenge could be ensuring strategic focus internally at PayPal. Eric Haggstrom, vice-president of business intelligence at Advertiser Perceptions, warns that “organizational focus and buy-in” can easily become an issue. “The most successful retail media platforms have done so because advertising became a key focus of the organization,” he says. “It’s unclear how focused financial services businesses will be long term on the potential advertising opportunity.”

Now more than ever, everything really is an ad network

Despite potential hurdles, most media experts we spoke to are bullish about the future of financial services media networks.

AppsFlyer’s Mitelman sums it up neatly: “We’ve seen the model of ‘everything is an ad network’ [something adtech veteran Eric Seufert frequently professes on X] really blossom this year, and companies across different verticals such as travel, finance, ride-hailing, delivery services, accommodation and even car dealerships have joined the party or are joining it as we speak. The future is now, and this is how brands will execute targeted campaigns worldwide, both endemic and non-endemic to the nascent networks.”

And among the competition, PayPal, to some, looks especially well positioned. It’s developing robust on- and offsite advertising solutions for a variety of media buyers and sellers, while players like Chase appear to be focused on traditional display ads on their digital properties – and others, like Revolut, are seeking out more straightforward data-selling agreements. These kinds of approaches are often more disruptive to the consumer journey and more difficult to monetize. For this reason, Riggle predicts that the Chases and Revoluts in the market will see more “mixed results.”

Today, it would appear that PayPal has little to lose and everything to gain from its push into advertising.

“This is a no-brainer for PayPal, a massive fintech platform that is the go-to alternative payment option on any e-commerce site you can imagine is sitting on a treasure trove of data that previously only large media networks could leverage with sophisticated tech,” says DDB’s Goldstein. “If it can give middle-market businesses sophisticated consumer spending data and subsequent targeting, that is hugely valuable and can deliver sustainable revenue to PayPal.

In the near future, Threefold’s Crawford says, “I would not be surprised to see … PayPal earnings reports that show their ads business is making up a sizable percentage of their profits – just like we now see at Walmart.”

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