Why PayPal Will Spend $4 Billion to Aquire Honey

PayPal will pay about $4 billion to acquire Honey Science Corp., which makes a browser extension and mobile app that aggregates retail discounts.

How it works: While I’m typing “SUBWAY” into every discount code box I can find, Honey combs 30,000 participating retailers for deals. It then applies the discount it finds directly to your purchase. Honey also has a price-tracking tool and a rewards program that allows users to trade in points for gift cards.

No artificial sweetener

$4 billion sounds like a lot for a digital coupon book, but you’ve never seen a digital coupon book like this.

• Honey has 17 million monthly active users.
• Honey says it’s saved users over $2 billion.
• Last year, Honey was profitable on a net income basis, and it logged over $100 million in revenue.

So what’s PayPal got planned? Fortune predicts that PayPal will mine Honey’s treasure trove of user data for insights to give to its 24 million merchant accounts. In turn, PayPal merchants can offer personalized discounts for Honey users.

Another route: Honey could also help PayPal become a bigger player in the brand discovery phase currently dominated by social media. Honey aggregates deals from every retailer that offers sales—not just the ones where users are already loyalty club members.

Plenty of payment hives

PayPal's acquisition timing: fashionably punctual. Its rivals in fintech have spent much of 2019 focused on amping up their commerce services.

• Apple Pay transcation volume is growing 4x as quickly as PayPal’s, according to Apple CEO Tim Cook.
• Visa, Mastercard, Discover, and American Express teamed up in October to create a payment information plugin to compete with PayPal’s.

But analysts say PayPal will thrive. By dipping into Honey’s pot of customer data and retail relationships, PayPal can become the start-to-finish resource for every online purchase.