Why PayPal is making a bet on advertising as it looks to reignite its business

By Emily Bary

PayPal's stock rises as company looks to build out new advertising business and connect its merchants with its consumers

PayPal Holdings Inc. is trying to execute a turnaround, and its latest initiative involves the creation of a new advertising business.

The digital-payments company announced Tuesday morning that it plans to build a new advertising platform. The goal of the new business is to "use customer insights to build a dynamic, truly personalized platform that will drive better advertising spend performance for merchants while delighting consumers with compelling offers," the company said in a release.

PayPal (PYPL) already has already announced advertising initiatives, including an "advanced offers" feature that the company said back in January would give shoppers cash-back rewards aligned with their past purchases. Advanced offers, which makes use of artificial intelligence, will be part of the new platform. During PayPal's January innovation day, it also previewed "smart receipts" with personalized rewards offerings.

"These are all ways that we can monetize and improve the connection between our merchants and consumers," Chriss said on PayPal's February earnings call.

The company is bringing on new talent as it looks to build out the new business. Mark Grether, formerly the general manager of Uber Technologies Inc.'s advertising business, will take on that role for PayPal's advertising business.

Further, Plaid veteran John Anderson has come on board to lead PayPal's consumer group, and he'll oversee product strategy for PayPal and Venmo, among other functions, according to the release.

Shares of PayPal are up 1.4% in premarket trading Tuesday.

Under Alex Chriss, who took over as PayPal's chief executive in September, the company is in the midst of refocusing around its strengths and areas where it's most likely to win.

Chriss said on the company's last earnings call in late April that the company was "assessing a handful of areas of investment where we believe there are compelling unit economics and market upside." He added that PayPal would also "take action" if management identified places where it could "improve focus and prioritization."

The moves come as PayPal shares are down about 80% from their July 2021 peak. The stock is roughly flat on a year-to-date basis.

-Emily Bary

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05-28-24 0840ET

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