Tuesday, PayPal (NASDAQ:PYPL) has confirmed plans to initiate an advertising business, a move that was first reported by the Wall Street Journal earlier in the day.
The payment giant has appointed Mark Grether, the former head of Uber (NYSE:UBER)'s advertising division, to lead the new unit. Under Grether's leadership, Uber Advertising expanded to a $1 billion enterprise with over 500,000 advertisers worldwide.
The new advertising platform aims to leverage PayPal's extensive customer purchase data. The company has been utilizing its data and artificial intelligence to tailor offers to individual buying habits, including adjusting for atypical transactions such as gift purchases.
PayPal is introducing Advanced Offers, a model where advertisers pay only when a consumer completes a purchase, signaling a shift towards performance-based advertising.
PayPal's foray into advertising also includes a strategy to engage "non-endemic advertisers," which are businesses that do not directly offer products or services through PayPal's platform.
These external advertisers will have the opportunity to target PayPal's users with advertisements across various channels, including external websites and digital streaming services.
Wolfe Research has maintained a Peerperform rating on PayPal, acknowledging the company's move to monetize its data through an external ad sales business.
While this development may not have been fully anticipated by investors, Wolfe Research notes the rationale behind leveraging PayPal's substantial customer data for advertising purposes.
InvestingPro Insights
As PayPal (NASDAQ:PYPL) embarks on its new advertising venture, investors and industry watchers are taking a keen interest in the company's financial health and market position. According to InvestingPro data, PayPal has a market capitalization of approximately $65.27 billion, with a P/E ratio sitting at 15.41, which adjusts to 15.75 when looking at the last twelve months as of Q1 2024. This indicates a relatively moderate valuation in terms of near-term earnings. Moreover, the company has experienced revenue growth of 8.39% over the last twelve months, suggesting a solid operational performance.
Among the InvestingPro Tips that stand out, PayPal's aggressive share buyback strategy could be a sign of management's confidence in the company's future. Additionally, despite 26 analysts revising their earnings downwards for the upcoming period, the company is still expected to be profitable this year, with a notable position as a prominent player in the Financial Services industry. For investors considering a deeper dive into PayPal's potential, there are additional InvestingPro Tips available, which could provide further insights into the company's prospects.
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