PayPal is planning an ad business using data on its millions of shoppers

The digital payments company plans to build an ad sales business around the reams of data it generates from tracking the purchases as well as the broader spending behaviors of millions of consumers who use its services, which include the more socially-enabled Venmo app.

PayPal has hired Mark Grether, who formerly led Uber’s advertising business, to lead the effort as senior vice president and general manager of its newly-created PayPal Ads division. In his new role, he will be responsible for developing new ad formats, overseeing sales and hiring staff to fill out the division, he said.

PayPal in January introduced Advanced Offers, its first ad product, which uses AI and the company’s data to help merchants target PayPal users with discounts and other personalized promotions.

Advanced Offers only charges advertisers when consumers make a purchase. Online marketplaces eBay and Zazzle have begun testing it, according to a PayPal spokesman.

But PayPal now aims to sell ads not only to its own customers, but to so-called non-endemic advertisers, or those that don’t sell products or services through PayPal. Those companies might use PayPal data to target consumers with ads that could be displayed elsewhere, for instance, on other websites or connected TV sets.

PayPal processed 6.5 billion payments by approximately 400 million customers in the first quarter, according to its most recent earnings report.

“If you’re someone who’s buying products on the web, we know who is buying the products where, and we can leverage the data,” Grether said. Consumers who use the PayPal credit card would also provide the company with data from real-world bricks-and-mortar stores, he added.

Shoppers would by default have their data included in the new network, but they can opt out, according to the PayPal spokesman.

Apart from its data-driven ads, PayPal has also begun running some untargeted merchant offers on Venmo, the spokesman said. The company, however, wants to avoid alienating younger users who see Venmo as a sort of social-media network by overwhelming them with promotions, he added.

Many companies have built, or are beginning to build, ad networks that leverage data they already have on their customers to target ads for outside marketers.

PayPal, like other businesses that process transactions of all sorts, might eventually demand higher ad rates than some retailers’ ad networks do, because it can provide a more detailed picture of the people advertisers are targeting, according to Andrew Lipsman, founder of consulting firm Media, Ads + Commerce. For instance, PayPal might group consumers by their relative affluence, or their status as business travelers, he said.

At the same time, financial services companies need higher growth in ad sales for them to have a significant effect on the bottom lines, since their core businesses have higher profit margins than those of retail chains, he said.

PayPal’s announcement follows last month’s news that JP Morgan Chase would begin allowing advertisers to target users of its website and banking app based on their transactional histories.

A cascade of financial companies are likely to follow these brands’ entry into the crowded retail media marketplace, said Lipsman.

The news comes as PayPal’s fortunes have fallen far from their pandemic highs. In January, the company said it would lay off 9% of its global workforce in a cost-cutting effort. The following month its stock dropped after executives said they weren’t expecting much profit growth this year.

PayPal’s profit rose in the first quarter, however, and the company raised its outlook for the year.

In addition to Grether, PayPal also hired John Anderson, formerly head of product and payments at fintech company Plaid, as senior vice president and general manager of the company’s consumer group. 

Both executives report to Diego Scotti, who left his longtime role as chief marketing officer at Verizon last year and is now PayPal’s executive vice president, general manager of the consumer group and global marketing and communications.