A Review of PayPal’s
Acquisition History
PayPal’s announcement on February 14th of its agreement to acquire TIO Networks, follows a series of
acquisitions PayPal has made over the past four years. From small, technology shops like Stackmob to large
established players like Xoom and Braintree, PayPal has attempted to address key elements of its growth
strategy via acquisitions. Some of the transactions have been high profile and are integral to PayPal’s product
and technology strategy, while others seem to have served as “acquihire” plays where PayPal brings in talent
through smaller company buyouts.
Below, we review some of the rationale and commentary provided by PayPal and others at the time of the
acquisitions. We also look at what PayPal or industry stakeholders have said about the acquired companies
over time.
Date
Transaction
2/14/17
Comments/Rationale
What
acquisition
does
TIO Networks is a cloud-based multi-channel bill payment processor delivering
access to secure bill pay via kiosk, walk-in, mobile, and web solutions.
What
they were
saying then
Dan Schulman, President and CEO of PayPal, said, “By acquiring TIO and integrating
bill payment into our global payments platform, PayPal adds another key service in
our efforts to become a part of a consumer’s everyday financial life… TIO’s digital
platform, and physical network of agent locations make paying bills simpler, faster,
and more affordable. We are excited by the opportunity to extend this valuable
service to our existing customers and welcome new billers and customers to PayPal.”
Comments
and
developments
This will help the company reach the “underserved” chunk of North Americans who
are living paycheck-to-paycheck, some who even lack bank accounts. “There’s a
chance to create a bridge for those users into the digital world,” Bill Ready, PayPal
COO told TechCrunch.1
What
acquisition
does
Modest enables contextual commerce by providing a mobile commerce platform
that lets merchants create a customized store, integrate stores with other apps and
use buy buttons to sell.
What
they were
saying then
Bill Ready, SVP Global Head of Merchant and Next-Generation Commerce, PayPal:
“Contextual commerce is an exciting opportunity for PayPal, representing a new
frontier for commerce that is rapidly growing. The acquisition of Modest will help
us do amazing things in this area, faster than ever before. For merchants, this means
PayPal will be able to offer a complete commerce solution (payments and order
management) to help them add contextual commerce channels to the ways that
they sell to their customers. For consumers it will mean seamless, simpler, and safer
ways to buy the things they want, anywhere they discover them.”
“So why sell to PayPal? [Harper Reed, co-founder of Modest] told VentureBeat in
an interview that both he and his cofounder had a set of goals when they founded
Modest: “This won’t be any fun if we’re not able to scale. If we can build a great
product, but can’t push this out to millions, then it’s boring…we found this amazing
cheat code to get to scale.”
PayPal buys
TIO Networks
8/19/15
PayPal acquires
mobile payment
start-up Modest
Dan Schulman (4/27/16): “We introduced PayPal Commerce, a set of tools and
APIs which are currently in beta that make it easier for merchants to securely
Comments sell across multiple context; e-mail, social share, blogs, articles, ads, in-app, and
anywhere consumers are online or on their mobile devices. This new offering is the
and
result of the rapid integration of the technology and the team we gained through the
developments acquisition of Modest in August 2015. It is a critical element of the full service suite
of capabilities we are building into our merchant platform as we help retailers move
fully into digital commerce.”
1
A Review of PayPal’s Acquisition History
TechCrunch “PayPal buys TIO Networks for $233 million” (2/14/2017).
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A Review of PayPal’s
Acquisition History
Date
7/2/15
Transaction
PayPal agrees to
acquire digital
money transfer
provider Xoom
for $890M
3/5/15
PayPal acquires
Israeli cyber
security startup
CyActive
Comments/Rationale
What
acquisition
does
Xoom is a digital money transfer company focused on international remittances.
What
they were
saying then
Dan Schulman: “Expanding into international money transfer and remittances
aligns with our strategic vision to democratize the movement and management of
money. Acquiring Xoom allows PayPal to offer a broader range of services to our
global customer base, increase customer engagement and enter an important and
growing adjacent marketplace.”
“Xoom is a digital disruptor and like PayPal it is big on mobile, which is expected to play
a major role for all types of payments in the future. While 30% of PayPal payments
originate from mobile devices, already significantly higher than competitors, Xoom
claims 60% of its transactions as mobile.”2
Dan Schulman (7/22/16): “Xoom’s U.S. customers can now send money to loved
ones in 53 countries, and it continues to redefine global remittances through mobile
technology, ending the quarter with more than 70% of transactions originating on
a mobile device. We continue to see the benefits of our integration efforts, with
Xoom adding more than double the number of net new actives this quarter versus
Comments a year ago. I’m pleased to say we’re executing on how to position the business case,
and
and I have high hopes what Xoom can offer to PayPal consumers in the years ahead.
developments All of these innovative new experiences are driving PayPal’s leadership in mobile
payments.”
Schulman (9/22/16): “We think about reimagining the movement of money for the
entire world,” Schulman said. “We used to be a button on a website, but we aspire to
be so much more.”
What
acquisition
does
CyActive provides software and services that predict how malicious software will
develop and offer companies detection and prevention.
What
they were
saying then
“We’ve made the strategic decision to expand our security efforts by establishing a
security center in Israel. Located in one of the world’s top cybersecurity hubs, this
new security center will allow us to tap into the country’s cutting-edge technology
and top cybersecurity talent,” James Barrese, chief technology officer for PayPal,
said in a blog.
Comments
The company now serves as PayPal’s global cybersecurity R&D center, making
and
PayPal the latest multinational to call Be’er Sheva its Israeli cybersecurity home.3
developments
3
VentureBeat: “Meet Israel’s new cybersecurity hub” (7/23/2016).
2
A Review of PayPal’s Acquisition History
Finextra “PayPal’s Acquisition of Xoom” (7/6/2015).
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A Review of PayPal’s
Acquisition History
Date
3/2/15
12/17/13
Transaction
PayPal acquires
mobile payment
startup Paydiant
PayPal Acquires
Mobile Backend
Provider
StackMob
Comments/Rationale
What
acquisition
does
Paydiant provides a white label platform enabling merchants to integrate mobile
payments and loyalty into their own branded mobile app.
What
they were
saying then
“PayPal describes Paydiant as “another great company that is focused on reinventing
mobile payments.” Anuj Nayar, PayPal’s senior director of global initiatives, explained
that his company is getting Paydiant’s expertise in store-branded credit cards, gift
cards, and loyalty offers.
“[PayPal SVP and Global Head of Merchant and Next Gen Commerce] Bill Ready. We
believe this will accelerate mobile-in-store payments for these merchants and drive
consumer engagement through loyalty, offers and the prioritization of preferred
payment types, such as store branded credit cards and gift cards…Similar to PayPal,
Paydiant’s technology agnostic approach means that merchants can use the mobile
payment technology that best suits their business, whether that is QR code or NFC,
and they can do so across major operating systems and platforms.”
Rob Harper, Director of Mobile Commerce, PayPal UK (9/5/16): “We’re focused
on helping more retailers grow their businesses across all channels. Last year, we
acquired Paydiant, which enables retailers to create their own secure mobile wallet
solutions under their own brands, in their own apps. In the future, we expect to see
more retailers pursuing contextual commerce – a new category of shopping that
Comments enables consumers to buy things where they find them, whether that’s in an email,
and
on Pinterest or in a messenger app.”
developments
Dan Schulman, President & CEO (4/27/16): “Paydiant is part of our fundamental
underlying platform. So when you think about the piece parts that we’ve started
to put together, we had PayPal that was obviously very strong and online market.
Braintree is extremely strong in the mobile and in app marketplace. And Paydiant,
very strong in the instore environment.”
What
acquisition
does
StackMob began as a complete developer stack for app builders to tie their software
to cloud-based backend systems.
What
they were
saying then
“By joining PayPal, the StackMob team will maintain its focus on developers and
extending innovative mobile technologies that aim to allow consumers to access the
rich capabilities of the PayPal global network,” StackMob CEO Ty Amell added in a
statement. “We believe that our work at PayPal will make it easier for developers
to create seamless payment solutions that span online, mobile, and in-store
experiences.”
“They’ve proven the ability to build really flexible and solid platforms,” [PayPal CTO]
James Barrese said. “When you look up and down at PayPal, we are rapidly expanding
and in many case rewriting parts of our backend. Given our need to have really
amazing services, both for internal engineers as well as our external experience, we
need experience on how you build these things out at scale.”
Company email sent to Stackmob customers (2/12/14): “We’ve decided to
Comments close the StackMob Backend-as-a-Service and shut down the StackMob brand to
make it easier for our integrated StackMob and PayPal teams to focus on helping
and
developments developers create seamless payment solutions that span online, mobile, and in-store
experiences.”4
4
VentureBeat: “PayPal closing down backend service StackMob mere months after buying it” (2/12/2014).
A Review of PayPal’s Acquisition History
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A Review of PayPal’s
Acquisition History
Date
Transaction
9/26/13
EBay’s PayPal
Acquires
Payments
Gateway
Braintree For
$800M
5
6
Comments/Rationale
What
acquisition
does
Braintree is a payment facilitator with mobile capabilities focused on online
merchants. Includes the p2p payments service Venmo acquired by Braintree in
2012.
What
they were
saying then
“Braintree is a perfect fit with PayPal,” said eBay Inc. President and CEO John Donahoe
in a statement. “Bill Ready [CEO of Braintree] and his team add complementary talent
and technology that we believe will help accelerate PayPal’s global leadership in
mobile payments. Together, we expect that PayPal and Braintree also will accelerate
our leadership in supporting developers who are creating innovative solutions for
next generation commerce startups.”
“We wanted to go startup fast,” John Lunn, global director of the PayPal Developer
Network, told ReadWrite. “Braintree is going to be the platform for developers.
We’re not going to change anything… we’re going to use this new Braintree platform
as the new outward-facing platform for developers.”
“Braintree reports huge growth three years after PayPal acquisition.”5
ƒƒ Transaction volume has grown 25x, nearly tripling every year since it was
acquired.
ƒƒ Last year Braintree said it surpassed $50B in payment volume.
ƒƒ Growth because mobile payments have skyrocketed and Braintree has
powered the payment processing technology for a range of popular apps like
Uber, Airbnb, StubHub, and Fan Duel.
ƒƒ “From our early days, we’ve had a vision for what commerce could be and
continue to take every step necessary to bring this vision to life,” Braintree
CTO Juan Benitez said in a statement. “Innovation in e-commerce and mobile
commerce happens when merchants and consumers are given unique new ways
Comments
to connect. PayPal’s vast global network combined with Braintree’s platform
and
allows us to deliver experiences that only we can offer together.”
developments
John Rainey, CFO (4/27/16): “We generated more than $2.5 billion of revenue in
the first quarter, up 23% on a currency-neutral basis. Of that, transaction revenue
increased 21%, which benefited from rising engagement as reflected by the increase
in the number of payment transactions for active customer account. This increase
also reflects the growing relevancy of Braintree as we move from a payment button
to a full services payment partner where we capture all of the merchants’ processing
volumes.”
Dan Schulman, CEO6 (7/20/15): “Venmo is growing by leaps and bounds…Our
strategy is to provide even more value to users and tie the Venmo community into
the PayPal merchant marketplace so that they can use Venmo to buy things. That
could happen potentially as soon as later this year or in the early part of next year
(2016).”
Chicago Business Journal “Braintree reports huge growth three years after PayPal acquisition” (10/3/2016).
Forbes “As PayPal Goes Public Again, CEO Hints At Working With Amazon And Sets Sights On Acquisitions” (7/20/15).
Sources: Company press releases, Financial Times.
For more information, please contact: Omid Tofigh, Principal, [email protected]
U.S. Headquarters
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Annapolis, Maryland 21401, USA
U.S. Office +1 (410) 855 8500
www.firstannapolis.com
A Review of PayPal’s Acquisition History
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Europe Office +31 (0) 20 530 0360
[email protected]
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