A (3:07)

Right. And I think related to that, one of the challenges with this commerce media, retail media explosion has been fragmentation. From the buyer's perspective, they don't, they have to buy on a lot of retailers. From the seller's perspective, they have to get scale. So you said 50,000 merchants. Wrong. That's a lot, a lot of small ones also. So how did they.

B (3:29)

30 million.

A (3:29)

Yeah, 30 million. Sorry, I got confused with numbers. So what's PayPal doing and what should those, that long tail of merchants be thinking about retail media?

B (3:39)

Yeah, maybe. Let me think, let me start kind of where we started from a payable advertising perspective. And then I kind of come to your question. So when we started about one and a half years ago, the first question was, okay, we have not access to what we call a transaction graph, the data, right? How can we basically help on the one hand our consumers to see more relevant advertisement, but more importantly, how can we help our merchants with two things. The first one was how can we help them to actually sell more? And secondly, what can we do to help them to better monetize their own eyeballs? How can we basically help them to build their own retail media business? And so what we started in the first year was answering the first question, how can we help them to sell more by building out our own advertising business both on PayPal and Vemno. We invested more into honey. We went then international, the UK and Germany. We launched our off site advertising business leveraging transaction graph in the form of PMPs. We then launched storefront ads which is basically the payment function comes into the creative itself which allows basically consumer to transact within the creative. And it was all about this kind of how can we help our advertisers to sell more? And then the second question was, okay, how can we actually our merchants, AKA our merchants, how can we help them to better monetize their own eyeballs? And it comes now to your question. When we thought about that question, it became very obvious that all the big kind of Retailers, they already have their own retail media businesses. But on our platform, we have millions of SMBs who do not have access to the opportunity to build their own retail media business because they're just too small. Right, right. And they don't have the expertise in house, which means it creates for them kind of a disadvantage in the ecosystem to compete with the big retailers. And that then brought us to the idea, okay, how about we basically bring all of our SMB merchants together and create a single unified advertising platform on their behalf, which is what we then launched two weeks ago called the ads manager for our SMB businesses. And that now brings all the media together in one single buy. That, from an advertiser perspective, gives them the opportunity for the very first time to actually buy into media that was inaccessible in the past, audiences that were unreachable to them in the past. And on the other side, it enables our SMBs to, for the first time, actually earn money by monetizing the eyeballs on their own sites.

A (6:17)

Right. And it's sort of an existential question because if you're competing with like a Walmart and they have that revenue stream and you don't, you're not going to be able to offer the same prices and advertise on Facebook or wherever you're advertising to get the customers. And it all flows together if you don't have that media stream.

B (6:35)

Exactly. I mean, you think about whether Walmart or Amazon, how are they actually making money? At the end of the day, it's less about selling products, it's more about selling eyeballs. Right. And if you don't have that second kind of arm to your point, it's really hard for you to compete. Right. And so for us, it was the idea, okay, we help them to monetize eyeballs, we help them to make money, which they then can choose to reinvest into lower prices, more advertising, more, or maybe they just take a few more dollars home.

A (7:06)

All right, so these, this long tail of merchants using PayPal for checkout there must be, it must be kind of a real mixed bag of who they are. Right? You know, I've used PayPal to buy a T shirt somewhere or, you know, I think I used it for language translation services for a company. But like, how do you, how do you do use a taxonomy? Do you use AI? How do you figure out, you know, how to monetize that long tail?

B (7:32)

It's, in a way, it's a very similar challeng challenge to the open web. Right. The open web is also kind of A mixed bag of many, many.

A (7:38)

Right. The open web is a mixed bag.

B (7:40)

I think we'd all have very different content. Right. And in that sense, what basically we as a industry have done for the open web and making the open web kind of accessible and monetizable. The intention of PayPal is to do the same for our SMBs. We call it Open commerce. Right. And we will also build kind of our own verticals within the SMBs to really ensure that the eyeballs are relevant for advertisers. Obviously, we can overlay our transaction data to really make sure the right users see the right ads on the right SMB website. So in that sense, the challenges from a technology perspective are not new to us as an industry. Right. It's just the application is new in the sense of now we are applying it for a specific kind of area, retail media SMBs, which have again been unaccessible in the past.

A (8:30)

Do you think it's going to be harder necessarily than say, a big retailer, or are you going to have to apply things like brand safety tools or other techniques to kind of get your arms around that huge amount of publishers?

B (8:43)

I don't think it's really harder because at the end of the day, from a consumer perspective, you're still in the same kind of mindset where your intention is to actually buy something. Right. And we are basically using that intention to kind of help the merchants to steer that intention to the right products and obviously then provide more value for the consumer. So I don't think it's anything different compared to a big retailer. But I would say that from an SMB perspective and the ones that we spoke with, they're really, really excited about this opportunity to again, for the first time, access to kind of this real huge budget. Everyone talks about retail media, everyone talks about commerce media, and yet they are left alone. And so for us, the pitch is very simple, which is we can basically help them first to earn money and then secondly, we can help them to actually spend the money in a very efficient way.

A (9:35)

Right, let's talk about the demand side, spending the money. So in a typical retail media situation, it's the brands who sell their products on the retailer who are the first round of demand sources. So what's the dynamic in your world?

B (9:51)

I mean, we have the same. Right. For example, we have the same opportunity that advertisers, well as not on people, on them, come for the same purpose. Right. And obviously the same holds true for our SMB network. The advertisers at the end want to get where the consumers are and where the consumers have this kind of moment where they are kind of want to spend money, which is interesting for us. Paving it away for a second from an SMB perspective. We also have, as you know, Vemno as part of our PayPal family. And not only can advertisers get in front of a young audience, a Gen Z audience, but also an audience who's actually spending money. They're spending money on Vemno. Right. So they're in this mindset of spending money, then the mindset of spending money with friends. And if you then advertise in this environment, it's really, really interesting. And then you overlay that with all what we know about the Vemno users across Venmo usage, what emojis they share with each other based on the purchase behaviors. Right. What they do on PayPal. It's really powerful from an advertiser perspective.

A (10:55)

The Gen Z people love Venmo for some reason.

B (10:58)

They do, yeah.

A (10:58)

They just love it.

B (10:59)

They do. And it's great to see kind of what emojis they use. Right. Whereas the pizzas, the Ubers, even. Gaming is a big topic on Venmo, where we send money back and forth and it's a social phenomenon. Right. And basically participating that from an out of perspective is unique, differentiated and very interesting.

A (11:22)

Do you keep your Venmo feed public or private?

B (11:27)

You can take it out.

A (11:30)

Are there advertising products in Venmo right now? Yeah, yeah. What they like?

B (11:35)

Indeed. Advertising products. And it's the whole conundrum. It's. It's big retailers, it's even automotive companies advertise on Vemno. It's fashion, it's a big topic on Memno. It's travel, actually. In October, we were already sold out in terms of real estate that we made available for advertisers.

A (11:56)

Is that upper funnel kind of stuff?

B (11:57)

It's upper funnel. It's above the fold. It's upper funnel. And we also have another kind of interesting ad slot, which is after you send basically money to your friend, then this kind of thing or the post checkout environment. And it did. I must say, I was really positively surprised how interested it is from an advertiser's perspective to Avatar on Vemno. I would have not expected it, but I was really positively surprised how much demand we actually have.

A (12:29)

And what about Honey? So Honey, you acquired a couple of years ago at this point, sort of an affiliate model for the most part. So how is Honey participating in the retail media trend?

B (12:41)

Yeah, I mean, Honey we acquired, I think something like four years ago.

A (12:44)

Oh, really? That long?

B (12:45)

And time is flying. And so Honey originally was all about how can we help merchants to basically nudge consumers to actually finalize a purchase on their website. And indeed it's an affiliate program. But if you think about what we have with Honey is with a tremendous amount of data because we know about consumers, not only what they actually purchase on a retail media website, no matter what payment methods you use, we also use it as a really strong data collection engine for purchase intent. Right, right.

A (13:18)

It's got a lot of purchase intent.

B (13:20)

We have a lot of purchase intent coming from Hani. On top of that, we have access to merchants catalogs data. So we see about 80, 90% of all catalog data in the US from.

A (13:32)

Across all of 89%.

B (13:33)

80 to 90% massive amount of data which has now been used within PayPal.

A (13:38)

Are the merchants giving it to you or are you just inferring it from the people?

B (13:41)

Yeah, basically inferring it when people make purchases. Right. So we have access to that kind of amount of data. So you have purchase indent, you have the catalog data, you have the actual kind of transaction data itself. And combine all of that with the social transactions in Venlo with The data from PayPal gives you a huge, huge amount of kind of again, what we call transaction graph that we can now leverage for, for targeting. And we didn't even talk about measurement. Right. If you think about it, we can also use the entire data pool to provide closed group attribution back to our advertisers. And as I mentioned earlier, we're not only running ads on Payflmm, we are now also leveraging PMPs to run campaigns off site. So we can even run a CTV campaign and then measure the impact of CTV with the transaction graph for the advertiser.

A (14:34)

So effectively that's like an audience extension play off site marketing. Do you disclose who you work with for that?

B (14:41)

On the SSP side, we're working with the Pepmatics and the magnets of the world and from there you can make it available in any dsp.

A (14:49)

Sounds like you should own a DSP.

B (14:51)

One and a half years in. So let's see what happens next. Right? Yeah, so, but you bring me to a really interesting point, which is.

A (14:59)

I'm unemployed as of.

B (15:00)

We're in touch with Joe. Yeah, indeed. But the interesting point about that is one of the cool things about PayPal is that as we're sitting across all the merchants, right. We can actually show advertisers not only how a single merchant is performing, but also how they are performing across all the merchants, AKA we can show them market share analysis and we can share with them how market share is actually evolving depending on how much money they spend and where they spend the money. And that's interesting because typically the conversation on the avatar side starts with the cfo, not a cmo. The CFO is the first one who actually decides how much money the CMO is allowed to spend. And that is defined typically on what's the market share and what can I do to grow my market share? And how much money do I need to spend to grow my market share? Right. And so the first question is, what's the market share? How can I grow market share? And to answer that question, you need to sit across all the merchants, which is what we do. You can't just be one single merchant. So we can help to answer this question from a CFO's perspective. And then the second question is once the CFO has decided how much to spend, he then gives the money to the cmo. The CMO of the agency is deploying the money, and then the question becomes about things like incrementality. Right. And that's where we can again help, because of the transaction data would then basically help the cmo, the agency, to decide where to basically best spend the money on which merchants.

A (16:28)

Right. You sort of have it, have it both ways in a way, because you can offer the brand, the manufacturer of the product, this insight into what retailers they're potentially reaching a consumer in. But then you actually take the affiliate fee from the retailer.

B (16:42)

Right? Yeah, on the, on the, on the honey. On the honey side. But we can even go to, to emergency from our knowledge. Right. You think that you are kind of under invested from a specific category or brand compared to what we see is happening on other merchant sites.

A (16:59)

Right. And then, and then of course, if the retailer has, is using one of your products for checkout, that's a different source of telemetry about what's going on. Right, Right.

B (17:10)

So maybe to this point, it's a really interesting point because we have a lot of conversations right now from merchants, which is basically, hey, if you basically implement PayPal, give us more presentment, it means we have actually more transaction data which we can then leverage to help you to grow your retail media advertising business. Yeah. And so again, that's why we cannot only help on how can we help merchants to sell more? We can also help merchants to make more money by improving their retail media business.

A (17:37)

Right. It's also kind of a unique position because if you think about your. Your counterparts in the financial services world, the payment folks, they're taking, they don't have as many chips on the table to play with. Right. And various different strategies in the area. I want to turn the conversation to AI and agentic because that's actually in the title of our talk. We haven't talked about it yet. So what are you working on in the AI agentic world or. And so I'm going to ask you what your vision is for the whole thing. You can take it in one, you do one or the other first.

B (18:14)

Maybe let's start with what we're doing right now. Right. And a few things. So the first one is obviously, if you think about agenda E commerce, it also means that we as a consumer, we need to get used to making purchase decisions in a very new environment in an environment which we as consumers are not used to make such purchase decisions where we eventually even outsource the decisioning to agencies. Which is actually pretty similar to 20 years ago when PayPal was created in the first place, where suddenly we were starting to basically make purchases online. And then you need someone you can trust if you actually make such a payment online. Which was PayPal. Right. PayPal was originally all about how can I make an online transaction with someone who actually I can trust and I can rely on? And fast forward to today, we are, I would say, in a very similar situation. As consumers want to now make purchases in these kind of enchanting environments, they still need to rely on someone who they can trust with their money. And hence we are working now with all the agendic players to basically integrate PayPal and to provide that trust in this kind of agentic environment. So the consumers have as little kind of doubt that they now should actually spend in such new environments. That's the first one.

A (19:39)

Okay.

B (19:40)

And the second one is, in addition to the integration into these platforms is how can we now actually even kind of expand the tooling or the tools or the utilities that are currently provided in commerce environments? And in many cases, what we see is right now from a consumer perspective, you might get a really strong recommendation on what you should actually purchase. Let's say you want to buy a new TV screen, right? You can go into an enchanting environment. You get some recommendations, you should buy brand A or brand B. But actually making that purchase is still quite struggling for you. You need to then go to a merchant website, search for the same brand, and then eventually you buy outside of the Commerce environment at least as of today day.

A (20:28)

Sure.

B (20:29)

And with honey. Right. We can basically collapse that process by giving the consumers the opportunity to basically from almost within the engine environment make the purchase. And that obviously then is much easier from a consumer perspective increases the conversion rate from a merchant perspective, increases the value for the engine E commerce provider. And so I think it's a win win situation by, by leveraging what we have within PayPal, the catalog data, the relationship, the merchants, the trusted kind of payment processing capabilities and bring all of that together and basically kind of help to get agenda commerce to next level.

A (21:10)

It seems like there's three parties, either two or three parties involved. There's the AI provider, consumers are going to choose who they want to use. Then you have to have the products in the catalog and then the third is you have to check out and sometimes those second two are combined. We just saw, I think it was last week or the week before there was news that OpenAI and Walmart were doing something which I assume is both 2 and 3. Do you think that's going to continue where the AI providers are going to have a bunch of partners to enable commerce?

B (21:44)

I mean the question is, are these kind of AI like commerce provider, agency commerce provider, are they going into logistics? Yes or no? Right.

A (21:53)

Well, Walmart is, but not everybody.

B (21:55)

Again, but, but if, if the agency commerce providers are not going into logistics, you obviously have to then partner with someone who can do your logistics. Right. Which is what we've seen last week. And then the question again is, to your earlier point, you have to have someone who is doing the recommendation what product to. To purchase, you have to have someone who's providing logistics and you have to have someone in between who's taking care of the payments and all of that and it, and where we come into place and where we help to bring the other two parties together.

A (22:24)

Right. And when we think about what we were talking about earlier, this long tail of merchants, they have no ability to do any of that. Right. They just want to sell something and they are seeing, I'm just putting words into mouth, they're seeing AI sort of a replacement for search. It's just another way to find the merchant. Right. And they need, they need that transaction to happen anyway.

B (22:44)

Yeah, exactly. And again to your point, right. They don't have access to what the big players have access to. And that sense, by enabling, enabling them to participate in this kind of, in this game. Right. And giving them some tools to do so in a way it's almost kind of helping to democratize a little bit the access to AI and the power of AI, the power of accessing retail media, spending, monetizing, all that. I think it's kind of, it's great to see how we are trying to balance a little bit so that we at the end don't just have a few kind of very big players and no one else helping the SMBs to thrive in this, in this new kind of world.

A (23:20)

Part of the way I framed the AI conversation and maybe you don't agree with which was I was like, you have a mainstream AI provider like OpenAI or Gemini, you search for products and then someone like PayPal makes it happen. Do you think that's, do you think that's going to be the dominant model or do you think people will go to, let's say, their Honey toolbar and use that for shopping entirely?

B (23:44)

I guess they will do both. Right. In many cases they might actually go to one of the big players and then they have PayPal to do the rest. And then there may be more specialized use cases where then they go to Honey. Right. And everything happens with Honey. I don't see a world where you only have a universal agenda commerce provider for everything and anything. It's more likely you do in one, maybe 70% of your stuff. But then there's still 30% where you shop somewhere else. And that's where you then go into more specialized players such as Honey. Right. Who are subgenre experts for a specific area.

A (24:22)

Yeah, yeah. And despite Amazon's dominance, shopping is pretty fragmented. Google shopping all the other places. So we've been using actually the word agentic a little loosely. We've been serving AI and agentic. Agentic technically is where an agent is doing stuff for you. And we've published at Architecture a couple of different articles on the subject. One that said, no, it's never going to happen. The other one is like, yeah, actually it might happen. How do you, how do you feel about this idea that a consumer is going to literally outsource some of their shopping to an agent?

B (24:54)

I mean, we all don't know how much we will trust agents in the future. Right. And if so, I'm sure we start with just the commodity products. Right. Restocking my milk or whatever it may be. Right. But if you really want to buy a new whatever suit or so we may still want to have the final decision. Right? Right.

A (25:12)

I'm not trusting an agent for what.

B (25:14)

I might, might assume that the agent is going to provide us recommendations. Right. But at the end, the final decision maker I'm sure is still us. And hence it's not just a rational decision. It's based on emotions. Trust, as we spoke earlier, is still going to play a big part. Right.

A (25:30)

So it kind of. It reminds me a little, maybe it's a weird metaphor, but Amazon had those buttons they were selling for a while where, like, if you ran out of Tide, you just had a Tide button and you'd press it and it failed because, like, it just feels weird. People have sort of a lot of risk whenever they buy things, you know, they. They are conservative. So to close out, tell me what you think the world of commerce looks like, you know, now, five years from now.

B (25:57)

Wow. I guess five years, given how quickly we are moving, it feels like 50 years from now. Right. But if you think about it, the question for me is actually less about what is going to change. It's more a question about what is actually not going to change. And I think that helps us much better to understand how the future is going to look like. And as we just spoke about things like at the end, we make a lot of decisions ourselves. And as much as we talk about math in one of the sessions earlier, right at the end, we're still human beings who haven't changed over the last, I don't know, 200,000 years. So we make a lot of decisions with our guard, with emotions, and that won't change even if AI is around. And so the question is, how is the world going to look like where the humans are still the same, AI might be different, and how are the decisions going to make? And I would argue that things like trust, things like the social connectivity between humans, as in them, trust as in people, is not going to change in three or five years because it's how we are hardwired and it won't change. And maybe on the surface, yes, we use agent to help us making our life easier, to help us with kind of taking some friction out of the process. But when it really comes to us human beings, the interactions with each other, the trust and all of that, the emotions, I don't think that's going to change. And the question is, how can then brands find the right balance between enabling kind of a friction as commerce while at the same time speaking to the emotions, the social connectivity of human.

A (27:29)

All right, that's pretty deep and I think we'll end it there. So everyone give a really big hand to Dr. Mark Grether from PayPal. Thank you for listening to the marketecture podcast. New episodes come out every Friday and an insightful vendor interview is published each Monday. You can subscribe to our library of hundreds of executive interviews at marketecture. You can also sign up for free for our weekly newsletter with my original strategic insights on the week's news at News Market tv. And if you're feeling social, we operate a vibrant Slack community that you can apply to join@adtechgod.com.