The conversation focuses on PayPal’s (NASDAQ: PYPL) efforts to revitalize its business and stock performance under new leadership. The company, which thrived during the COVID-19 pandemic but struggled afterward, is now looking to enter the advertising market. Leveraging its vast user data, PayPal aims to offer personalized advertising opportunities for merchants. This move is part of a broader strategy to enhance user experience and engagement through AI-driven tools. The new CEO, Alex Chris, is steering these changes, including hiring the former head of Uber’s (NYSE: UBER) ad unit. The discussion highlights the potential for PayPal to grow through this new revenue stream.

Transcript:

Austin, PayPal has been a darling, and let’s face it, a dog in the market.

It was soaring during COVID and crashing under a pretty bloated cost structure and slow growth, but hope springs eternal in the market and there is a new CEO at the helm and they’re shaking things up.

What I want to ask you is what is the story with PayPal and could they even get their storyline into some attractive markets like AI?

Yeah.

You know, this one’s really interesting.

So PayPal, as you said, it really became a COVID darling, but this is a company that is now under new leadership, trying to inject some new life into the company and new life into the stock.

And one way they’re doing that is by entering the advertising business.

And they announced that they’re going to be using data from its millions of users to offer personalized advertising opportunities for merchants.

And this is really important because remember, PayPal also owns Venmo.

So this move is part of a broader strategy to enhance user experience and merchant engagement through various AI-driven tools.

And we saw the first glimmer of this a few months ago, and they sort of fell flat, but the second follow-on makes a little bit more sense.

So CEO Alex Chris, formerly of Intuit, definitely a gentleman who understands all about payments and the payments industry.

He joined in 2023 and his first big splash was an announcement to inject AI into the company all across the checkout experience.

And frankly, it fell flat because it wasn’t really tangible.

It’s hard to understand what that meant.

You’re going to accelerate the checkout experience, but the PayPal experience was already pretty smooth.

It’s like, what else is left?

But now when you say that you’re going to bring AI and introduce advertising for merchants, this one feels a lot better.

And that’s because the ad business right now is very tangible.

You can put dollars and cents against it.

It has historically represented 2% to 3% of GDP.

So it’s a very, very big pie to go after.

And look, as we continue to see ad dollars move from other more traditional forms of media, be it terrestrial or print or direct mail, into digital where targeting and ROI is much better.

So not only do we see this really consistent 2% to 3% of GDP, which is a really large pie to go after, we continue to see a lot of dollars flow from traditional to digital advertising.

So there’s a lot of dollars that you can go after here and they’ve brought in a big gun to do it.

So they brought in the former ad unit or the former head of Uber’s ad unit to lead it.

Now, Uber, they’re a ride-sharing company.

Why would you bring them into an advertising business?

But that matters because Uber themselves have also become an advertising company and they’re targeting one billion in revenue from advertising alone this year.

So this is a company that has just they have a lot more than their namesake PayPal product.

They handle transactions for over 400 million customers.

And Venmo, which has largely been called an under-monetized division of PayPal, this now gives them a chance to mobilize that data for better targeting for advertising.

So I’m actually really excited by this move.

I like to see PayPal trying to reinvent themselves.

It’s great that they’re trying to get lean with AI, but it’s really wonderful that they’re also going to look at going after additional revenue with some of these advertising opportunities.

You know, Austin, there’s a saying that over a long enough timeframe, every technology company just becomes an advertising company.

And I think the point about Uber is really great because you can look at a stock chart for that company and how much the advertising business has helped lead them to really impressive share gains in recent years.

With PayPal right now, they just need to begin kind of reaccelerating their business.

So if advertising can present a tailwind there, there’s a lot of upside in the stock.

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