Where are the Western SuperApps?

When we think of SuperApps we tend to look East. China with WeChat and Ant’s Alipay, Southeast Asia’s burgeoning Goto Group (merger of Gojek and Tokopedia), which just cashed in $400M at a $28.5B valuation, and its competitor Grab. Korea has Kakao and Japan has Line. Latin America also is seeing the emergence of superapps such as Mercado Libre and Rappi.

In the US and Europe, it’s long been discussed whether Super Apps would work. But now Paypal looks to be aiming to be the first. Its latest move was rumoured to be the acquisition of Pinterest for $45B. The deal has been pulled off yesterday after its shareholders balk. But would it be the right move for them or not?

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SuperApps in the West

We can argue that new models of business demand a SuperApp bringing together social media, e-commerce, banking, payments and more.

When looking more at the financial side, two major trends are also contributing to the ambition of SuperApps: fintech rebundling (fintechs have started to build propositions around customer lifestyle and bundle financial and lifestyle services to enable one-stop shops for customers) and convergence towards financial services (companies outside finance are adding financial products to their customers as value-added services, for more on this).

But what about competition concerns and antitrust?

SuperApps are walled gardens, which optimize user experience by unlocking the power of data for personalized services but raise competition and antitrust concerns. Even China recently had to force the opening of Wechat and Alipay to each other.

Another two factors which have prevented the rise of SuperApps in the US are: market power (the maturity of western economies has been a barrier to SuperApps. Many industries in the US are dominated by oligopolies) and the heterogeneity of the US population as consumer behaviour and attitudes.

Paypal shot at being a SuperApp

The rumoured Pinterest acquisition comes on the heels of quite a few others: Japanese Buy Now, Pay Later company Paidy (here for more), Swedish payment company iZettle and deal-finding browser add-on and mobile application Honey. The acquisition of Honey was a first step in expanding from only competing on checkout to becoming part of the deal discovery process.

The rationale behind the Pinterest acquisition would have been that digital payments and online shopping go hand in hand and PayPal is trying to unite one with the other so as to engage with consumers early, frequently, and in a fully integrated fashion. Also, technology and financial services companies are realizing that owning their audiences, instead of renting it, and going direct can lower CAC and increase LTV.

Pinterest would have inserted well into this vision. Last year the company launched a new way to shop on the platform, giving users the ability to browse in-stock inventory and improved visual search to suggest shoppable products. Earlier this month, Pinterest said it was rolling out new features for advertisers and brands to promote their products to users on its site, the company’s latest initiative to grow online shopping and advertising on its platform.

Also, Pinterest has 450M users, this compares to PayPal’s 400 million active accounts. A nice basket for Paypal to fish in even if there is uncertainty on the degree of overlap, but Pinterest’s monetization is low, with just $1.32 average revenue per user in Q2 2021. Basically, Pinterest is a place to go and get inspired, but people finalize the shopping experience elsewhere.

The rumours of the acquisition had left many uncertain about the synergies in the deal and what the exact play is for Paypal. In response, Paypal shares fell 12% in 3 days on the news. Even though Paypal’s CEO warned that future acquisitions may surprise people, in this case the pressure seemed enough to pull the deal off.

Does Paypal need to be a SuperApp?

Several argue that PayPal’s desire to become a SuperApp has little to do with solving consumers’ needs than it does with fending off the competition for the merchants’ relationship. Competitive pressure from Square, Shopify and Stripe. Andrew Jeffrey, an analyst with Truist Financial, even called the potential deal “an act of near desperation” that made “zero sense” and that Paypal should increase its play in physical commerce, a slower growing but much bigger market compared to e-commerce.

Now that Pinterest is off the table, what will be the next target?


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