# S3 E6 T61 PayPal

S3 E6 T60 PayPal 

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[00:00:00] Tom: You are listening to the Middlemen  

[00:00:09] Tom: Todd, it's Friday getting towards the end of the winter. We're preparing for Shop Talk. What's going on with you? 

[00:00:19] Todd: I am just glad winter is coming to an end and daylight is after five o'clock in the Seattle area, so it's no 

[00:00:26] Todd: longer the, the pitch black of winter. So I look forward to the, the spring season of shop Talk possible, and then ultimately Cannes in June as we ramp up. But I think the, uh, no, there's, and you know, there's Marketecture next month too, and so it's the, you're getting into the march, April, June onprint circuit. 

[00:00:43] Tom: conference circuit. It's getting exciting and our guests are heating up. So I was a little bit, I, I would say that I was actually a little nervous having Mark Grether from PayPal on who's our guest today, because he's been on a lot of podcasts. 

[00:00:55] Tom: I'm like, are we gonna be able to talk about something new? Or has he said everything? And I feel like [00:01:00] we were pleasantly surprised that our conversation, which, uh, which got into a lot of different areas. Um, we didn't just talk about how he leveraged the same playbook. He moved from, Amazon to Uber and now to PayPal. 

[00:01:14] Tom: But even though it's the same first party data playbook, these are different businesses and different flywheels 

[00:01:21] Todd: Give ourselves some credit, Tom, for understanding the space better than other people, uh, and, and being able to get to the crux of the issues that I think are interesting and different. I think one of the fascinating bits of the conversation is you, as you'll hear Mark talk, he uses the phrase ad network and he means it in the traditional definition, not the BS RMN one company being a network concept, which we've complained about, ran it about before, but he uses the phrase that network and he means it 

[00:01:54] Tom: Yep. 

[00:01:55] Todd: he's does describe and talk about how they're really trying to build.[00:02:00]  

[00:02:00] Todd: Ad network around merchants. And what's interesting as well is how they talk about compensating the merchants. It's a two-way relationship. They're, they're looking for the merchants to be advertisers and promote themselves, but more importantly, they're going to be compensating merchants for ads that are run on inventory that they ultimately control. 

[00:02:25] Todd: And I think that's a really. Important evolution in the world of our men's. And it speaks to what we've talked about, which is retailers, merchants, as publishers. If you're in an ad network, you really are a publisher. And I think that's a really interesting, fascinating kind of insight here in terms of how PayPal and Mark is thinking about PayPal advertising. 

[00:02:48] Tom: Yeah. And I think there's been a lot, I mean, even on this podcast when we had Ari Paparo on, um, talking about. Is there a value that RMNs or commerce media networks can offer for [00:03:00] offsite monetization? So onsite? Sure, that's not hard to do. Um, but offsites more difficult. And I think that the flywheel of having a commerce player real, you know, PayPal is actually, you know, handling payments, bringing their capability to publishers in their storefront ads. 

[00:03:17] Tom: That is a different proposition than just a simple old school definition of ad network. Um, and I think that's. One of the more interesting parts for me for this conversation. 

[00:03:29] Todd: It is interesting. To think of PayPal potentially moving the ball forward in the industry. And in a way that's, again, akin to a playbook we did 20 years ago in the rise of ad networks, which served a very specific purpose. Were built around really what we'd call today, first party data, our unique data. 

[00:03:50] Todd: And I think the idea of doing that now around merchants or retailers is really an important step and evolution, and I'm excited to see where they go with it. And I [00:04:00] think the other thing that's important here is, and you'll hear this in the conversation with Mark, is how they really point to merchants as their first customer. 

[00:04:10] Todd: And that's a really important. PayPal ads isn't built for advertisers. I mean, obviously they're, they're a stakeholder in their, their service. But the primary goal here is to serve merchants first. And that's also an important, like if you look at the history of ad networks, that's how they, they looked at publishers as their primary customer. 

[00:04:28] Todd: And I think, so we're, we're starting to see, I think some, some really important evolutions in the world of environments and how they think and how they construct their businesses in ways that I think are gonna be very beneficial for retailers. 

[00:04:37] Tom: Great. Well, let's, uh, let's get into it with Mark. 

[00:04:42] Tom: Welcome to the Middlemen podcast. Today we have Dr. Mark Grether from PayPal. Mark. Hello. 

[00:04:52] Mark Grether: Hi, how are you? 

[00:04:53] Tom: We're doing great. Um, you know, we. 

[00:04:56] Todd: You're buried in a blizzard right now. He's in Philadelphia. which got Hit [00:05:00] badly. I dunno, mark if you're on the east coast of the US today, but it is. Looks, the pictures I'm seeing from my former haunts are brutal. 

[00:05:07] Mark Grether: I am actually in New York, right? Uh, it's, uh, it's, uh, it's fun outside. Let's say that it's. 

[00:05:14] Todd: I guess you're stuck at home is from what I hear, so a bit of a snow day, I guess, for those of you who are, uh, in the New York area. Um, well, it's nice to meet you, mark. It's interesting, you know, you coming and, and, uh, from seismic in part because, um, prior to. It Middlemen and, and other things. 

[00:05:31] Todd: Uh, I built and ran a DSP that used to compete with, with seismic called Zemanta. And so it's, it's interesting to see some sort of old school programmatic guys like you and I now in this, new world order of, whether you wanna call it commerce media or retail media. I, I find it interesting. Um. 

[00:05:47] Todd: Recently how the, the industry seems to be trying to move beyond retail to commerce and I think that speaks to your current role, which would be great to kind of hear your story and how you ended up 

[00:05:56] Todd: at PayPal but I love your perspective on are they one in the [00:06:00] same, are they not? 

[00:06:00] Mark Grether: Sure. Happy to, to share. Right? And, and indeed. Uh, We might have crossed, um. A path when I was, uh, running seismic. And, and so at the time, the idea of seismic, and the reason why we sold it to Amazon advertising was to enable Amazon advertising to actually become a full, um, marketing solution provider for advertisers. 

[00:06:21] Mark Grether: Right. Combining retail media on the one hand with what they're doing on Prime video on the other hand. Right? And so that was already, I would say, the starting point of it's not just about. Retail data. It's not just about a transaction data that one single retailer has. It's really about how can you provide advertisers an end-to-end solution. 

[00:06:44] Mark Grether: And, and so that, and also, um, continued, uh, with me when I went to, to Uber to build the advertising business. Over there again, there was, on the one hand, the transaction data from Uber Eats. There was a lot of other data that came from Uber Rides. And so the idea [00:07:00] it then was how can you combine transaction data with more than just transaction data to provide this kind of more end-to-end solution to advertisers? 

[00:07:08] Mark Grether: And again, here at, at, uh, at PayPal right? I have not access to, uh, data from 400 million consumer. 30 million merchants globally. So you can just imagine the breadth and depth of the data that we have to really provide this kind of end-to-end solution for advertisers. So if you think about kind of my CV a little bit, it's, it's all about data, right? 

[00:07:28] Mark Grether: And over time I was, uh, fortunate to get access to more and more data and, and therefore have the opportunity to provide kind of more richer, um, solutions to, to advertisers. 

[00:07:39] Tom: We love all of the, the, the different hop points on your, your cv. Um, I actually went and listened to some of your old podcasts and it said that you were part of the Yahoo of Germany Unified Media. So you've been doing this so many times. So when you come into a company, um, and they have a powerful data asset, what's like the hardest [00:08:00] internal barrier to monetizing that through advertising? 

[00:08:02] Tom: Like what, what breaks first? 

[00:08:05] Mark Grether: You know, , I would call myself kind of an entrepreneur, right? Building a business from the ground up within a large organization. Whether it's on PayPal, whether that's Uber, whether was it WPP Xaxis or, or, um, the German version of Yahoo it's always the same and it basically has four main components. 

[00:08:22] Mark Grether: The first one is to come in as the new guy and you have to, um, define the strategy, what you want to do with the data, and how then actually create a flywheel for the larger business. It's not just about the data in itself and how you can monetize it, but how does it actually help, right? To, um, accelerate the bigger picture. 

[00:08:43] Mark Grether: In our case, PayPal, it's about how can we leverage the data and the advertising, um, organization we have built to, um, yeah, turbocharge what we call branded check out Meaning more people are using the buy button, uh, more often for [00:09:00] higher, um, basket sizes. Right? At Uber it was how can we build an advertising business so that more people actually buy on Uber Eats or take more rides? 

[00:09:10] Mark Grether: For example, in take in the, in the case of rides, right? If you monetize data, you eventually can make, um, the prices for the rights cheaper and then then creates a flywheel. So it's all about kind of, you have to have this kind of North star that's, um, topic number one. The North Star need to be connected to the core business that you're part of. 

[00:09:29] Mark Grether: The second phase then is how do you actually build product, the product itself, the advertising product? Yeah. And, and that seems easy, but it's always a challenge because you typically have to hire people from the outside for whom it's not the first rodeo. Like it's not a first rodeo for me to build an advertising business. 

[00:09:48] Mark Grether: Um, and you need to basically bring in like-minded people, because typically in organizations that I've joined, you typically don't find these folks internally. Because they build, let's [00:10:00] say, a finance business or they build a ride hailing business, but they have never built an advertising business. So you need to bring in the people from the outside, you need to attract them, and then you'll be able to build, um, the product itself. 

[00:10:12] Mark Grether: The third phase is then about you need to be out and about and share with the world that you have now just launched an advertising business, right? Which is why you see us speaking at conferences like possible and then others to just make sure that you create awareness for advertisers that this new kind of advertising product is now available. 

[00:10:33] Mark Grether: And then you attract advertisers. They start running campaign to view, and then you basically, you scale the business, you bring in the fourth phase an operations team who can actually execute a campaign to run the campaigns. Typically, you start of managed service, eventually evolve to self-service. And, and that basically is in the fourth phase of, of how you basically scale the business. 

[00:10:53] Mark Grether: And then you go back and, and, and kind of, um. Tweak a little bit. The, um, the North Star, you've learned more about [00:11:00] how the advertising business is able to, um, accelerate the core underpinning business. And then you, you, you move on from there, but it's typically the four phases that you have to go through as you're building this business within the larger ecosystem. 

[00:11:12] Todd: As you're building, you know, PayPal advertising in particular. One of the questions that I think comes up is, how do the merchants react to the idea of advertisements, um, inside Right, the shopping cart, and is it, are you sharing revenue with the, with the merchants? What's the perspective of, you know, getting them to be comfortable with the idea of PayPal running ads in an area that they traditionally have considered their own environment? 

[00:11:41] Mark Grether: Yeah, let's clarify where we do run ads. Yeah. Um, and so again, starting point of PayPal ads is what we call a transaction graph. The data that we have from our 400 million mer uh, consumers. 30 million merchants. That's the one piece of the transaction graph. The second piece is the data that we have from Venmo [00:12:00] here in the us, right, which is not a rich data set, as well as the data that we have from honey that gives us not just transaction data that gives us social data, and it also gives us intent data with honey. 

[00:12:12] Mark Grether: All of that goes into the transaction graph. That's step number one. Step number two is now. Where do we deploy the data? Where do we actually run campaigns now? We started, um, running campaigns in our own, um, apps, namely PayPal, Venmo, and Honey. That was the starting point. The second point is now we've launched last year, um, running campaigns on the open. 

[00:12:38] Mark Grether: Sourcing data through, um, SSPs and basically it'll overlay our transaction data to get a scale, uh, needed to basically reach, um, consumers, um, at scale. Um, again, on the open web, it could be displayed, it could be CTV, right in the CTV case, as you can imagine, is super powerful to combine CTV [00:13:00] campaigns on the one hand with transaction data on the other hand, to provide this kind of close to attribution factor advertisers. 

[00:13:06] Mark Grether: But again, it is, it is open web. Now, more recently, we've also started, uh, and that's what you were alluding to, uh, to talk about how do we actually, uh, incorporate advertising on merchant's websites. In this specific case, we, we are going to start with SMBs, where we basically give SMBs the opportunity to participate in commerce media. 

[00:13:28] Mark Grether: Uh, none of them on their own would be able to do so, but if you bring all of them together, consolidate inventory. From thousands hundred thousands of SMBs into one big kind of, uh, ad network right? Then, uh, they as a, are attractive enough for, for advertisers in this specific case. Yes, indeed. We're then going to basically share the revenues with, um, our merchants. 

[00:13:53] Todd: It's interesting because, uh, we're, Tom and I are big fans of commerce slash retail media, [00:14:00] and. Especially for the open web, right? It does. It provides data in a way and transaction data that open web publishers just haven't had or have had to rely on the walled gardens to do. And one of the things that we've talked about, uh, with the rise of. 

[00:14:17] Todd: Retail media is the inclusion of merchants or retailers into that world and the rise of retailers as publishers. And so, and my question wasn't necessarily asked in the way of, oh see, they're gonna be scared of this. It was, oh, look at how if merchants start generating revenue from advertising. It's another example of how retailers are really the next generation of publishers, especially on the open web, and that I think is a really interesting shift in the world of advertising where you are now working with a new set of quote unquote publishers who have. 

[00:14:56] Todd: Interesting data on their own or through the platforms [00:15:00] they're hosting their shops on, and or partnering with transaction platforms like PayPal. And so I think that's really an interesting shift here. Is it just how public or retailers, merchants more and more look like traditional publishers? And I think this is very interesting because, you know, seismic selling to publishers and working with publishers and. 

[00:15:25] Todd: It, it's, you know, that that thread through your career kind of shows back up in an interesting way now, um, where you're now helping build a new class of publishers that didn't exist before. So I think that's an interesting shift in the rise of 

[00:15:39] Mark Grether: I think I, I absolutely agree with you. I think that's a really good point that, uh, the retailers now become publishers, right? You, you're absolutely spot on. Which again, is a new muscle for the retailers. It's a new muscle for, uh, PayPal, but also for an Uber or, uh, anyone else. Uh, who's out there, which again is why someone like myself can come in right. 

[00:15:59] Mark Grether: And help them to [00:16:00] guide through that kind of transition, right? The challenge though is for, for many, um, call them the, the new publishers, right? Is they don't have scale. How often are you as a consumer on a merchant website? Not too often. And so scale is actually the limiting factor for, um, these kind of new publishers and like what happened, uh, in, in the old programmatic world where publishers came together to form a ad network. 

[00:16:26] Mark Grether: The same is going to happen this time where retailers have not a choice to actually to come together and pull the inventory. To really become large enough for advertisers to care. Right now, the good news is if you think about PayPal, we already have the relationship to the merchants. We already have the data, um, of the merchants, and we already have the relationship to the consumers, right? 

[00:16:47] Mark Grether: So that's why I'm so interested in things like our SMB AD network as a first step to bring together pools of, um, retail. Impressions into a larger ad network and make that available then, [00:17:00] um, for our advertisers to, to purchase from. So that's a kind of the, I would almost say there's two phases, right? The first one is, yes, you have to become a publisher. 

[00:17:08] Mark Grether: That in itself is in the new muscle. And then the second question is, how are you, yourself big enough to survive? Or you need to basically collaborate with others to form a big enough consortium, um, to, to, yeah, stay relevant. 

[00:17:23] Todd: What is old is new again, right? We ad that's how the, the web was built right in, in terms of ad networks. Existed before programmatic and programmatic. I don't necessarily solves everything. I think that's kinda the lesson from the last 10 years of, you know, your my own experience, probably yours. And it's interesting as you're now, and, but it's interesting you use the phrase ad network. 

[00:17:44] Todd: People have been shy, I think in the last year or two, bringing that back into the dialogue when if you go back 10 or 20 years, I don't think there's anything necessarily bad about what ad ad networks delivered. To your point, publishers who don't have scale. [00:18:00] Need network partners. The idea of an ad network and networks were very successful for a very long time online. 

[00:18:07] Todd: And so it's, it's interesting to hear someone like yourself bring that term back and embrace it. And I think it has its purpose and role. I think the idea of, you know, when people call retail media networks, I always used to, when Tom and I started the middleman, I would, 

[00:18:22] Tom: well. 

[00:18:22] Todd: it's not an one, it's it's one retailer. 

[00:18:25] Todd: However, what you're actually describing is an actual ad network, 

[00:18:28] Tom: Well, I think, I think what was missing, for the company that's running the ad network back in the day didn't really have a lot of data or technical chops to run the ad network in such a way where they deserve that role. 

[00:18:42] Tom: And so this is where I think it would be interesting to ask you, mark, about. Um, you know, you have your new Storefronts Ads product, which is different from the SMB product. Is it the data that you're getting from Venmo and Honey that's helping you do a better job of bringing this to traditional news publishers [00:19:00] and other publishers will, will show what that ad, uh, experience looks like for those who are watching on the video. 

[00:19:05] Tom: But generally what I'm interested in is. Is just, you know, really just a buy button , on a webpage. Um, but what's behind that? What, you know? Why is that? Why can't somebody else just do that?  

[00:19:17] Mark Grether: Yeah. I think there. There are two main reasons why. Right. Just to, um, just to that the audience is aware. So we've launched a product which we called storefront ads, which basically a shopable ad, so a consumer can make a purchase within the ad without the need to actually leave, uh, the ad, which means we are collapsing. 

[00:19:34] Mark Grether: Kind of the conversion funnel into one or two clicks, which is super convenient from a consumer perspective. Um, super high conversion rates for, um, the merchants. And the benefit for a publisher is that the consumer stays at a publisher website as opposed to going somewhere else and may never come back. 

[00:19:49] Mark Grether: Right now the question is, why can we do that? And, um, others, not two main reasons. The first one is we have, as I mentioned earlier, the transaction data. That means we can do much [00:20:00] better job when it comes to personalizing the app that you see, because we know what else you have bought, right? And hence, the personalization is much more powerful based on transaction data across all merchants versus just what I would know about you by being on one single merchant website. 

[00:20:16] Mark Grether: The second piece is that because we have 400 million users on our platform and the identity of 400 million users, and I know that Todd is taught and not his twin product, Todd, because we have finance grade identity. We can also make sure that the, um, by experience itself, using the paper rails is super easy, super convenient. 

[00:20:41] Mark Grether: Again, one, one or two clicks, and then you're done with purchasing. Right? And that is basically something which, uh, no one else has in the industry. Both the data on the one hand, but also the payment rails and the identity on the other hand. And we basically have combined it now into one single ad form and rolled it out at scale. 

[00:20:59] Mark Grether: Right. [00:21:00] Uh, and I think that's kind of really real differentiating in the campaigns that we've seen here. Um, in this year, for example, they have something like a ten one a, uh, roas. Uh, 'cause again, it really comes to the power of the data and the conversion, um, funnel that we are, we're collapsing here. 

[00:21:16] Tom: So just wanted to press a little bit harder on that one because I think it's really interesting. I mean, you came from Seismic. I was at a company called Crisp in the mobile rich media space. This is what we want. We wanted to do personalization. We didn't really have the data for it. Um, but we're also coming at this at a time when we have LLMs broadening the context. 

[00:21:36] Tom: And, you know, most retailers and and merchants are saying, we, we have to like, make our PDPs even more robust. Um, we need to push out even more data so that we can be relevant. So in that new world, um, when I was asking about what's behind this. This button. You mentioned the targeting criteria. Is there also sort of, [00:22:00] um, just sort of context explosion that's happening that, that you need to deal with as well? 

[00:22:05] Tom: I. 

[00:22:06] Mark Grether: Lemme, lemme phrase it this way. I think the, the old model was from a merchant perspective, you were busy trying to pull consumers to your website. You invest on Google, you invest on Facebook, you invest, uh, wherever else on the open web, and basically it all point to one direction to your landing page of the merchant website, where then you try to convert a consumer to someone who makes a purchase. 

[00:22:31] Mark Grether: And that model is fundamentally changing right now, where the transactions, they don't need to necessarily happen on the merchant website. They can either happen in LLMs to your point. But they also may actually happen to the open web. In the open web. And so as a merchant, you need to make sure that any touch point that you have for consumer, you turn a touch point into a shopable opportunity. And so from my perspective, it is, yes, on the [00:23:00] one hand it's the LMS where we do work with all the big LMS and may make, uh, uh, the shopping experience also as seamless as possible by integrating PayPal into the lms, integrating our HONEY catalog into the lms, right? To make sure that the consumers find the right products if you're searching for something. 

[00:23:18] Mark Grether: But on the other hand, there are still the open web, which is not going away, right? And so you now need to also make sure that you are actually. Making the open web into, uh, an open commerce platform, so to speak. And again, turn all impressions of billions of impressions you have in Open Web into the, into shopable units. 

[00:23:36] Mark Grether: And only if you do both as a merchant, you basically are, um, prepared for the future. 

[00:23:43] Tom: Um, and there was one other thing I think based on your background that was very interesting. I, I heard in one of your pods that you talked about how Uber, everything was non-endemic and in running this commerce media behemoth that you have at at PayPal. Um, [00:24:00] you're, whether it's the SMB or the storefront ads, it's kind of, you know, in, in a lot of cases there's gonna be a lot of crossover to non-endemic products. 

[00:24:07] Tom: So how, how is it like from your elevated perspective of seeing this for so many years? How do you get into, at non-endemic? Because in the retail media world, it's still, the jury's sort of still out as to whether Nomics are really the right idea. 

[00:24:21] Mark Grether: Yeah, I mean, again, two things on, on Uber actually. Um, a little of correction. So when you think about ads and Uber Eats, that was and still is to my understanding, mainly endemics. Yeah. But if you talk about, um, Uber rides, that's what we call non endemic advertising, right? And the good thing about that is that it's truly incremental from a revenue perspective versus endemic is always a bit left pocket, right pocket. 

[00:24:45] Mark Grether: Um, same by the way, at Amazon. Now, if you think about PayPal and if you think about our transaction data that we have from merchants, right? We, uh, not only have the data from the merchant themselves, but also quite often from the brands. Get actually [00:25:00] purchased on the merchant websites or on the retail websites. 

[00:25:03] Mark Grether: Right. And hence, we may not have a relationship with a brand, and yet we have, um, the data, the transaction data from that brand. Yeah. And, and hence technically you can now call them non-endemic, and yet we have something powerful to offer to them. Transaction data. Or even if you think about in, in Germany, for example, the first campaign that we launched actually was with Mercedes. Clearly non endemic, right? Uh, it was an awareness campaign, but the reason why they were the first ones was because we have such a deep understanding of the, uh, consumers in Germany, right? That they were able to basically. Target a specific, um, audience segment that they wanted to go go after as they created, um, awareness for their new, um, Mercedes, um, car. 

[00:25:52] Mark Grether: So from that perspective, the fact that we actually have child suppress and death of our, uh, of our data, um, [00:26:00] across, again, so many categories, right? That actually speaks to the opportunity to go after both the endemics as well as the non endemics because again, we're not just so siloed where we know one little thing from from one retailer, and that's all what we know. 

[00:26:14] Mark Grether: We have everything horizontally across, and hence we are in a much better position to, yeah, run campaign for both endemic and non-endemic. 

[00:26:23] Tom: So one of the other things I thought was fascinating was your approach to getting a brand to invest was to sort of speak to the CFO and the way to speak to the CFO was you need to show the market share versus their competitors. And that sounds very much like. The business outside of retail media that the CPGs go into, which is like the Sonos of the world where they're, you know, very much showing the market share performance. 

[00:26:49] Tom: Um, what is, you know, what is that like from your perspective in commerce media? How well does that work? What do you learn from that? 

[00:26:59] Mark Grether: [00:27:00] Yeah, so, so my experience is talking to, to both, um, the CFOs and the CMOs is that CMOs quite often if they do talk about data to justify, um, how to spend the money, they may talk about roas. They may talk about incrementality of orders that they've delivered with the spend that they put to action. 

[00:27:23] Mark Grether: However, the CFO typically, um, cares about something else, which is market share, and he cares about his relative position to competitors. Right. He wants to know, am I growing faster than my competition? Am I doing something better than my competition? Am I improving relative to, um, competitors, my, my situation? 

[00:27:43] Mark Grether: And so the CFO is typically the one who at the end of the day, has to sign off on the marketing budget. Yeah. And hence, if you can provide, um, clarity to the CFO, how, um, your, um. Yeah, market share is going to increase [00:28:00] you speak actually his language. Now, in order for you to, to provide him the data points, you have to see where consumers actually purchase your products. 

[00:28:10] Mark Grether: And hence that's where we come in play because we have this knowledge across all the merchants, right? Let's say you're Nike and not only, um, selling Nike on nike.com, you may see on 50 different merchant sites, right? And so we know across all these merchant sites, um, where Nike is sold, what is the market share compared to competing, um, kind of brands. 

[00:28:33] Mark Grether: And so the first one is you can then show how much money actually, um, you can justify to spend in order to then improve your market share. That's number one. However, number two, you can also then guide, um, the CMO together with its agency, how to best deploy the spending. Which basically merchants, are overly kind of responsive to your marketing budgets and where you get more kind of bang for your buck. 

[00:28:59] Mark Grether: Is it merchant [00:29:00] one? Is it merchant two? So you can also, in a secondary, um, step, made this kind of budget al allocation across the merchant sites that you spend your money on. So the first step is you define how much money you get. That's a conversation with the CFO based on market share evolution. And the second step is with your CMO and your agency, how to best deploy the spend across the different kind of outlines. And all of that can be powered by the data that we have access to across all these merchants. 

[00:29:33] Todd: When you think about the advertising landscape and the data stack that you have on one hand, you know, you, you listen in like, oh, are you competing with. Like MasterCard and Visa and their ad businesses. And on the other hand, are you competing with the Amazons and other e-commerce platforms? How do you think about the competitive landscape, you know, from PayPal Media's [00:30:00] perspective? 

[00:30:01] Mark Grether: Yeah, I, I, I see myself more competing with the, the Amazons and the Googles and the tiktoks and, and the metas, right? Because that's where the money is, and the question that I ask. Um, our advertisers is what if you would put the last one to 3%, not into these platforms, but move them into PayPal, what incremental kind of output would you actually generate? 

[00:30:24] Mark Grether: Because let's be honest, there is a, um, diminishing kind of scale of return in any big platform, right? And the dollar is quite. Often spend inefficiently on these platforms. So don't spend the last dollars on these platforms, but move them into new platforms like ourselves where Theri, uh, curve at the beginning is still very, very steep. 

[00:30:47] Mark Grether: Yeah. And I think that's the best way how you can justify moving the money, um, to platforms like ourselves so that the sum of both actually, uh, is greater than just keep spending where you've [00:31:00] spent in the past. 

[00:31:01] Todd: To, to that point. Um, it's interesting you cite the, the, you know, the big platforms as your, um, the walled gardens as your, your big competitors. And I think it just speaks to where the dollars are versus perhaps in terms of a feature set of what you offer as being a, a direct competitor. And another sort of bucket that, you know, Tom and I were, were talking about is, you know, it selling to the merchants. 

[00:31:26] Todd: And to me, you know, I, I think a big part of Amazon or Metas or Google's business is selling to small businesses, to customer acquisition campaigns. And obviously the merchants who you're potentially monetizing are also ones you're potentially selling to. And you know, it. As with their Shopify audiences and moving in this direction of how do we enable merchant, um, consumer acqui acquisition, how much, you know, it a, does that need to wait for self-serve or is that really something that you're really starting to build out now? 

[00:31:57] Todd: And is that really the play for you all is [00:32:00] it's less about going to the biggest brands and more about how do I enable. Those, you know, the, the, those 30 million merchants to build better businesses. And, uh, Tom and I actually met that was working with trying to build kind of an ad network for Shopify merchants. 

[00:32:17] Todd: And so we have sort of like, we're very much interested in 

[00:32:21] Tom: We wanna know, we didn't get to do it. 

[00:32:24] Todd: an idea that you. It seems what you're potentially executing on. 'cause I do think when we talk to merchants, the big, one of the big pain points they have is how Meta and Google have really increased their cost of customer acquisition and feel like they're bit, as we say in English, a bit over the barrel as a result of their reliance on those two platforms. 

[00:32:44] Todd: So perhaps, you know, go, walk us through obviously that, that part of the story, I think of what the future of PayPal ads is and, and how you guys are thinking about it going forward. 

[00:32:53] Mark Grether: Yeah, I think there's a big, there's a big opportunity indeed helping our SMBs in two ways. First, [00:33:00] helping them to sell more, right? By running advertising campaigns on their behalf, part of our transaction data so that they just get a. By the way, also includes running campaigns together with them on the Googles and on the Metas, right? 

[00:33:16] Mark Grether: By leveraging our data in conjunction with their data as opposed to just their data alone. That is number one. And by the way, these platforms, right, only run campaigns for the SMBs, which means it's all about how can I basically get the next dollar out of my SMBs? That brings me to the second point, which is it's not only about, we are helping our merchants to sell more by running advertising campaigns for them. 

[00:33:44] Mark Grether: With them, it's all about also about how can we help our SMBs to what I call earn more, as we mentioned earlier, right? I'm also now putting advertising on their own websites, let's say, um, post checkout. This gives them an opportunity to [00:34:00] actually earn money from advertising something they will not get from the big platforms. And so the idea is now I can on the one and help them to earn money from advertising, and I can then help them to very efficiently deploy the money that they have now earned in running more efficient advertising campaigns so that they actually can actually sell more. 

[00:34:23] Todd: I think one of the things about retail media is if you're a small merchant, you don't necessarily realize that the large platforms have invested in this. 'cause it's high margin dollars, right? In terms of their business. And it's, it's a way to offset the brutally competitive nature of retail and the low margins. 

[00:34:40] Todd: And so to merchants out there, this, this is such an attractive opportunity and there aren't a lot of, to your point, I think I, I wanna jump in and hone in on, there really aren't many other true ad networks that will pay a merchant. Right now. It's take, take, take and you having, you know, a, a two. 

[00:34:58] Todd: Relationship I and, and [00:35:00] therefore they're truly a partner then is something to call out in terms of the landscape. And I think if, if Amazon and, and Facebook and could had to, or meta had to share revenue with the merchants, it would radically change landscape. So it's, I think this is something that all merchants should be ecstatic about and fighting for and pushing for,  

[00:35:21] Mark Grether: yeah, I think Doctor, you make a really good point, right? For the platforms, it's indeed all about take, take, take. How can I take even more? Can I squeeze out more money? Right? Because somewhere the growth. Needs to come from, right. Uh, for this platform. And to your point, it comes mainly from SMBs, right? And we are saying, no, no, no. 

[00:35:38] Mark Grether: It's not about take, take, take with a partnership where we help you both. Both selling more, right? By the way, which is also in, obviously in our own interest, because typically we're selling more means more payment transactions go through the payment rails of PayPal. Better brand checkout, but then we also have to earn more. 

[00:35:56] Mark Grether: Right. To fund all of that. Yeah. And so that's why [00:36:00] we are truly partner, helping them on both sides, not just on the  

[00:36:03] Todd: Yeah, I,  

[00:36:04] Mark Grether: we money. 

[00:36:05] Todd: no, it's good. And, and I don't, again, to our listeners, um, and viewers, I, I just don't think we talk enough about how radical it will be to retail media to enable revenue sharing with. Small businesses and that is, it seems straightforward to yourself or myself who come from the publishing, online publishing world or online advertising, historically speaking, right? 

[00:36:27] Todd: When you joined an ad network, you got paid and that, you know, I think it's aspect of when you say, Hey, we're building this ad network for merchants and truly an ad network in merchants are participating in the economics of that network. And so that is something that I think we could as a group, as an industry, talk more about like when is it truly two-way and how do we make sure it is two-way and everyone's getting their fair share for an versus. 

[00:36:53] Todd: To your point, take, take, take. Right. I think that's something we should all be talking more about, 

[00:36:57] Mark Grether: Yeah. 

[00:36:58] Todd: to. 

[00:36:58] Tom: Yeah, it starts to get [00:37:00] to an understanding of what, what did you mean by flywheel when you talked at the beginning of the episode? Um, and it sounds like, you know, you're finding flywheels in ways that expand the business, your co, your core business in the same way. Um, and I think that's, that's a really interesting part of it. 

[00:37:16] Mark Grether: And I think that's a trick, right? Again, coming back to the beginning of the conversation where it was about how do we actually set up an advertising business for success in larger organizations who are not true advertising first, it is about this, kind of find the flywheel. And making sure that advertising helps to accelerate the flying wheel, that is basically a trick. 

[00:37:35] Mark Grether: That's what you need to kind of, um, put your kind of, um, yeah, brain power into in the beginning to find that. And then it's all about kind of them actually deploying that playbook. 

[00:37:45] Tom: Yeah, I mean, I, you know, remembering, you know, the slide deck retail media networks that we were building out, um, you know, 5, 6, 7 years ago for, for grocery, we were talking about flywheels and the, the flywheel was an offsite ad is gonna bring more traffic to your site. Um, and [00:38:00] I think that, you know, we didn't really talk about that on the storefront ads part of it. 

[00:38:03] Tom: Um. You know how much of it is traffic, but you know, the fact that you're, you're so more embedded in the payments, you know, the supportive merchant operations is, is more interesting, I think, than just your simple retailer that doesn't get that deep into the weeds. So as we close up the discussion, is there anything else that we're missing in terms of, you know, what's on horizon? 

[00:38:27] Tom: What are you excited about in terms of either new technology or, changes to the way the business is working that you'd wanna share with the audience. 

[00:38:35] Mark Grether: Yeah, I mean we, we, we always touched on, on a few things. Again, it was about we help our merchants to sell more. Uh, but also to, to earn more, right? We help publishers storefront ads to more efficiently monetize their own inventory while at the same time very effectively, um, drive conversions for our merchants. 

[00:38:55] Mark Grether: I think that's also a, a key. Uh, message here. We haven't spoken about [00:39:00] our international rollout. We are already live now in the us in the UK and Germany, right? So it's also interesting for, for big brands that they can come to us from a global, um, global perspective, um, 

[00:39:11] Tom: That that part of it might be very interesting because you know, anybody who worked in, in advertising, I, you know, I started my career in China and you know, the idea of advertising in, in China specifically was always very challenging 'cause it had to be performance. You know, there just wasn't enough, you know, oxygen to, to enable, you know, anything else. 

[00:39:32] Tom: And so because of that, I think a lot of those businesses out there just didn't become a part of the system. And so if you're globalizing this, what are you learning from that, 

[00:39:43] Mark Grether: Uh, what do we learn from that is, I mean, the, the, the good thing about PayPal is it's a global brand, right? So this in so and so many countries, and hence we have both the consumer relationships as well as the merchant relationships, right? Uh, in, in these markets. And for, from that [00:40:00] perspective, um, to be honest, it's relatively easy, right? 

[00:40:03] Mark Grether: Globally, it's basically the same business, the same, the same kind of, uh, look and feel. And that gives us, um, the scale we need, right, to compete with the, the bigger platforms and global scale. So from that perspective, it was relatively straightforward to launch, um, the UK and Germany and more markets obviously to come. 

[00:40:22] Mark Grether: Um. Again, it's really about deploying the, the same principles, the same flywheel, right? The flywheel that works in the us. It also works in the UK and Germany. Uh, and so from that perspective, relatively, um, straightforward. Um, so again, coming back to what else is it that excites me in 2026? Again, it's really about this kind of, how can we actually help our merchants also to make them ready for an AI world. Yeah, we, I think we haven't spoken a lot about that yet, but I think that's another kind of big, big thing to, to think about. Um, which is, on the one hand, um, we make sure that on the LLMs [00:41:00] consumers actually can make a purchase, you know, something that, um, consumers are not yet kind of, um, kind of. Used to. 

[00:41:10] Mark Grether: Hence they'll need a payments infrastructure layer that they can trust. Something like PayPal, right? Which means higher conversion rates, which means more actually transactions will flow to the merchants that work with us. Um, a lot of the work, uh, a lot of the merchants, we can help them with making their catalog data available to LLMs, right? 

[00:41:32] Mark Grether: They come to us, we then go to all the LLMs. One step solution for them very simply. Um, and again, we can then also kind of follow up if a transaction may not happen on an LLM, we can also then extend that reach, restore from as offsite, right? So from that perspective, we also helping our, our merchants who basically again, bring a, or we, we are basically providing a solution to them that helps them to better monetize their own websites. 

[00:41:58] Mark Grether: We help them. [00:42:00] To more efficiently deploy their spending on platforms as we spoke. We help them to provide advertising solutions, storefront ads on the open web, and we are also helping them on the LLMs. So we basically, if not four avenues, so to speak, right. That we have with our merchants when it comes to advertising, which is much, much more than just sponsored listings 

[00:42:22] Mark Grether: Yeah. Uh, on a single website, which it's, 

[00:42:26] Tom: Yeah, I think that's our crusade is to, uh, to explain to the world that there's more than sponsored search, but yeah. 

[00:42:31] Todd: Well, there is in many ways , I think calling it PayPal ads is almost a disservice. And to your point about hey. Through this lens of what we call advertising. I'm really trying to be a broader partner for you. 

[00:42:46] Todd: Right. There's, how to acquire customers. I'm maybe gonna help you, um, merchandise your catalog better through recommendations like we call those ads, but they're really recommendations and I'm going to help you make more money or monetize. And [00:43:00] so I'm, I'm thinking about expanding your business and my relationship. 

[00:43:03] Todd: You think me about as just a credit card processing partner or pay payment processing partner. But I'm so much more and here's all the tools that, that help me do that. And in some ways. Calling it ads is a disservice, I think, to what you're trying to do as a, how do I help grow my relationship with you and the value of that. 

[00:43:20] Todd: The other thing is, and it just kind of occurred to me, to my comment earlier about thinking, you know, is MasterCard and Visa a competitor in the ad space? And to an extent they are. But one of the interesting things is I think PayPal through honey, through Venmo, through these other channels, is more transparent to its merchants than some of these other platforms. 

[00:43:39] Todd: And as you open. Ads business and you kind of showcase what data you have and how you can help them grow and how you can help them acquire and why people might be making certain storefront recommendations. In terms of targeting consumers, you, you don't know what happens with your data. If someone just runs their runs their transaction ultimately through MasterCard or Visa, you don't know. 

[00:43:59] Todd: Even if you use ShopPay, you don't [00:44:00] quite know what's happening with that data. And how is it necessarily being fed back to you? Obviously, you know, the, the black box that the walled gardens are to, to a lot of businesses and consumers is the same. And in some ways I think. Yeah, you're by, by working and recruiting the merchants into this program, you have to be more open about what it is and what it will be and, and its features and benefits and, and in a way like, Hey, merchant, I'm trying to help grow your business and therefore I'm gonna have to be more transparent about how, how I view your business and how I can help it. 

[00:44:30] Todd: And so that was sort of this, I think another current underneath this that I think is, is worth, um, again. How do you, PayPal ads is almost too small. I, it's easily understood, but I think there's a much bigger story there. 

[00:44:45] Mark Grether: Music to my ears. Uh, that's actually a really fantastic kind of, uh, internal pitch that I now need to bring to my internal kind of stakeholders. But more importantly, uh, it's a great pitch for our merchants because you're, you're spot on, right? We can provide so much more, [00:45:00] more to, to our merchants and just payment processing, helping them to kind of, um. 

[00:45:05] Mark Grether: Increase the conversion rate indeed with, with ads and the data that is powered by the advertising business. There's so, so much more that we can provide to, to them. And now it's kind of my challenge and my path for 2026 to bring out kind of that message to as many merchants as possible. And from, from that perspective, I'm super thankful that, uh, you helped me with this podcast in doing just that. 

[00:45:25] Mark Grether: So I, I'm, I'm really grateful. 

[00:45:28] Todd: yeah, no, it's, and I think to that point of recruiting merchants like you are, what I think is also helpful is your primary customer isn't the advertiser, it's the merchant. And I know too many of, in the ad space, too many businesses became about serving the advertiser, not the publisher. And I think essentially the same thing here is too many businesses will serve, again, the advertiser, not the retailer or the merchant. 

[00:45:52] Todd: And so I think. It's clear to me listening to your story today how at PayPal, the merchant is the [00:46:00] primary customer and you're trying to to their benefit, and I think that's powerful in how you're thinking about this, right? It's like, I'm gonna give them revenue share, I'm gonna help them acquire customers, I'm gonna help them grow their business. 

[00:46:11] Todd: To your point, I'm trying to help them more . And advertising here is just a vehicle to go do that. And I think that's a powerful, you know, opportunity. Whereas clearly to Amazon Meta, Google, the merchant is not the primary customer in any way, shape, or form, and that's probably. 

[00:46:28] Mark Grether: Yeah. 

[00:46:29] Todd: Here to, to talk about and I think to, and in prior live selling to publishers, um, you know, we, Zemanta got acquired by Outbrain and now known as Teads 

[00:46:37] Todd: And their primary user was our customer, was the publisher too. And it was interesting to see that through that lens of theirs. And you're sort of saying that today, now in a way that I don't think many other businesses in this space, whether you wanna call it commerce media retail media or thinking of the merchant first. 

[00:46:53] Mark Grether: Yeah, and all the value we can provide to the merchants, which are to your point, above and beyond just [00:47:00] running a few advertising campaigns here or there. 

[00:47:03] Tom: Well, really appreciate you coming on. This is one of those episodes like we had with the longtime veterans out there in the retail media space. We could go on for like two hours, but we won't do that to you. Um, but, uh, really appreciate your time. Thank you for joining the middlemen. 

[00:47:17] Mark Grether: Thanks so much for having me. 

[00:47:20] ​