PayPal Goes Modest

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Harper Reed and Dylan Richard first burst onto Chicago's tech scene as part of Barack Obama's 2012 reelection team, and their social media wizardry is often credited for keeping the president in the White House.

The pair then founded Modest, a company that allows stores to embed buy buttons in their apps and emails — and is now a subsidiary of the newly independent PayPal, which is running a campaign of its own to attract the business of merchants that it was unable to reach when it was part of eBay.

"This is a huge coup for PayPal. They not only get this platform and the technology, but the expertise," said Richard Crone, a payments consultant. "They're kind of the 'Ben and Jerry' of big data, but their expertise is in short supply."

Terms of the deal, PayPal's first since officially spinning off from eBay, were not disclosed. Modest's 18-person staff will work out of Braintree's offices in Chicago's Merchandise Mart. Braintree's Venmo has been one of PayPal's most successful divisions in melding social networking and payments to reach younger consumers.

Before founding Modest in 2012, Reed was the chief technology officer of Obama's reelection campaign and Richard was its lead engineer. Their team's social media expertise could aid PayPal products such as One Touch, a Venmo system that PayPal has been working to adapt to other payment environments, Crone said.

"They want to extend One Touch to add buy buttons for in-app, social media purchase, e-commerce and in-store," Crone said. "With this addition they can cover all of the bases."

PayPal did not make an executive available for comment by deadline on Wednesday. In an announcement on PayPal's website, Bill Ready, senior vice president and global head of merchant and next-generation commerce for PayPal, said the acquisition of Modest will enable a "complete commerce solution," including payments and order management, with greater speed and improved consumer experience.

Contextual commerce and "buy buttons" are becoming increasingly relevant as companies try to close the gap between using smartphones to research purchases and to actually pay for them.

For example, PayPal's announcement mentioned Pinterest's Buyable Pins, which use PayPal's Braintree platform to sell products from merchants including Nordstrom, Neiman Marcus, Gardener's Supply Company and Michaels with minimal navigation on iPhones or iPads.

"It's very smart for PayPal to pick up a company that can increase its capabilities in this space," said Thad Peterson, a senior analyst at Aite Group. "They are getting into a position where a merchant can offload the entire commerce process on PayPal and focus on sales."

Stripe also works with Pinterest and powers buy buttons on Facebook and Twitter. Apple Pay and Google's upcoming Android Pay also function as buy buttons within apps on their respective smartphone platforms.

Tim Sloane, the vice president of payments innovation and the director of the emerging technologies advisory service at Mercator Advisory Group, is bullish on the experience of Modest's team but says the company itself is still a work in progress and does not provide enough information on its website to demonstrate that expertise.

Even so, the Modest acquisition "will be a major differentiator going forward and I would bet that Harper Reed and Dylan Richard have significant knowledge and insights for delivering such solutions, despite little of its being visible on the Modest website," Sloane said.

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