PayPal Acquires Startup to Make Products as Viral as Goodreads

EBay Inc. (EBAY)’s PayPal unit is buying Iron Pearl, a startup that helps companies find ways to make their products more attractive to customers on the Web.

Iron Pearl co-founder Stan Chudnovsky is assuming the role of vice president of growth at PayPal, heading a new team tasked with getting existing customers to boost their use of services, PayPal President David Marcus said in a blog post yesterday. The companies didn’t specify terms of the agreement.

EBay, based in San Jose, California, is expecting payment volume at PayPal to double in the next three years as people increasingly shop and pay for goods on mobile devices. PayPal has introduced new tools and software in the past 18 months, including a mobile credit-card reader for smartphones and tablets, and a system that lets consumers use PayPal at checkouts in physical stores such as Home Depot Inc. (HD)

“There are only a very few people who have actually mastered the art of growth,” Marcus said in an interview, referring to Chudnovsky’s background in helping companies cultivate active users. “Stan is definitely one of those.”

Marcus said Chudnovsky’s experience at Goodreads Inc., the reading social network that Amazon.com Inc. agreed to buy last month, would be useful at PayPal. Chudnovsky was a board member and investor in Goodreads for eight years, helping its viral- marketing efforts and encouraging readers to write reviews. Goodreads has 16 million members and 23 million reviews.

Card Readers

PayPal has declined to say how many merchants are using its mobile card reader in the U.S., which charges a flat rate of 2.7 percent for card swipes. Square Inc., started in 2009, has had 3 million merchants activate its stamp-sized swiper, with $12 billion in payment transactions on yearly basis, according to Aaron Zamost, a spokesman for Square.

Chudnovsky and Iron Pearl co-founder James Currier have a track record in online games and marketing before working on Palo Alto, California-based startup. The two founded viral- marketing website Tickle Inc. and sold it to Monster Worldwide Inc. (MWW) in 2004 in a deal valued at around $100 million.

More than 5 million people joined PayPal in the last three months of 2012, the biggest quarterly gain in more than eight years, according to Marcus. Chudnovsky and Currier will lead the effort to increase the pace of growth of PayPal’s 123 million active customers, Marcus said in the post.

Chudnovsky “managed to create genuine and sustained viral growth and retention for his own startups, and has advised others to grow at a tremendous pace,” Marcus said. “We’re confident that applying this unique, and highly effective skill set to PayPal will lead to making our groundbreaking payments experiences even more ubiquitous.”

To contact the reporter on this story: Danielle Kucera in San Francisco at dkucera6@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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