Wednesday, September 12, 2007

ChannelAdvisor Acquires Marketworks!

Auctionbytes announced today that ChannelAdvisor has acquired Marketworks for an undisclosed price. Both companies have been vying for the top eBay Seller business for years.

According to Auctionbytes; "ChannelAdvisor will keep over half of the Marketworks staff in areas such as technology, brand services and customer service. Marketworks CEO Doug Hadaway and others on the management team will stay only a few weeks to help during the business integration.

Prior to the acquisition, ChannelAdvisor had 20 percent of the market share of eBay's largest sellers, Wingo said, referring to Titanium PowerSellers selling $150,000/month and more on eBay. With the acquisition, he said the company will have a 30 percent share of eBay's Titanium-level sellers. "That was one of those things that drove our thinking."

The rest of the details can be found at Auctionbytes and at Marketworks

I think this purchase was more of a case of pouncing on an opportunity rather that a strategic decision, though with eBay's marketplace slowing down CA may have found it more difficult to grow their business. It is possible that Marketworks executives
[more appropriately investors] were looking for an exit and it made sense to work out a deal with the #1 company in the eBay space. I certainly don't believe that CA pursued Marketworks. It must have been one of those deals they couldn't pass up.

The acquisition will increase CA's valuation going forward, help them with the struggling WebStore side of the business and solidify their position in the marketplace business. Integrating the two companies may prove to be a chore but CA has shown its ability to integrate acquired companies in the past. Major Marketworks companies like Adam Hersh and eForCity will now become part of the CA family.

What is clear; this will be a blow to Salt Lake City based Infopia as CA gets stronger. Look for a possible marriage between Zoovy and Infopia in the near future.

One last point, that may have been overlooked. This acquisition and possible further consolidation in the space are definitive signals that eBay is slowing down. Marketworks, may have seen their growth hit the ceiling and decided this approach was one of a few options. I certainly don't think it is a sign that the eBay Marketplace is healthy. A few years ago eBay could support many large service providers and sellers; not anymore.

Update: I forgot one thing and thought of it while taking my shower this morning (sorry for that visual) This acquisition does speed up CA's trajectory towards going public, so in that respect there are some strategic benefits. (I still don't believe that was the motivation). I guess now. I will have to begin speculating on the moves CA is making. That should please my eBay friends. Of course now Wingo will stop answering my emails.


ONLYEBAY said...

Also lets no forget that EBAY probably own around 20% of ChannelAdvisor so especially now that EBAY's 3rd party business is under fire, they want to be on the frontlines. What better way than having direct visibility on the selling trends of their top 30% of sellers.

Randy Smythe said...

I think eBay's ownership of CA has been diluted over the years. I don't believe they participated in the latest ($30 mil) round of financing so I would think their stake is less than 20%. I do know the two companies have had a contentious relationship over the years. Now CA has even more leverage.

Anonymous said...

I might be out of the loop, but if CA is facilitating some 3B in eBay transactions and webstores, and they take 2% as fees, that's only 60 million in annual revenue for what would be classified as a software company. That's not exactly go public material.

I think that you've the the right idea about future consolidation, but I would think that a company like Zoovy of Infopia would be better off hooking up with a proven and growing ecommerce winner like Volusion rather than each other.

Randy Smythe said...

In regards to Zoovy and Infopia I would have to agree. I just think that each of them will have to look for a deal now.

As for the Revenue from CA that is strictly their eBay revenue (sure it is the largest slice) they are also seeing increased revenue Searchadvisor, ShoppingAdvisor as well as their other Marketplace activities.

If they get to a $100 mil run rate that puts them in IPO range.

Anonymous said...

In my opinion, CA made a mistake in purchasing Marketworks. A majority of Marketworks customers are very small, to tiny businesses, which means CA now needs to have more overhead to manage these very low profit companies. CA/Marketworks competitors have noticed an immediate impact of this transaction because many CA/Marketworks customers are not happy with the merge and are looking for new solutions. I think CA rushed into this deal without checking all the bases...bad move.

Randy Smythe said...

It really depends on how much they paid. With the purchase CA basically owns the UK business. I've heard that they are going to cut the Marketworks Staff by 50%

The purchase adds to their valuation and get them one step closer to going public or being bought out.

If the deal was a sweet one then it is even better. The smaller sellers will naturally leave so the resource to manage them won't be substantial.

I still think it was a smart deal.