Tuesday, October 09, 2007

10 Reasons Why eBay Will Eventually Acquire ChannelAdvisor

eBay's recent purchase of German Auction Service Provider AfterBuy got me thinking about eBay's end game in the auction tools business. I had always thought that it made sense for them to own that part of the business but with so many different service providers, how would they go about acquiring the right ones. Well, in the aftermath of the ChannelAdvisor acquisition of MarketWorks this AfterBuy purchase is starting to make sense. So here are 10 reasons I think eBay will eventually acquire ChannelAdvisor:

  1. eBay wants to own the entire transaction, which means they want the roughly 2% that these large service providers like CA get for their services. With the possibility of rolling back fees or at least capping them for now in their main marketplace business, eBay is looking for growth elsewhere.

  2. They already own the low end of the listing business with the SYI (Sell Your Item) Form, Turbo Lister, Blackthorne, Seller Manager, etc. Now that ChannelAdvisor owns MarketWorks, if eBay were to buy the company they would have a high percentage of the mid-size to large seller business as well.

  3. They already own a small stake in ChannelAdvisor, some peg it as high as 15% but that is a simple investment, they do not have controlling interest in the company and in fact they do not even have a board seat. At least with Craig's List they have a board seat.

  4. The AfterBuy purchase makes more sense if you consider it one step in a strategy to own the listing process. ChannelAdvisor is growing internationally in markets like the UK, Germany and Australia. AfterBuy is a major competitor of ChannelAdvisor in Germany. Is it possible that CA has spurned eBay's advances before and eBay upped the ante by buying a competitor? This would be a very similar strategy to what they've done with Craigslist here in the states with the introduction of Kijiji.

  5. AfterBuy is heavily involved in multi-channel selling in much the same way as CA. eBay, IMO, wants to be the shopping engine for the world's ecommerce. With a CA purchase they would own SearchAdvisor, Shopping Advisor and additional Marketplace listing tools. Of course an eBay purchase of CA might cause some friction with Amazon and Overstock but AfterBuy is heavily involved in Amazon listings so that doesn't appear to be a concern on eBay's part.

  6. ChannelAdvisor falls under what I call the PayPal dilemma. It is a service that a high percentage of top eBay sellers use that eBay has no control of. eBay management likes control. At this point eBay's ownership of CA only pays off when CA goes public or is sold. Like PayPal, I'm sure there have been discussions or even offers for CA and as CA gets ready to go public the price just keeps going up.

  7. CA's purchase of Marketworks consolidates the market segment enough to make an acquisition a no-brainer. The value of the company continues to rise.

  8. Investors in CA are in this for the money, unlike Craig Newmark and his Craigslist investors. If the price is right CA will sell. To this point, my guess is that the price has not been right.

  9. ChannelAdvisor is a great company with solid management and would be a much better fit for eBay than Skype or StumbleUpon and it won't cost eBay over $2 billion but it will cost them much more than StumbleUpon.

  10. An eBay purchase of CA would let eBay control Scot Wingo, there would be no more wild outlandish speculations on his blog. (That was just for you Scot.)

All of this is my opinion, based on observation and just a smidge of inside knowledge on how CA works. I think it would be a wise move on eBay’s part and they better do it sooner rather than later if they don’t want the price to keep going up.


Just my 5 cents!~

22 comments:

Craig said...

fyi: there are no investors in craigslist.

Thanks!

Craig

Randy Smythe said...

Craig, thanks for the clarification.

Anonymous said...

Randy, why do you suggest eBay obtain even greater control of the marketplace. Is this spreading good news or advocating a "utopia"

Randy Smythe said...

I'm not suggesting that eBay do this, I'm observing that this is the direction they are headed.

Believe me I'm not putting ideas into their head.

BILLSTUFF said...

I sincerely hope you're wrong about this. It's bad enough having annual and semi-annual fee increases on eBay. We don't need the same frequency of fee increases with Marketworks. I've been a MW customer for eight years, and to the best of my recollection, I have never witnessed a fee increase. Their motto is "We make money when you make money."

Randy Smythe said...

Bill, I may very well be wrong but based on what I'm seeing it makes sense that this is where they are headed.

As for MM and CA it will still be performance based pricing so I wouldn’t see that changing if eBay owned them :)

Anonymous said...

I'm not as optimistic as you regarding CA's numbers. With all of the expansion that CA has been going through, and with the continuing demise of eBay's transaction volume, I'd say that CA is likely having some internal valuation problems. Expanding off and off eBay is the right way to go, but CA's pricing structure is something that doesn't fly with any real ecommerce business. I can have nearly any standalone website on CA recreated in India or China for a $3K-$6K and the merchant would own their own site. I vote that CA's numbers start going sour and a sale is eventually made out of necessity.

Randy Smythe said...

Anonymous

I think the MarketWorks acquisition helped CA avoid some of these issues. CA is growing Internationally and their diversification into Search and Comparision Shopping services should help them avoid any problems.

My friends at CA thought my post was funny. My friends at eBay haven't responded to me about it yet. We will see.

trevor ginn said...

you have given some pretty valid reason why eBay would want to invest more heavily into listing software. However, I can't really see them buying a software package which encourages people to list on other platforms (even if eBay is it's real strength)

Randy Smythe said...

Trevor,

eBay purchased AfterBuy and they help users post on other sites. The CA guys thought the post was funny.

I just bring things up to get the discussion moving. The post was my most visited post in the history of the blog.

Anonymous said...

Why would eBay buy a system that SUCKS as bad as Channel Advisor? It took me 4 hours over 2 days to get checked out. PayPal is a instant service.

TS said...

Nice observations. Regardless of eBay buying CA down the road, CA seems to position itself well in long-tail sellers' interest, providing full range of channel services.

I have a quick question for you, Randy. Who do you say are the key competitors of CA in the US market? I'm trying to figure out the competitive picture of e-commerce space, specifically multi-channel selling..

Thanks,,,TS

Randy Smythe said...

In the US Marketworks was CA's biggest competitor until CA acquired them.

Now, Infopia, Monsoon, Zoovy, Kyozou are the biggest competitors.

Monsoon is very entrenched at Amazon, Infopia is more geared to Web Retail and eBay, Zoovy has a lot of backend tools. Kyozou is a Canadian company that I think is similar to Zoovy but I haven't looked at them in depth.

There are also smaller players like Fillz for the media marketplaces and Vendio etc.

I hope that helps.

T. S. Chang said...
This comment has been removed by the author.
TS said...

Thanks a lot!

Building on your thought of potential acquisition by eBay, do you think companies like CA expanding their business horizon into actual retail and becoming eBay's sort of competitors help increase their valuations?

Also, I thought about offering online ad services in addition to search ad, partnering with local-focused channels, and/or introducing gift cards somehow..

TS

Danna Crawford said...

Hi Randy, I was just passing by and wanted to say hello :-)
And wish you a Merry Christmas!

Danna ..<><....

Randy Smythe said...

Thanks Danna! Merry Christmas to you and yours and to everyone who reads the blog Happy Holidays.

Anonymous said...

channeladvisor is terrible... I wish there was a way to know before you click buy that you were going to be put through that garbage. (btw tigerdirect.com uses them if you want to avoid the hassle avoid them... but what do you expect from a site that takes the ability to view already loaded pages away from you if you do not have java enabled)

JJ

Anonymous said...

Yeahhh, I love this!! Someone could create a blog: ChannelAdvisorSUCKS.com right now!!! This is the most disgusting service at the web. They are really REALLY very bad!!! They make me SICK everytime I go there. It's impossible to use that shit!! AAARRRRRGGGGGHHHH!!!!!!! FUCK CHANNELADVISOR.COM !!!

Anonymous said...

so....?

Fangyaya said...

kate spade purses
true religion outlet
mont blanc pens outlet
coach factory outlet online
coach factory outlet online
prada handbags
michael kors outlet store
ugg slippers
coach outlet
michael kors outlet online
michael kors outlet online sale
uggs sale
polo ralph lauren
coach factory outlet
ugg boots
the north face jackets
nike shoes
nike tn
louis vuitton purses
coach outlet
abercrombie outlet
uggs outlet
cheap ugg boots
ugg outlet
uggs on sale
ugg on sale
nfl jerseys cheap
ugg outlet
ralph lauren uk
coach factory outlet
michael kors
nike air max uk
longchamp pas cher
coach outlet
oakley vault
adidas outlet store
oakley outlet
canada goose coats
fitflops shoes
discount jordans
20169.14chenjinyan

chenmeinv0 said...

canada goose jackets clearance
fitflop shoes
oakley vault
coach outlet online
michael kors handbags outlet
true religion outlet
gucci bags
ugg boots
moncler jackets
toms outlet online
2016.12.26xukaimin