Monday, December 17, 2007

Amazon Merge with eBay? No, No, No

This morning Henry Blodget, on the Silicon Alley Insider blog, expanded on a recent post by Saul Hansell at the New York Times recommending that Amazon buy eBay. Mr Blodget thinks it would be a good idea also, writing.

"The combination makes sense because Amazon's strengths have always been eBay's weaknesses: service and site interface. eBay's global network effects, meanwhile, though much diminished in recent years, would make the combined company the world's dominant commerce platform."

Surely a combined eBay/Amazon would be the "world's dominant commerce platform" almost immediately but Amazon doesn't need eBay to accomplish this, they have charted a course for their business that will eventually make them "the world's dominant commerce platform"all on their own. While eBay struggles to maintain the status quo, Amazon works diligently on a long-term plan.

Here are 5 reason's this idea is a pipe dream.

  • Culture Clash - Amazon is run by entrepreneurs, visionaries, long-term thinkers. eBay is run by consultants who micro-manage the bottom line, are only concerned with the quarterly results and only make changes when they are forced to. The company cultures are too divergent. Jeff Bezos is not going anywhere, so eBay managers would need to adapt to the Amazon way of doing things which means most of them would head for the exits.
  • Amazon doesn't need Auctions, they tried this on their own and it didn't work. Fixed price is the future and Amazon is the king of "Fixed Price". Auctions have matured in the biggest eBay markets and will continue to mature in other International markets. Amazon, is charting a different course with its 3P Seller business and will eventually become the #1 marketplace for professional sellers. While eBay will continue to be the place for the casual seller.
  • Amazon, is a technology company, eBay is not. Amazon is investing in its platform for the long-term while eBay tries to figure out how to grow without investing in technology or infrastructure.
  • Amazon doesn't need PayPal, though I'm sure they would love to own it. Amazon, looks at payments as a cost not a revenue stream and their goal is to cut costs so that they can increase profitability. PayPal is best suited as a stand-alone company but that won't happen in the near-term because it would expose the major weaknesses in the Marketplace business.
  • Amazon will get there on their own. They have a long-term plan and they are working on that goal. Adding eBay would be a distraction that would derail their efforts in accomplishing that goal.

IMO, eBay would be much better off merging with Yahoo than Amazon as the company cultures are very similar and eBay is heading more towards an advertising model then a retail model. Amazon would be better off acquiring Overstock.com or Buy.com than merging with eBay.

Just my 5 cents.

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