Since this official announcement at the beginning of the week, the e-Commerce world is rustling with questions, fantasies, ideas on what this buyout means, the changes it will induce on Magento and the solution. These last 5 days, I have been swamped with e-mails asking my views on this change, as were the other community managers in Germany, United Kingdom or other countries.
Before going further, I wish to state that what follows is just my personnal opinion and in no way an « inside » information nor a « Magento Inc corporate rep » notice/opinion. It has been 3 years since I started interacting with Roy and Yoav, a bit less with Bob, and we became close enough thta I have regular exchanges with them but I have no « eyes only » exclusive information.
On the other hand, we are working on Roy Rubin’s first official interview following Ebay’s Magento buyout, which will be the Bargento opening. It’s not finalized yet but we are on it and it’s quite possible I interview Roy Rubin & Yoav Kutner as a « Keynote » during the Bargento 2011 opening.
Be there, we will tell you everything, expect good stuff. Send me your questions if you have any, I will try to ask them !
It has been a few weeks since …
Since the beginning of this year, the operation made sense to me (I will get back on this later).
Since Meet Magento 5.11, rumors were there.
Since monday, there is no more mystery. Even if a contact in the know on the VC side tells me that there is still some paperwork left, the agreement is signed. We are talking here about a complete Magento buyout from Ebay. The few issued shares that remain will likely be compensated in Ebay shares or cash; Roy’s and Yoav’s have been sold to Ebay.
Unexpected? I don’t think so. To me (and again I and only I am accountable for theses words), when Ebay signed for the first part of the 49% of Magento’s shares, the deal was sealed to end with a complete buyout within one year, conditioned by the completion of a few goals. [Author’s note 11/06/2011: I had a conflicting information since then and it seems that Ebay did not plan the second part of the deal]
Why? Because that is the usual way in such cases. Moreover, it is not in Ebay’s habits to make investments without taking controle, moreso in sectors critical to them. Lastly, Magento, as promising as 2010 solution could have been, was an embryo. Waiting one year to confirm the results seems a logical decision.
Ebay’s global strategy
Obviously, when a company like Ebay invests, it’s not a random nor opportunistic decision. While opportunistic buyout does exist on this market, it stays within the frame of a long term strategic « take over the world and the neighbouring galaxies within xx years » kind of plan.
In Ebay’s case, it is sufficient to study the worldwide e-commerce market current situation and to put it together with recent acquisitions to understand the scheme. Besides, remember that in the end of 2009, Ebay already mentionned X.com with PayPal X, so the plan is quite old!
Amazon dominate the market in about fifteen countries and developped some killer weapons:
- a rock-solid customer service
- a near perfect website HCI-wise cited as an example all over the world
- a logistics system that goes beyond whatever came before
- a Cloud system to make its architecture profitable while making a pretty penny
Ebay was a pioneer in its field but:
- garage sales now amount only to 25% of Ebay transactions, 55% being direct buy, what remains being car or real estate
- with these 55% of direct sales we are dealing more or less with a big SaaS player, with merchants that use Ebay as their platform
- Paypal is a bank dedicated to e-commerce, owned by Ebay, it is Amazon’s Cloud secret weapon equivalent
- The giant wants to become a worldwide marketplace (like PriceMinister or Pixmania in France) to compete with Amazon in its own way
This results in Ebay placing itself as a direct Amazon competitor on a slightly different market, with its own weapons and an existing network.
But this armory lacked some key items:
- 2010: Investment in Mangeto Inc
- 2011: GSI buyout
- 2011: Where buyout
- 2011: Complete Magento Inc buyout
Theses moves have only one goal: to push Ebay towards its future, put the company back in the world leader race. It is very likely that Ebay will acquire other « best of breed » actors to catch up.
For the next acquisitions, my bet is on the other actors of the value chain: logistics, web marketing, mobile marketing, M-commerce, hosting (Cloud) and CRM/ERP tools. Ebay will complete its service suite and it will rise or buy what it lacks.
X.commerce by Ebay
First, the bricks:
- GSI commerce
Each brick is crucial and Ebay has created a direct link with all of these technologies or companies. The goal really is to have the broadest position service-wise. Proximity commerce, geolocalization, payment gateway , couponing, delegation, barcode (by Red Laser for POS), digital marketing, BI & analysis, solution… it’s making great strides, a few more acquisitions or partnerships (M-commerce? M-marketing? Advertising network?) and the landscape will be complete!
The platform will stay open so that key components like Paypal will not be unique and will not block the other technologies or providers. The idea behind X.Commerce is to be an « Open Ecosyystem » so as to not hinder the growth of the platform.
Magento integrating Milo ? Ebay in Magento’s BO ? All these bricks will reinforce each other and tighten together over time, maybe towards a complete API that will cover several actors from the chain.
Ebay’s Big Plan
In the end, what is « The Big Picture » for Ebay ?
This is what I am betting on:
- X.commerce: a business hub where to take margins on different services, while keeping it open so that all of the technologies can be a part of it.
- Offer a complete course for the retailer: Ebay->Go->Magento CE->Magento EE->GSI with added value on each step, probably backed by a Cloud to focus on the service offer rather than the underlying infrastructure.
- Last but not least, to make the world’s biggest bank flourish. Because with more than 300 millions accounts, mostly american and european, PayPal is the new bank in the e-commerce world and incidentally, one of the biggest retail bank worldwide. One can publish quotes, be paid, pay with ten or so different methods. To me the secret plan, more than the End to End service, is here: to make a margin on hundreds of millions of bank accounts. 300 millions accounts, expenses that will be near 1500 € per person per year, to ??? a small percentage on this ???, this is to be a world heavyweight bank, isn’t it?
Magento position within this strategy and vs. GSI?
It’s a wide question but X.Commerce is large-scale project and I think it has a « product line » structure. It aims to provide a service that will include storage, transportation, invoicing, access to company tools (ERP/CRM), hosting, marketing, advertising etc..
But it is likely, when playing in this league, that segments are very clear to Ebay:
- Ebay Stores & individuals / SOHO : Magento GO
- SME: Magento CE / PE
- Top 5000 worldwide retailers & merchants: Magento EE
- Top 500 worldwide retailes & merchants: GSI, the ones with 1 billion dollar or more in on-line sales
After that, analysis work becomes more complex. It is quite known that GSI technical platform is average. What makes the company noticeable is its service offer. To me, merging Magento and GSI makes no sense platform-wise, so it is likely that Magento eventually equip GSI to replace its technical offer. GSI for service, Magento for platform, Paypal for payment, X.commerce is starting to take shape.
Components are here, services too, existing clients will be able to migrate, future clients will benefit from seamless integration with payment gateways … Who is the giant here? The world’s first online merchant or the millions of « tiny » merchant websites?
Uncertain about this, Ebay plays on both fields, concurrencing Amazon by capturing low market at a fast pace, while developping its bank (PayPal) and targeting high-end market with GSI. Magento Enterprise version fits naturally in this setup, right in the middle for mid-size market.
This broad spectrum lets Ebay take care of its clients’ growth, from the beginning (on GO platform) to delegated e-commerce with GSI. Ebay will cover all the steps of its clients’ growth, with a palette of services that will widen as time goes on.
Tracking the clues
Clues are in the wild but putting them together is a bit complicated. With Bargento, Imagine, Magento Dev Paradise and Meet Magento, one has to be everywhere to get the big picture.
After this last Developper Paradise in Ibiza, we have got more informations on Magento evolutions and the roadmap is fast-paced, which means to me that the solution is durable. In fact this buyout from Ebay wil strenghten the product, the company funds and Magento features, most likely an opening of the product with a big webservice.
Yoav spoke of SOAP, REST, RPC-XML and loose coupling, all of this has a strong opening connotation, PHP will remain the key, as the open source.
In addition, during Imagine at the beginning of the year, Yoav announced that the technical development base will have the same API across all the Magento platform (GO, CE, PE, EE, Mobile) so a large number of modules will be compatible across platforms.
Webservice, opening, API, to me all of this points toward a big open platform.
Delegated e-commerce and multi-channel: the key?
When one wishes to play at this scale, it is necessary to think multi-channnel. Indeed, retailers, who are the ones that pull e-commerce now, are often equipped with POS, paper catalogs, indirect sales channels and dream of mobile in addition to their websites.
Merging all these sales channels cannot be made « automagicaly » and e-commerce solutions have to be more and more agile. From what I can see in the next Bargento 40% of the speakers and exhibitors will speak about one multi-channel form or an other. The trend is strong.
About delegation, same deal. The biggest brands want to focus on their core activities, design, marketing and production but the Vente Privée model proved that they also agreed to yield a part of their margins for a complete service in return. Actors like GSI, Mix Commerce, DCF, Baobaz and several others aim at this market and will fight to convince retailers that delegation is the best solution from an economic point of view.
Obviously, merging delegation and multi-channel is an expected move so I am convinced that these models will dominate the retailers market segment mid-term. With its new strike force and X.commerce project, Ebay will play a key role in this segment.
What about the other giants ?
It seems unlikely that Oracle, Google, Microsoft and IBM will let the train take its leave without them.
Oracle bought ATG, probably not just for cosmetic purposes. Even if Microsoft is in trouble now, the company is not known to gladly stay in the backstage and has huge assets to get back in the game (unless it decides to let this battle slip by).
IBM had to absorb Oracle’s Sun buyout because Websphere Commerce relies heavily on Java but it is still a powerful opponent, with a well-known software and some companies still are in a « Nobody has ever been fired for having chosen IBM » state of mind.
Amazon will not sit idle and its offer on the mobility seems a bit lacking, it is probably on this niche that the giant will strike back. I think the M-commerce operators will be worth a pretty penny on the short term. It is also possible that, still with a head start, connected TV type media will keep the giant busy.
Apple is indirectly still one of the e-commerce leaders. Being the worldwide top seller of mobile applications, dominating mercilessly the app segment, high-end mobile phones, music sales and tablets, it would be surprising that Cupertino chose to not have a bite of this pie.
Forgetting Google would be too easy if they didn’t already have e-mails, phones (OS at least), plannings, search engine, advertising, etc. Who can compete with Google when it is the first SEO and SEM provider, making them the very first traffic vector for an e-commerce website?
Google Wallet is not an detail either when you see that the lawsuit started off immediately and that the recruits are former PayPal bosses. To sum up, it is unthinkable that Google will keep its hands off this market, all the more than its position, google shopping and panda are as many indications that tends to show a strong interest in e-commerce. In addition, Android is a great base to develop M-commerce.
What of the other technologies ?
Hybris: A UFO appeared on the top end market. It has been many years since the solution appeared but Swiss are dicreet people so we are only starting to hear about it. Strong of tens of millions euros in sales figures, of a casting made of former large groups heads and a rock solid technology, Hybris stand out.
And when it’s about scaling, growing, handling tens of millions of products, the newcomer convince easily the big players of its efficiency, its flexibility and the virtue of relying on a strongly structured language. The solution is expensive (we are talking about hundreds of thousands euros for licenses) but do (almost) everything. The product manager is natively dedicated to multi-channel so yes, Hybris will be part of the top end landscape and, like Magento before, it made its appearance in the Forrester research group charts.
Commerce Guyz & Drupal Commerce: Having hundreds of thousands of developers trained to its technology is a big head start. Likewise, being Ubercart successor, the game is not the same as you already are in the place. With its very strong CMS aspect all of its competitors lack, Drupal Commerce will strike hard. Moreover the technology is extremely modular; imagining Drupal’s flexibility combined with e-commerce strength is almost frightening.
Prestashop wants to raise funds to support its ambitions and embarks onto the American journey with one of its founder. The product is doing all it can to get rid of this « small websites solution » image and remain a historical SaaS pioneer in its own way. The solution is way older than many of the others and its pace seems to quicken now. In a market with such players, Prestashop wants to expand over french borders and into the international market, a move attempted by Oxid in Germany or its dreadful french competitor RBS.
RBS Change is a very efficient product, clean and arrived in the market 3 years ago. Founders are french and it is yet another jewel born in France. The XUL Backoffice is very handy and original, although it requires to use Firefox for its Backoffice, the product is innovative, fast and very efficient. In fact it is one of the fastest amongst the PHP frameworks. and the company makes its business model, its product and its marketing evolve, I think they are part of the « emerging players to watch ».
Oxid Esales is the e-commerce solution leader in Germany. This single fact is noteworthy because the german market is demanding, already well-structured and mature. With such strong bases (wide domination in Germany), lots of references and a very positive feedback, all that is left to do is capture Europe and World. An other actor the size of RBS or Prestashop with strong claims and every reason to be confident!
The others SaaS: Oxatis, Powerboutique, Demandware, and many other are on the prowl. From small ones for the first two to big ones for the third, each of them wants to that its offer is the best suited to this particular market segment but the other « framework » actors are showing up with their own pretentions, RBS, Drupal, etc. This will be a very dynamic and overly competitive market.
The other existing technologies: WCS, ATG, Microsoft commerce and many lesser-known frameworks, all these actors will not quit and will keep playing; small or big, risks and opportunities are huge, and to quote one of my friend (who is a head in one of the top 5 french websites), « Things are only getting started in e-commerce ».
So who will buy who?
Some attractive targets:
- Companies specialized on mobile, tablet and tactile development. Many mid-size actors are doing a good job with a good expertise, Mobile Roadie or Adyax for example.
- Frameworks (for their intrinsic value and their client portfolio), Ebay is equipped but what of the the other ? IBM or Oracle could go for Hybris, an other giant for Oxid or RBS to have its own SaaS, opportunites are numerous.
- Advertising networks (online and mobile)
But perhaps also :
- logistic companies (warehouses, automatons, transport, delivery)
- digital marketing companies
- integrators (for external growth of bigger integrators)
- private Cloud operators
Initial article by Philippe Humeau on its blog Wikigento, translated by Vincent Gross.