We are a week or 10 days away from the Alibaba IPO. Alibaba’s IPO is currently driving the ecommerce industry as companies ensure that they are best prepared after Alibaba raises billions. One company clearly working hard to combat Alibaba’s potential impact is Rakuten. Rakuten has been acquiring US based businesses which they will add to their Asian based business. Interestingly – I wonder why has Rakuten not thought about acquiring businesses in Asia? Their last 2 purchases has been US based companies that for all intensive purposes will become bolt-ons. The eBates acquisition is in my opinion a clever acquisition – one it can be added to Rakuten’s global business but also provide intelligence towards where shoppers get most cash back post purchase. Is Rakuten looking to buy more ecommerce companies?
Something is happening at eBay and it is not good. Firstly – Apple conveniently does not mention PayPal as part of their Apple Pay product. For the record I think Apple Pay being US only is indicative of Apple trying to get all elements (partnerships, legislation etc) done prior to rolling it out globally. PayPal has a problem; Amazon, Google and now Apple are looking to add more value to their payments businesses while keeping PayPal outside their ecosystems.
I don’t agree with the news that eBay will be adding a mobile advertising network in Q4. It reeks of desperation as advertising inside mobile apps lead to confused users, a drop in click through rates that adversely affects mobile conversion rates (which are low in any case). I don’t see Alibaba, Amazon or any other mobile apps ecommerce business as adding advertising soon.. Also this story, every quarter that Google is to invest in eBay is either eBay looking for help from Google or an analyst that wants to increase the eBay share price for a few hours. I don’t see Google investing in eBay as that will in the long run create huge trust issues for Google inside the commerce industry.
Amazon has gone up a few gears and are moving at a speed I have not seen before. First they subtly tell the world that they are working on an advertising product to rival Google’s advertising monopoly and then the Seattle-based behemoth acquires Twitch. Currently it feels like Bezos is asking questions to the Google founders because they are trying to get into the vertical that Amazon dominates (ecommerce).
I think the Twitch purchase was based on a few factors: Twitch did not get the answers it desired from Youtube. Secondly – Amazon has always bought content based business – DPreview, IMDB, goodreads etc, so this is not a completely new thing. Twitch adds a few things to Amazon’s business – a community to are deeply connected with gaming (ads to a gamer will lead to conversions and sales while watching a video of someone playing). It adds another data source to Amazon enormous data-based business model and as VC, Mackey Craven points out this might be also for technology.
Alibaba is to IPO in September with trading of shares to begin from the 8th. This is the moment the entire ecommerce industry has been waiting for. It changes the entire industry as suddenly there is a new player that has a lot of cash that can go into underserved markets. I expect them to do something big in the US to rattle Amazon’s & eBay’s cages. I am speculating but believe they will acquire a few businesses in South East Asia and move aggressively in markets such as Latin America, the Middle East and India. Rocket Internet and Zalando’s IPO’s are also potentially affected by this IPO – if the market accepts it (unlike what happened to facebook) I suspect their IPO’s to be at the end of September.
Readers, since my last post a lot of things have happened. It clearly is the last 6 months of the year as news keeps breaking, Amazon launches new product after new product, Alibaba is still to IPO etc. Over the last 2 weeks, 2 companies have been on my mind: Rocket Internet and Wayfair. Both are in the process of raising funding and both operate in 2 verticals that are not dominated by Amazon.
Wayfair in my mind is an example of 2 founders that understood the market and benefits of having a central business before anyone else did. Let us be honest, Wayfair started as a collection of niche ecommerce businesses that consolidated into CSN Stores and then into what we all know as Wayfair. Think about this – in 2011 when this company announced that they did a $1 billion in total sales I remember seeing a lot of posts about “who is this company”. Well fast forward 3 years and we have the IPO of a Boston behemoth that is going to be a big vertical business that will make things difficult for Amazon, eBay, Etsy and One Kings Lane. What is interesting to note is how little VC investment they have taken as well as how much control the founders have. I think their IPO will be a success (In ecommerce terms they will be known as the company that IPO’d before Alibaba).
Well, what can I say about Rocket Internet. They are one of the few companies that I know of that is able to add $1 billion to their valuation inside 7 days. Clearly something is going on at the German incubator as they have sold 20% of their business to 2 investors. First they sell 10% to the Philippines Long Distance Telephone (PLDT) company which valued the business at $4.5 billion. In less than 7 days they sold an additional 10% to United Internet from Germany at a valuation of $5.7 billion. Just when we all thought the selling off of parts of Rocket Internet companies were complete, they announce a consolidation of shares with existing shareholder (Holtzbrick Ventures) which leads to Holtzbrick Ventures owning 2.5% of Rocket Internet. Are we going to see the much anticipated Rocket Internet IPO?
Amazon waited all of 24 hours for Flipkart to officially announce their $ 1 Billion fund raising amount to announce that they will be investing $2 billion into India. This is a big deal for a few reasons – it is clear that India is an important part of Amazon’s future thus they did not wait to announce this massive investment into Amazon.in. It clearly is an arms race between Flipkart and Amazon for market leadership in Indian ecommerce but I cant help but wonder this leaves Snapdeal. Does Snapdeal look for more investment? I am honest when I say Indian ecommerce has me thinking – is it the size of the opportunity that is leading to this investment race? Is it investor angst that India might become another China? Those not familiar with Chinese ecommerce – the market is dominated by one company (Alibaba) and international investors got shun by local investors. I don’t necessarily think that Indian ecommerce is at all similar to Chinese ecommerce but there are definitely similarities.
The other big news is the TrunkClub acquisition done by Nordstrom. I believe Nordstrom to be one of a handful of retailers that understands ecommerce; thus they continue to acquire ecommerce businesses that will provide them long term sustainability. Every acquisition that Nordstrom has done is to provide them with scale in a part of retailer that they were lacking. Their investment into Bonobos was to ensure that they have a front row seat at the men’s fashion industry. Hautelook was to ensure that they could provide their digital clients with a selection of deals. Trunkclub is in my opinion a combination of a lifestyle and business acquisition. Lifestyle is to be able to provide male clients with a stylist to help them solve a clothing situation. The business part is to add this on top of their own business to their clients. I am a Nordstrom fan (visit their stores when I am in the US) and believe that they will continue to acquire ecommerce companies that fit their needs).
I have been thinking about eBay over the last 6 weeks. The primary reason for it is “why did eBay repratriate $6 billion?” but also other news such as – David Marcus leaving Paypal into a newly created role at facebook, eBay being hacked and not saying much about it and the continued focus on Russian ecommerce. The company also announced moves into Latin America and an acquisition (AppTek) which is suppose to aid it in moving into new regions. The point is that eBay has been in the news for a variety of reasons and seems to be going a hundred miles a hour in a hundred directions.
PayPal – the “unifying element of commerce”
I am firm of the belief that eBay should have spun PayPal off. Why? Payments is a hot industry which is seeing an enormous amount of innovation. Tell me – where does PayPal fit into that? Close to the end of the line for payments businesses? I thought so.
I read the excellent piece about the PayPal mafia that was in the TechRepublic and I could not help but wonder why eBay could not keep any of the founding team to stay at the business. Would PayPal have been spun off by now?