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?
The week is in the record books and a few stories dominated the ecommerce industry. Unconfirmed reports that Flipkart is / has raised a billion dollar round. This round of capital is supposedly led by DST, Tiger Global and Accel Industries. Flipkart has me scratching my head – it is burning cash at astounding rates? I get the feeling that investors are interested in the company due to the size of the opportunity in Indian ecommerce. Is this the last round of investment before an IPO? What will the company be doing with the fresh round of capital? I believe that Flipkart will be looking to augment their mobile commerce efforts – thus a mobile wallet / payment startup is a target. I suspect that some of the cash will be going to a new facility for the staff to work at (not to be confused with a distribution center). Is Flipkart going to be the Indian version of Alibaba?
The week also contained Amazon results and lots of blogposts and opinions have been made public about the companies poor performance. Lets recap what the company has done in 2014 – launched Kindle Fire TV, launched a Fire phone, invested heavily in Prime and grocery delivery. Then Amazon has been hiring new staff in all of their various businesses, spend millions on new content for their video platform and is facing pressure in their Webservices business which has lead to discounts for customers. Put all of that together and it is clear that Amazon is spending any profit back into their business which is what Bezos has been doing for the last 10 years. Is Bezos testing WallStreets patience or is WallStreet willing to continue to believe in Amazon and Bezos?
Last week was dominated by 2 stories – eBay posting disappointing results and Amazon unveiling a “all you can read” Kindle package. The eBay news is not surprising – Google hit the company with a search penalty based on low quality content and also eBay is still battling with the after effects of being hacked. Those two elements by themselves will harm any Internet business – together they will harm a large business for a few quarters. The bad results could not come at a worse time for eBay. They have potential competition entering a part of the business (11 Main) and am also facing less than desired results on their eBay Now business.
Amazon seems to be moving at a faster rate than normal with regards to the ecommerce business. The Kindle unlimited service seems to me to be an unAmazon product. The selection at launch is poor (not one of the big 5 publishers has books that you can read) and seemingly this product went to public release inside 7 days. I am still trying to understand why Amazon would want to do this? Is it a reaction to Oyster? Is it to force the big 5 publishers to provide them with ebooks? or is this primarily to drive more revenue to the Amazon published ebooks?