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?
The week is in the history books and it contained news that will have significant impact on ecommerce over the next 12 – 18 months. Google is to increase their investment into same day delivery to the rumored amount of $500 million. Commerce is one of the few online industries in which Google is not the dominant first point of contact for Internet users. In terms of their core business (which is advertising) the fact that Amazon is the first place on which customers search for products means that Google is losing the opportunity to show ads and make revenue.
Flipkart is at the moment the market leader in ecommerce in India. They are raising money at astounding rates and will most probably IPO in the next 12 months. Flipkart is having to battle Amazon in India which is burning the cash they raised. They are supposedly looking to raise another $500 million before they go public but I keep wondering whether they are growing too fast – what Amazon took 20 years build, Flipkart has almost done in 25% of the time.
Alibaba is also on route to their IPO. The investment banks are all trying to get a piece of the action as the money they will make from this event is astonishing. Goldman Sachs was an early investor in Alibaba and then sold their stake way too early. Goldman Sachs invested $3.5 million and then sold that stake for $22 million in 2004 – I wonder what that stake would be worth today?
The week contained stories in which ecommerce companies are looking for future business success (Rakuten) and a look into the success of PayPal prior to their acquisition by eBay. Rakuten seems to be going more horizontal and after a serious streak of acquisitions they seem to be looking at something akin to what Google is doing with Google Ventures. Rakuten is a multi-national technology company that has ecommerce in their stable of companies. Hiroshi Mikitani made the majority of his wealth with ecommerce in Japan but has steadily diversified with payments, marketing services, regional ecommerce businesses and now with this $100M investment fund. I think one just needs to look at what Jeff Bezos and Jack Ma have done with regards to investing in startups to realise that this is somewhat normal.
PayPal seems to be having a year of spotlight; first from Carl Icahn and then their CEO leaves and they are clearly in a spot of bother. eBay is going to have to make some decisions regarding PayPal in the next 18 months and what I find really interesting is that none of the founders is trying to make a case for them to stick with eBay. PayPal was a catalyst for the mobile payments industry and the sad reality is that they have became a victim of their initial success. They have bought a lot of mobile payments companies but it still seems to me that they have a cultural problem. Compare the current state of PayPal with that of new kids on the block Stripe and Klarna (they are in combination what PayPal is currently). It is clear that the newer companies are growing faster and in the long term could become competitors for PayPal.
The week for ecommerce was a quiet one in terms of news but some news stories are going to be driving the ecommerce landscape in the next 18 months. The one company not involved with the Alibaba IPO, Alipay struck a deal with Stripe, the new hot payments startup. Alipay is the company that is going to drive the Alibaba behemoth long term and this partnership with Stripe is massive. It is the first time that I can think of a Chinese payments company makinga deal with a US focused payments startup. This story validates something that I have been thinking about – PayPal is no longer the hot digital payments business. I am fully aware of the past history between eBay and Alibaba but the fact that Alipay has partnered with Stripe speaks volumes.
What is the real story behind the Amazon vs Hachette fight? Amazon supposedly wants better pricing for ebooks and wants to charge publishers for services related to special, ebooks etc. There has been a lot of stories around this but I think that is not the real battle that Amazon is fighting. In the UK, Amazon wants to be able to print books that are no longer available from publishers. Holistically, this makes sense as in the UK and US markets Amazon is one of the biggest book sellers. If Amazon will be able to do this (long term I think it it will happen) right now is another question, it seems unlikely but the process has started and Amazon has placed the book industry on notice again.
The week was one that featured a major story from Amazon and the realities and impact surrounding Alibaba became real. That is the summary of the past week. The Fire phone release was not unexpected but Amazon did cause some head scratching with costs of the device. I am writing a larger post of the Fire phone as the implications of it – is not to be underestimated.
Alibaba’s impact on Asian and global commerce is now in the public domain. The updated SEC filing contained a variety of details about Tmall and Taobao. Every ecommerce executive should take a look at the impact of this Chinese behemoth has had in its home market and consider the impact it can have on your market. The next set of questions relates to their IPO – how much money is Alibaba looking to raise? What are the strategic next steps for Alibaba?
Snapdeal seems to be starting the road to an IPO as well. The Indian marketplace is part of Indian ecommerce, which is a hotbed and a capital hungry industry at the moment. The Snapdeal story is one that is interesting – they started as a daily deals business which pivoted to a full price ecommerce business. The business has evolved into a marketplace and has also raised significant capital. The question that both Flipkart and Snapdeal raises for me – on what basis will investors be contributing to their potential IPO’s? Potential of the market, size of the opportunity or long term investment into a new emerging ecommerce market. This will be interesting to follow.