We are a few days away from the beginning of October, which is the start of the festive season for ecommerce businesses. All the planning should have been done as systems will be tested as customers make their early festive purchases. The coming week also contains the annual Shop.org conference which will be in Seattle in which global ecommerce executives come together to learn about new trends etc.
We are also most probably going to see potential rivals in home goods going public this week. Wayfair, the Boston based powerhouse will be going public. Greg Bettinelli whom did a great job looking at the Zulily IPO documents had some interesting insights this past weekend:
Across the Atlantic, Rocket Internet will also most probably be going public this week. The company has claimed that it will be taking a more hands-on approach with the various businesses it has in its portfolio. I tend to believe that Kinnevik the major funder behind Rocket Internet will be happy that institutional investors and other investors takes some risk in the platform venture based company. However not everyone is seeing the upside of the Rocket Internet IPO:
The long awaited Alibaba IPO has come and gone. The Chinese behemoth went public amid a huge amount of PR and celebration. Needless to say – I believe that it is a line in the sand moment. We will most probably look back at the past week in years to come as a watershed moment for Chinese technology companies.
Alibaba – a Chinese company now has billions of opportunities to disrupt regions, single markets or competitors. The major story that broke on the day of the IPO was that Alibaba was supposedly looking into funding Snapdeal. If that is the case then Indian ecommerce is the first market in which all of the heavy weights are seen competing. Alibaba will be looking at going into India, the Middle East and Latin America as currently they have little or no presence there. I cant help but feel that a lot of the investment into Alibaba is more an investment into China than in the company itself..
In the next 6 months we will get an idea on how profitable Alibaba really is. I believe strongly that in the last 12 months they did a lot of promotional events to ensure that their IPO prospectus have a lot of amazing numbers.
Secondly – I also think that a fair comparison to Amazon is still in order – are they really that profitable? I understand that they don’t have logistics and last mile delivery like Amazon does, but with the exclusion of the massive Chinese scale – this business does seem to be to good to be true.
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?