Ma announces his successor at Alibaba, eBay says paid search has no effects, Google make plenty of changes and more.

Middle of March is normally the start of news that relates to end of quarter information. SEC filings, quarterly results and lots of press coverage is the norm. The point is we are almost done with quarter one and Alibaba did the unthinkable. Jack Ma, the founder of the biggest ecommerce business in the world has announced his successor. Jonathan Lu is to take over from Ma and his appointment I think is a very strategic one. One, he is one of a handful of Alibaba senior management  who has vast knowledge of the entire operation. Also, I think his background in finance has helped him. It is clear that an Alibaba IPO is coming and he will be the person meeting with banks etc. One other thing to note, is that Alibaba has decided to appoint a local executive and not an international CEO to lead them into the future. Alibaba in my mind is going to be a threat for all ecommerce businesses in the coming years.

The article or story that dominated my thoughts was the eBay story over Paid Search ads. eBay claim that they have results to backup their conclusion that paid search is ineffective. “Overall, paid search turns out to be a very expensive way of attracting new business: The study’s authors estimate that, at least in the short-run, paid ads generate only about 25 cents in extra revenues for each dollar of ad expenditures. (For branded keyword searches, the additional revenues are close to zero” It is a fascinating read but I think a few things needs to be said. One, eBay has proved this for their own keywords and have tested their own hypothesis. I generally think that paid advertising is to be used in a controlled manner as it can lead to unsustainable growth (hello Groupon) but this raises some eyebrows in the direction of Google Adwords. Also keep in mind, that eBay has a reputation of bidding on low quality keywords which must be taken into consideration. Google answered this situation in 2012 and I must say I think we might see more of these stories in the coming 12 months. Adwords is the revenue driver for Google and they will defend it aggressively.

The 10 stories that caught my attention this week:

1. Amazon Has An Estimated 10 Million Members For Its Surprisingly Profitable Prime Club – Prime is one of the revenue drivers for Amazon. Bezos is always coy about the membership number as I think this is a pretty important piece of intelligence for Amazon rivals. Is there any other ecommerce loyalty programme that has 10 million users?
2. Google Benefits as Priceline Outspends Expedia on Web Ads: Tech – Google always benefits when there is rivalry in a specific industry. Priceline has annual ad spending of over a billion dollars per annum. Travel is one of the most competitive Adwords categories – boy I would love to know click through rates and ROI on this massive amount of investment done by Priceline.
3. Target reportedly signs on with rumored Google Shopping Express same-day delivery service – Ladies and gentleman, we have a new topic that will be closely watched by everyone associated with ecommerce. Which businesses will sign with Google Shopping Express? I think we will see large retailers who have been harmed by Amazon targeted.
4. E-commerce company FiftyOne picks IPO underwriters: sources – FiftyOne is an ecommerce businesses that I think we will see quite a bit of. IPO is interesting as that would indicate that they need to raise additional money and would like outside funding to give to their original investors. Why do I think they will be a long term business? Retailers will always look for other ways to make revenue from existing merchandise.
5. It’s Adapt-or-Die Time for Daily Deals Firms – The daily deal space is on the downhill to extinction. Andrew Mason’s deal ran out at Groupon and LivingSocial is also under the microscope. I think we will see either consolidation or businesses closing. Groupon has already added significant investment into their products business. I think they will over time become a local ecommerce business whom sells products like any other ecommerce business..
6. Zalora Receives €20 Million Investment and Builds a Software Development Center in Singapore – What would a post be without a mention of a Rocket Internet story? Zalora has over time become an important business for Rocket Internet. I find the fact that they are going to use some of the investment for a software development center interesting as I thought all software operations are run out of either Germany or Portugal. Are we slowly beginning to see Rocket Internet consolidating resources to specific businesses instead of having them centralised?
7. Nice pants: Bonobos raises $30m off of strong growth and Nordstrom deal – Bonobos is one of my favorite case studies. Entrepreneurs who spot an opportunity, go for it and then make a sustainable business. The mere fact Nordstrom keeps close on the deals with Bonobos is indicative on the management they have. Nordstrom is a retailer that I think will be one to watch for. I wonder if they are considering an outright acquisition of Bonobos down the line?
8. E-Commerce in Egypt: A Market Overview – I keep a close eye on Egypt as I think the market is a long term one. Note to the rest of the ecommerce world – Africa is the next big thing..
9. Google continues to push ad-based shopping results, launches Product Listing Ads on smartphones – It is clear that Google is concerned over their mobile business. Product Listing Ads on smartphones is not a surprise but yet another sign that Google is no longer the “do no evil business”.
10. Forget Brazil – Mexico and Colombia are the new eCommerce frontiers – Brazil in my own mind is the emerging ecommerce market closest to becoming a developed market. Why do I say that? Internet penetration is very high and a lot of businesses have moved to become regional players. Mexico has in the last 18 months been used as a testing area for businesses focused on Latin America. Lots of potential in the market for businesses whom wish to invest over the border in my opinion. Columbia is in my view the uncut diamond for businesses that are willing to play the long game.

Bonus links for this week:

• ComparaOnline.com acquires CortaContas from Buscape Group and consolidates its entry to the Latin American market – Buscape selling Cortacontas is interesting and indicates to me that they are focusing their operations.
• European Online Retail Forecast 2012 to 2017: Online growth will begin to polarize across Europe – Market segmentation will take place as Northern and Southern Europe drift into different maturity phases. Long story short – competitiveness and growth is on the cards.
• Target buys two e-commerce chains to boost culinary business – “Discount chain Target Corp has agreed to buy Chefs Catalog and Cooking.com to boost its ability to sell cooking products and kitchenware online.” I think it is clear Walmart and Amazon drives retail and online retail in North America. The investments make sense as it improves Target’s ability to sell cooking and kitchenware online.
• Rent The Runway Poses A Threat To Department Stores – Rent The Runway has the potential to disrupt retail as the lack of sales through their business model will have retailer implications.
• Taobao Mobile Hit 300 Million Visitors in 2012 – Taobao is the business that will drive Alibaba’s long term growth and they have positioned mobile commerce as a customer acquisition strategy for their loan business. The scale that this business operates is off the charts amazing. “Taobao Mobile, last year its cumulative visitors hit 300 million, of which 57 million ever purchased items. The transactions through mobile went up by 6 times YoY, covering 6.87% of the total (1.77% in 2011). An average of 9.28m users searched for items on Taobao Mobile daily, and in every single hour over 220,000 goods were sold through this platform.”
• Alibaba Names Jonathan Lu As New CEO, Replacing Founder Jack Ma – I wrote this after thinking about the Alibaba leadership change, but still am wondering is Ma going to be pulling the strings still at Alibaba?
• Google SVP Jeff Huber Steps Aside As The Company Divides Mapping And Commerce Units, Will Join Google X This news was under reported in my mind. This is a massive change at Google and in my mind is the sign that commerce is getting a lot more attention from the leadership at Google. The irony in this is that Marissa Mayer was responsible for this until being sidestepped by Larry Page. I think we will be seeing a lot more news about Google commerce in the next few months

Onwards..