10 Reasons Why eBay Will Eventually Acquire ChannelAdvisor

eBay's (EBAY) recent purchase of German Auction Service Provider AfterBuy got me thinking about eBay's end game in the auction tools business. I had always thought that it made sense for them to own that part of the business but with so many different service providers, how would they go about acquiring the right ones? Well, in the aftermath of ChannelAdvisor's acquisition of MarketWorks, this AfterBuy purchase is starting to make sense. So here are 10 reasons I think eBay will eventually acquire ChannelAdvisor:

1. eBay wants to own the entire transaction, which means they want the roughly 2% that these large service providers like CA get for their services. With the possibility of rolling back fees or at least capping them for now in their main marketplace business, eBay is looking for growth elsewhere.

2. They already own the low end of the listing business with the SYI (Sell Your Item) Form, Turbo Lister, Blackthorne, Seller Manager, etc. Now that ChannelAdvisor owns MarketWorks, if eBay were to buy the company they would have a high percentage of the mid-size to large seller business as well.

3. They already own a small stake in ChannelAdvisor, some peg it as high as 15% but that is a simple investment, they do not have controlling interest in the company and in fact they do not even have a board seat. At least with Craig's List they have a board seat.

4. The AfterBuy purchase makes more sense if you consider it one step in a strategy to own the listing process. ChannelAdvisor is growing internationally in markets like the UK, Germany and Australia. AfterBuy is a major competitor of ChannelAdvisor in Germany. Is it possible that CA has spurned eBay's advances before and eBay upped the ante by buying a competitor? This would be a very similar strategy to what they've done with Craigslist here in the states with the introduction of Kijiji.

5. AfterBuy is heavily involved in multi-channel selling in much the same way as CA. eBay, IMO, wants to be the shopping engine for the world's ecommerce. With a CA purchase they would own SearchAdvisor, Shopping Advisor and additional Marketplace listing tools. Of course, an eBay purchase of CA might cause some friction with Amazon (AMZN) and Overstock (OSTK), but AfterBuy is heavily involved in Amazon listings so that doesn't appear to be a concern on eBay's part.

6. ChannelAdvisor falls under what I call the "PayPal dilemma". It is a service that a high percentage of top eBay sellers use that eBay has no control of. eBay management likes control. At this point eBay's ownership of CA only pays off when CA goes public or is sold. Like PayPal, I'm sure there have been discussions or even offers for CA and as CA gets ready to go public the price just keeps going up.

7. CA's purchase of Marketworks consolidates the market segment enough to make an acquisition a no-brainer. The value of the company continues to rise.

8. Investors in CA are in this for the money, unlike Craig Newmark and his Craigslist investors. If the price is right CA will sell. To this point, my guess is that the price has not been right.

9. ChannelAdvisor is a great company with solid management and would be a much better fit for eBay than Skype was and it won't cost eBay over $2 billion.

10. An eBay purchase of CA would let eBay control Scot Wingo, there would be no more wild outlandish speculations on his blog. (That was just for you, Scot.) All of this is my opinion, based on observation and just a smidge of inside knowledge on how CA works. I think it would be a wise move on eBay's part and they better do it sooner rather than later if they don't want the price to keep going up.

Just my 5 cents!

Disclosure: none

Comments

[User 112534:]

good points, bear in mind that vendio also acquired andale years back. this market is long overdue for either roll ups, whereby they all join forces for additional leverage, or they are acquired by ebay. years ago, IACI should have rolled all these services companies up, they could have on the cheap. in the end creating a marketplace to compete with ebay may be done by acquiring the systems used to post the auctions. it would take an effort, but liquidity in that marketplace would occur in short order with the right kind of portal, marketplace. IACI could do it, if their business units only knoew how to work with each other better... but thats another story.

2007 Oct 10 05:10 PM