EBay said it is buying the rest of e-commerce platform Magento, which it previously had a 49 percent stake in, in a bid to build a broader commerce operating system that spans online, mobile, social and local. In effect, eBay is looking to be the go-to resource for online and offline retailers, helping connect them to consumers.
Los Angeles–based Magento offers an open-source commerce software suite that allows merchants to build flexible online stores that can be customized easily. Tens of thousands of merchants use Magento and its newer software-as-a-service (SaaS) solution called Magento Go. The deal—the terms of which have not been disclosed—is expected to be finalized in the third quarter. The purchase of Magento comes after eBay announced in February that it had made a $22.5 million investment in Magento a year earlier, worth a 49 percent stake.
Building an X.Commerce platform
By swallowing up Magento, eBay is building what it calls X.Commerce, an open platform that can offer a wide array of end-to-end services to merchants, providing everything from local inventory data and discounts to historical information on pricing, transactions and browsing. It then offers tools for payment and helps close the loop on transactions so retailers know how it all came together. EBay, PayPal and GSI, a digital marketing and e-commerce company that eBay is in the process of buying, would provide some of the basic building blocks for the platform. But X.Commerce would also incorporate other eBay assets and enlist the help of developers who could build on the operating system. EBay expects to share more about the X.Commerce platform at its newly renamed X.Commerce Innovate conference on Oct. 12 and 13. From the eBay press release:
“Technology-driven innovation is blurring the lines between online and offline commerce, changing the way consumers shop, and enabling retailers of all sizes to benefit from the latest innovations from the developer community,” said John Donahoe, the president and CEO of eBay. “The feedback we’ve heard from external developers has been clear — they don’t just want payments or an ecommerce site; they want access to a full set of commerce capabilities to build complete shopping experiences for merchants. We believe the acquisition of Magento and creation of our X.Commerce group will enable us to meet developers’ needs and drive global commerce innovation for retailers and consumers.”
It’s a big strategy move but one that has been tipped off by eBay’s recent acquisitions. With its pickups of RedLaser and Milo as well as its recent purchases of WHERE and Fig Card, eBay has been assembling the components for a deeper push into commerce, especially local transactions. RedLaser allows eBay to insert itself into comparison shopping as mobile consumers use their smartphones to help them shop. Milo helps connect users to the local inventory of products around them. With WHERE, eBay got not only a local guide for mobile users but also a location-based ad network and a deals service called WHEREBuys. That allows eBay to engage a user through an ad or deal; then, by integrating with PayPal for payments, it can close the loop on the transaction and theoretically charge a premium for it. Fig Card, a competitor to Square, also helps merchants accept mobile payments, which can include PayPal. And combined with GSI, which provides e-commerce infrastructure for large retailers and brands, eBay has solutions that appeal to both small and large companies.