eBay Inc. is acquiring open source e-Commerce platform Magento, following an initial investment in the company in 2010. The June 6, 2011 announcement was delivered on the heels of eBay’s late March news announcing plans to acquire GSI Commerce for $2.4 billion.
The online marketplace juggernaut, which already owns 49% of Magento, did not disclose financial terms of the remaining acquisition, but reported that the deal is expected to close in Q3 2011. The GSI Commerce deal also is expected to close during Q3 2011.
News of the acquisition comes just a few weeks after eBay Inc. CEO John Donahue told The Wall Street Journal in late May that the company could use some of the $2.4 billion it will receive from the sale of its remaining 30% stake in Internet-phone provider Skype to make acquisitions and return money to investors through share buybacks. In April, eBay announced that Q1 2011 revenue rose 15.9% to $2.55 billion, fueled by a 23% rise at PayPal and a 12% increase at its marketplaces, beating forecasts of $2.48 billion, as reported in the Journal.
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Industry analysts expect the eBay/Magento partnership to help fuel development and growth for the individual companies, and potentially give Amazon.com a run for its money. “When I look at their collection of acquisitions, it strikes me that they are pulling together capabilities that look a lot like Amazon’s merchant services,” noted Nikki Baird, Managing Partner at RSR Research. “eBay now has a path for someone starting out as an occasional seller, up to a power seller, up to an independent e-Commerce platform to be a storefront, up through fulfillment.”
Combining Company Teams
Magento’s leadership team and its 290+ employees will join eBay following the closing, but will continue to operate out of Magento’s Los Angeles and Ukraine offices. eBay plans to integrate Magento into its X.Commerce platform group led by Matthew Mengerink, who also leads the eBay and PayPal developer programs. Magento will be eBay’s product brand for its X.Commerce storefront and app store properties. Magento and the existing X.Commerce teams will leverage one another’s capabilities, but will have distinct product focus. During the next year, key functional systems and processes will be integrated with eBay Inc. Both teams will work together to develop joint integration plans over the coming months.
On the company blog, Magento reported that it will continue building its team and enhancing its product line, including the Magento Community, Enterprise and Mobile Editions, as well as Magento Go and the Magento Go Platform.
Brian Walker, Principal Analyst at Forrester Research, noted the potential services extension for both companies on his eBusiness & Strategies Professionals blog. “It is time for Magento to mature as a solution and as a business,” he said. “The same development approach and business practices that can support a small insurgent open source commerce platform do not scale to supporting multiple products with very diverse needs and across many maturing clients…With the completion of this acquisition eBay has the ability to clarify the product initiatives, add needed investment to product development, and mature the support given to developers, partners, and customers. eBay and PayPal have a unique opportunity to monetize merchant services and platform offerings by incorporating PayPal payment services and the eBay marketplace offerings. The addition of the GSI portfolio of merchant and marketing services, such as creative agency, search marketing, email services, and fulfillment can provide a diverse set of revenue streams for the X.Commerce business at eBay.”
