Big news in e-commerce today – acquired by Rakuten

May 20, 2010

ChannelAdvisor ChannelAdvisor By ChannelAdvisor

Some interesting news in the e-commerce and marketplace world. has been acquired by Rakuten  for $250m in an all-cash deal.  First, I wanted to congratulate all of the folks we know and work with at (Neel, Randy, etc.) on a great run and what looks to be a great new parent going forward.

You can check out the coverage at several places, each has a new tidbit of info:

  • WSJ is here ($)
  • TechCrunch is here
  • VentureBeat is here (don’t believe that revenue number, kind of crazy)

Rakuten’s CEO, Hiroshi Mikitani said: “We feel it has a great strategic fit with our global expansion. Our goal is to become the number one e-commerce company and Internet company in the world.”

Pretty bold statement and if you’ve never heard of Rakuten, one that may seem kind of ‘out there’.

We’re getting a lot of questions from customers that are active on and Wall St. so I wanted to take a bit of time and look at this deal as I do think it has obvious ramifications for the marketplace and will have ripples outside of

First, to orient everyone, I give an ‘about’ overview followed by an ‘about rakuten’ perspective.  Not many people in the eBay/Amazon worlds have heard of Rakuten, but they are a huge Japanese company that already has a meaningful US presence that just got bigger and signaled some important moves  by bringing into the fold.  Finally we’ll look at what this means to the US marketplace players – eBay and Amazon.


The latest and greatest Internet Retailer 500 guide approximates’s ‘first party’ (where they are the retailer, not their third party marketplace) GMV at $690m for 2009, up from $657m in 08 and enough to place them as the 32’nd largest retailer. doesn’t separately release third party (3P for short) GMV or revenue, but they did have this press release recently that pegged the growth of that segment at a whopping 150% and Neel Grover, their CEO, said: “We firmly believe that our marketplace platform is the future of online retail.” has 14m registered users and comscore and  other traffic measuring sites put their traffic at avg 4m/m with a big spike in Q4 of course.

It’s widely believed in the industry that’s 3P marketplace is 10-15% the size of their 1P business, so call it a $100m GMV/yr marketplace.  It’s also pretty easy to guess that the 1P business which is largely drop-ship media and CE products is very low margin. 

Based on those facts, my speculation is that the $250m price tag, while it may seem low when compared to the $690m top-line, when you look at the bottom line/EBITDA, Rakuten probably put the bulk of the value in the more lucrative 3P marketplace (say $200m) and the rest in the 1P market that really is a loss leader/break-even leader for 3P (say $50m).

About Rakuten

Who is Rakuten and how the heck do you pronounce Rakuten? Well I can’t help you on the latter, but on the former, here are some highlights:

  • Rakuten’s CEO, Hiroshi Mikitani is the richest dude in Japan and one of the richest in the world #7 actually.
  • Rakuten has their fingers in a LOT of businesses (check out the chart that follows) in Japan – including owning a baseball team! The cash cow of Rakuten is their e-commerce site which is an online mall concept called Rakuten Ichiba – you can check it out here (more on this in the speculation section)
  • Their $3.2b revenues and $9.5b market cap place them as a top 10 internet company globally.
  • They are so focused on global expansion they hold all board and company meetings in English – very unusual for a Japanese co.
  • Rakuten enjoys 64m active members.
  • Rakuten acquired one of the two largest affiliate networks, Linkshare, back in 2005 for $450m (more on this later)
  • Rakuten doesn’t have a Paypal competitor that I’m aware of, but they do have this point systems they offer throughout the mall called Super Points that folks in Japan are crazy for. Like Farmville in the US, there is a whole set of entertainment and other outside e-commerce items that have grown up in a Super Points ecosystem.  This guy is clearly very excited:

The following graphic is from their annual report and shows the lines of business they are in: (click to expand)

What does this mean for e-commerce, eBay, Amazon, etc.

E-commerce is a tangled world and the first things to keep an eye on are the various intersections between the three (eBay, Amazon, Buy/Rakuten) companies:

  • is eBay’s largest seller with around 1m items for sale and $2m/month in GMV between their buy seller ID and buydeals.  In fact, eBay has anchored their media strategy around  should they become more competitive (read on, it seems like this is a clear yes) and let’s say leaves eBay, then you have a big hole to fill there from a GMV and selection standpoing.
  • recently started selling again on Amazon and is a top tier CBA (Checkout By Amazon) merchant.
  • is a big Paypal merchant as well.

Mr. Mikitani wasn’t being too secretive about their plans for when he told reporters: “If we can convert it ( into what we do here in Japan, then it is going to be a lot more powerful,” he said. “We believe that we have a very different business model from Amazon and eBay. We empower the merchants,” he said.

So taking this comment and thinking about the three assets now at Rakuten’s US disposal:

  • The Rakuten Ichiba online mall business model that is wildly successful in Japan
  • The rapidly growing 3P supported by a 1P loss-leader
  • The LinkShare affiliate network with 1,000’s of merchants and $B’s of affiliate flow-through

My speculation is they will attempt to mash-up these three things to create a US -flavored version of Ichiba.  If you read Mikitani’s last statement: “We empower the merchants.” I think this bodes very well for sellers already on and those that are looking for another marketplace to come on the scene and balance the 800-lb eBay and Amazon.

An Ichiba-like system in the US would be unique and innovative on several dimensions:

  • Unique offering – The US doesn’t have a 100% 3P marketplace with an integrated cart, integrated points/cash back system. Think Etsy/Bonanzle but with a much larger company and a broader view and a mix of large and small merchants and some clever cross-merchant marketing and merchandising with high entertainment value.
  • Advanced merchant services (this is a sampling of what they offer in Japan) including: Rich content management system, advanced inventory system, advanced order management system, CRM capabilities (these are all called Rakuten Merchant Services or RMS), University system for sellers (training), dedicated e-commerce consultants (ECC) and much more.
  • Aggressive merchant pricing – Rakuten charges 5% take rate and has some fixed fees and some a-la-carte services like the Universities and ECC systems.
  • Linkshare + Buy 3P can get this going quickly – I’ve been watching the LinkShare acquisition since ’05 and honestly Rakuten hasn’t really done anything that I can see there, so it will be interesting to see if they plug those merchants right into this ‘US Ichiba’ that I’m speculating on here.

A new player is here….

Speculation aside, what is clear is that a new $9.5b player is in town from Asia, they are willing to spend $250+$450m = $700m to get the pieces they need, and they clearly have their sights set on a US Ichiba-like marketplace as an alternative to eBay and Amazon.

This is a pretty big deal for merchants so we’ll be keeping an eye on developments, stay tuned for more information as we learn what’s going on and how you can take advantage of it to SELL MORE.

SeekingAlpha Disclosure – I am long Google and Amazon. eBay is an investor in ChannelAdvisor. is a business partner of ChannelAdvisor’s.