eBay Acquires Magento (Inside Information)

As you’ve heard by now, eBay will be closing on a 100% acquisition of Magento in the third quarter of 2011.  This should not surprise anyone too much considering eBay took a substantial stake in Magento with a $20-something million investment in February with the string attached that Magento develops Magento Go to compete with the entry-level eCommerce market, equipping eBay to offer a plug-and-play SaaS eCommerce solution to their millions of eCommerce customers using PayPal.  Add in the fact that eBay is a huge player in the eCommerce world, and it makes sense they would want to create a comprehensive offering by blending together their eBay and PayPal offerings with an eCommerce platform offering.

So, it makes sense.  Now the real question:  What does the future of Magento look like?  I’m going to stick my neck out here and take a guess based on my conversations with Magento insiders yesterday, my knowledge of Magento’s market position development since its inception, and eBay’s current position.

First, let’s take a look back and see what eBay has been doing up to this point to build this X.Commerce “operating system.”  PayPal purchased a 49% stake of Magento back in February, and Magento then builds a hosted SaaS version of its software, Magento Go, to service the lowest end of the market.  Then eBay acquires GSI Commerce, a company that services the highest end of the eCommerce market, for $2.4 billion.  Shortly before this, eBay announced that they would be bringing together their eBay and PayPal developers to one conference in October 2011 to begin the process of collaboration and unity.  And earlier this week, eBay has now completed their conquest and purchases Magento, which services the mid-sized eCommerce market.  While there are still certainly more acquisitions to be had, eBay has positioned itself to effectively service eCommerce merchants of all sizes

That’s all easy stuff, though.  The real question is, how is eBay going to bring all of this together under one roof?  Will there be one software platform to rule them all?  Or will eBay keep them segregated?  I believe that eBay must keep the GSI Commerce side of the business separate from the Magento and Magento Go side of the business.  If nothing else, for this simple reason:  Magento is open-source and PHP-based.  GSI is proprietary and Java-based.  Combining two completely different platforms would be very challenging, and if they did combine them, they would nearly certainly have to maintain Magento’s open-source nature to retain the development community’s buy-in, which is a leading reason for Magento’s massive success.

What I do think is more possible is that Magento, Magento Go, and GSI will be rebranded under the X.Commerce flag in some way, but not immediately.  I am very confident eBay doesn’t want to make one ring to rule them all.  Rather, they’re building a ring shop, so if you want a ring, you know where to go:  X.Commerce.

So for the time being, it appears as though this is going to have a primarily positive impact on Magento’s future.  My primary concern is that eBay’s size will inhibit one of Magento’s most redeemable qualities:  It’s agility and responsiveness to market demand.  To my satisfaction, Magento’s leadership will remain in place, but there will be additional oversight from this point forward.  Only time will tell how that will affect Magento’s agility in the future.
The good news is that we at Classy Llama will continue to be increasingly more agile and effective on the Magento platform, and we are prepared to flex with the changes as they come.  We will be attending eBay’s Innovative X Conference on October 12th and 13th, which will be the first coming together of eBay, PayPal, and Magento developers (and probably GSI Commerce and others) under one roof to collaborate and build X.Commerce, the most comprehensive eCommerce offering on the market.  We’re excited.  We have a bigger arena in which to play the game we love.

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