|Mon Feb 14 2011 22:17:31|
What eBay's Investment in Magento Means
By: Ina Steiner
eBay revealed last week it had acquired a 49% share of Magento, an open-source ecommerce software for online sellers. A lot has changed since Contributing Editor Greg Holden talked to Magento founder Roy Rubin last July - most significantly, Magento has announced a new web-hosted version of its software for retailers, Magento Go, which allows retailers to open their own ecommerce enabled websites for a monthly subscription fee (pricing will start at $15/month, Roy told me on Thursday).
What is eBay's interest in Magento, when it already owns a web-hosted storefront service (ProStores) in addition to its enormous global Marketplaces platform?
eBay's investment in Magento is primarily about PayPal. Two years ago, PayPal opened up its platform to third-party developers, who have since created innovative solutions integrating PayPal's payment service. With its open platform, PayPal gets additional transaction fees without taking on the development investment or risk.
PayPal saw that an open platform could help it grow its business, and this is what sparked PayPal's interest in Magento, which has a large developer community (open-source means third-party developers can provide new functionality to the software, which they can charge for, or offer to users for free).
eBay's partial ownership in Magento gives PayPal entree to a large base of third-party ecommerce developers. PayPal had a big presence at Magento's conference last week, and Naveed Anwar, Senior Director of Pay Pal X Developer Network, was one of the keynote speakers.
In several months, Magento will launch the Magento Go Platform, which will allow developers to innovate and build applications for the Magento Go hosted solution. The Magento Go Platform will feature a range of APIs that will expose all of Magento's functionality, both front-end and back-end, to developers.
Magento is clearly a great fit for PayPal. But what about eBay?
eBay has always been ambivalent about helping sellers expand beyond the eBay marketplace. In 2005, eBay acquired Kurant's technology and turned it into a new offering called ProStores, which remains a rather neglected piece of its portfolio.
eBay could promote Magento to its mid-sized sellers who are looking to build their own website, but I suspect there is piece of the puzzle we're not yet seeing when it comes to eBay's latest investment.
It's too early to know just how online sellers will view eBay's investment in Magento - after all, the point of creating one's own website is to get away from the heavy hand of marketplaces. But if Magento Go, which launches in a few weeks, is compelling enough, sellers may be able to get over their distrust of eBay.