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Yahoo Casts Off Ecommerce Business

Yahoo is casting off its ecommerce business, including Yahoo Stores, later this year when it spins off its Yahoo Small Business unit. YSB will move over to a new public company, currently referred to as “SpinCo,” along with Yahoo’s approximately 384 million shares of Alibaba.

Amer Akhtar, head of Yahoo Small Business, announced the news on the unit’s blog hosted on Tumblr. “With this new opportunity, we can invest even more in our platform and chart our own course,” he said. However, Yahoo had just launched a “next generation” Yahoo Stores platform in August under Akhtar’s predecessor, Amit Kumar.

Yahoo spokesperson Lauren Whitehouse said Akhtar would continue with YSB through the transition. “In addition to Amer, all of our Yahoo Small Business employees have been invited to join the new company,” she said.

Asked whether Yahoo Small Business would be physically relocated and whether Yahoo Small Business and Yahoo Stores would be renamed, she said, “We don’t have details on that at this time.”

While spinning off a business unit is not unprecedented, especially these days, what isodd is the reason for the jettisoning – as the Wall Street Journal put it, YSB drew short straw.

The Wall Street Journal said the purpose of the Alibaba share spin-out was to unlock the value of those shares and save investors billions of dollars on taxes. And, it explained, “Yahoo was also required to jettison a part of its operating business so that, at least for tax purposes, the new entity includes an “active trade or business.””

In this case, Yahoo decided it could live without the YSB unit, and who knows? It may even be a relief to get rid of the unit.

Yahoo’s Chief Financial Officer Ken Goldman referred to YSB as a “legacy ancillary business” that earns $50 million. The Wall Street Journal said it seems safe to say the YSB unit “didn’t fit neatly into any of Chief Executive Marissa Mayer’s current priorities of mobile, social, video and native ads.”

Akhtar wrote on the YSB blog, “All of the Yahoo Small Business tools and services that you have come to rely on will remain at your disposal. In fact, we’re mapping out additional investments now for our platform and services to ensure the highest level of support for our customers and our partners.”

EcommerceBytes spoke to two of those partners who have built services catered to Yahoo Stores merchants to find out what they thought and what they were hearing from merchants.

Scott Smigler, President of Exclusive Concepts, said merchants and vendors tend to fall into two camps – those excited because they believe the new company will have the financial resources to make upgrades to the platform; and those who are skeptical because of many false-starts over the past 5 years of initiatives that were supposed to be “big.”

As one of the largest Yahoo Small Business partners, Smigler said his company has a lot invested in Yahoo making the right decisions, and overall this seems to be a positive and exciting development. However, he said, “If this company is ultimately sold back to Alibaba, the impact could be negative.”

Kevin Richards of Ventura Web Design said some merchants view this as the last nail in the coffin, while others view the development very optimistically. “YSB is currently contained as a profitable business segment within a much larger corporate entity. Being a small part of something much larger doesn’t always allow you to get the proper support or resources that you may need to properly grow and support your existing customers. With Yahoo Small Business being broken out of Yahoo and operating separately under a new entity, this could quite possibly eliminate any barriers and processes that may have held the platform back in recent years.”

Both Smigler and Richards already have diversification plans in place. “There is a lot of competition amongst eCommerce platforms right now (Yahoo, BigCommerce, Magento, etc.), and continued changes are to be expected,” Smigler said. “We’ve already factored this uncertainty into our business and product planning and are prepared to mitigate threats and to capitalize on opportunities.”

Richards said merchants should be optimistic about the opportunities coming their way, but he said no company should ever keep all of their eggs in a single basket. Ventura Web Design, which used to service Yahoo Stores exclusively, now supports other ecommerce platforms including Shopify, Bigcommerce and Amazon, according to its website.

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Ina Steiner
Ina Steiner
Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). She is a member of the Online News Association (Sep 2005 - present) and Investigative Reporters and Editors (Mar 2006 - present). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com. See disclosure at EcommerceBytes.com/disclosure/.