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Mon Feb 14 2011 22:17:31

What eBay's Investment in Magento Means

By: Ina Steiner

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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.




Comments (25) | Permalink

Readers Comments

What eBay's Investment in Magento Means   What eBay's Investment in Magento Means

This user has validated their user name. by: Ming the Merciless

Mon Feb 14 23:14:05 2011

Ebay can be counted on to do absolutely nothing to help North American sellers, and I do as little business with the Ebay Syndicate as possible.

They can NOT be trusted. They do NOT and do NOT tell the truth. They ARE unreliable. All of them.

The viciousness with which ebay has attacked North American sellers selling North American products should be a warning to anyone wanting to do business with any ebay company.

Have a Pro Stores store? In addition to the shoddy service and constant glitches, I think ebay is about throw you guys under the Magento bus.

What eBay's Investment in Magento Means   What eBay's Investment in Magento Means

by: jake

Mon Feb 14 23:28:29 2011

Cant wait to see how eBay mess this one up...dont tell me they are going after the apps market for mobiles LOL?

From what i see eBay is looking like a for sale sign will be going up soon ...It's all about Paypal now and that should be fun when they get the spotlight shon upon them for poor finace controls and very shady dealings with peoples money

What eBay's Investment in Magento Means   What eBay's Investment in Magento Means

This user has validated their user name. by: Philip Cohen

Tue Feb 15 02:10:39 2011

Maybe eBay intends to try to buy all of Magento and then close it down. After all, why would they otherwise want to buy into a technology that can only ultimately hurt their Marketplace business?

eBay/PayPal/Donahoe: Dead Men Walking.

What eBay's Investment in Magento Means   What eBay's Investment in Magento Means

by: Repeat Monkey

Tue Feb 15 03:39:49 2011

Hmmmm where have I seen this before? Sounds a little like Craigslist. Give eBay an inch and they take a mile.

What eBay's Investment in Magento Means   What eBay's Investment in Magento Means

by: PongGuru
Web Site

Tue Feb 15 06:15:01 2011

The eBay ProStore is a very buggy application. I tried their 10.2 version lately. Ultimately I helped them to fix bugs than building my store. Alas! Such a crappy application has more users.

What eBay's Investment in Magento Means   What eBay's Investment in Magento Means

by: Enough Already

Tue Feb 15 07:09:58 2011

Magento will be for the small to medium sized sellers.  They want to preserve the "eBay Brand" for the Big Box stores that they claim they have "no problem talking to."  Separate the marketplace - small, individual and mid sized sellers will flock to Magento, leave the chinese junk on eBay.  Great plan. Can they pull it off???

What eBay's Investment in Magento Means   What eBay's Investment in Magento Means

by: Frightened Fran

Tue Feb 15 07:33:31 2011

Approach ''Magent-Go'' with great caution.

I suspect that in time (if not immediately) those merchantes who use the eBay/Mageto software-as-a-service platform will discover that they have lost control over their own store policies (ie: returns and shipping) and that they have lost ownership rights of any images they use to illustrate the products being sold.

It will be eBay-plus...only the plus doesn't mean ''better''...it's WORSE.

What eBay's Investment in Magento Means   What eBay's Investment in Magento Means

by: summer in the city

Tue Feb 15 07:37:11 2011


I wouldn't get your hopes up. Everything Donahoe touches turns to doo-doo.
Always has, always will.

What's not to understand?


What eBay's Investment in Magento Means   What eBay's Investment in Magento Means

by: old timer

Tue Feb 15 07:53:15 2011

As much as I would like to see another option for sellers looking to expand/leave eBay, I don't think many sellers upset with eBay's treatment will jump on the Magneto band wagon. Disgruntled sellers (usually upset for good reason) have long memories, just like a disgruntled buyer. Neither makes for a good customer base for any company.

In my case, eBay's involvement/ownership means that Magneto will not be on my list of options. Trust is built on experience and my experience with JD's world view is pretty bad.

Ina, how about some more in depth articles on other options/service providers for sellers looking to establish their own web sites? Those would be of interest to a lot of your readers.

What eBay's Investment in Magento Means   What eBay's Investment in Magento Means

by: John

Tue Feb 15 08:25:18 2011

Different rules for different sellers, The BIGS will get eBay and all the perks for being a BIG. The little's will get magneto, and all the added fees for being a little.

Complaining will do little good, soon the Troth feeders will chime in to pump the sale.

What eBay's Investment in Magento Means   What eBay's Investment in Magento Means

by: Doris Knight

Tue Feb 15 09:53:59 2011

I think the dollar signs in the eyes of Magento execs prevented them from seeing (or remembering) eBay's actions with regard to Craigslist.

History will repeat itself. eBay is not to be trusted.

As an aside, Magento was just ONE of several shopping cart options that I considered when exploring ways to start expanding my business beyond ebay.

As it turns out, I chose another shopping cart package, but THANK THE DEITY that I did not choose Magento!! It's been such a struggle to BREAK AWAY from eBay's ABUSE and it would be SO MADDENING to have made such meaningful strides only to discover that eBay/PayPal had wormed their way back into my business.

They're a CANCER!

What eBay's Investment in Magento Means   What eBay's Investment in Magento Means

by: Poppa

Tue Feb 15 10:23:49 2011

I think it's clear that eBay have the resources to do anything they need to  strengthen their position. While this may not sit very well with the open-source community, or people who dislike eBay, this was a very smart move. Why have a competitor down the road, when you can invest in them or own them outright. They've done it with craigslist, ChannelAdvisor and of course, most famously, PayPal.

What eBay's Investment in Magento Means   What eBay's Investment in Magento Means

by: goju

Tue Feb 15 12:05:58 2011

i dont get a good feeling about this ebay investment in magento. i have a small business, and i want to remain independent, big companies like ebay and amazon will eat up small businesses.

What eBay's Investment in Magento Means   What eBay's Investment in Magento Means

by: chaz

Tue Feb 15 13:47:42 2011

I'd love a technology that let me enter data and upload photos in a simple way as with Auctiva that could then take them and put them in a templated website for me even if not perfect.  ProStores is supposed to do this, but doesn't.  I started it once and would never go back, especially with its technical problems.  Auctiva's commerce solution isn't much better.  Right now it's almost easier to just put up one's own simplified web site that isn't necessarily a full ecommerce site than go with a company supposedly offereing ecommerce solutions, which require a seemingly endless number of preliminary steps before you put even one thing up for sale.  And almost as soon as one company looks like they have a solution, such as BigCommerce, users end up reporting problems.  I find it amazing that ebay has never seen the gigantic money they could make by making worldwide ecommerce web sites easy for sellers, especially if they did not insist on charging a percentage of sales.  Their limited vision is what hurts their and their sellers' progress (among many other things).  

What eBay's Investment in Magento Means   What eBay's Investment in Magento Means

by: Patricia This user has validated their user name.

Tue Feb 15 15:39:38 2011

Sellers will get over their distrust of Ebay when H#LL freezes over!

What eBay's Investment in Magento Means   What eBay's Investment in Magento Means

by: Digby
Web Site

Tue Feb 15 16:23:13 2011

Yes Ina, I think it would be great if you gave a bit more focus on web commerce webstores and companies such as Magento etc.

And stand alone websites.

What eBay's Investment in Magento Means   What eBay's Investment in Magento Means

by: Joe Average

Tue Feb 15 17:10:17 2011

Well, maybe eBay cannot screw this one up (like ProStores and eBay Stores). There is a reason why they have a 49% stake in Magento and not 51%. On paper at least, eBay does not have control. Right?

What eBay's Investment in Magento Means   What eBay's Investment in Magento Means

This user has validated their user name. by: Ming the Merciless

Tue Feb 15 20:07:33 2011

@Joe Average

See the Craig's List case. Ebay only owns 24% of their stock, and 24% was enough to create legal havoc with Criag's List founders thanks to Negged Meg Whitman's bad faith negotiations.

Ebafia is only 2% short of controol over Magento and could initiate a hostile takeover at some point.

There are other choices than Magento. Why give ebafia any more money followed in the future with (more) power over your business?

What eBay's Investment in Magento Means   What eBay's Investment in Magento Means

by: buck efay

Tue Feb 15 20:57:04 2011

I pay Yahoo like $15 a month for my website, they give me free tools to build it & run it, and if the customer NEEDS a shopping cart, I send them to my FREE clone listings on Ecrater! Why PAY these people? The last time they took over a software company I used was Blackthorne. Their founder defended the deal to me on a webchat & said there were no plans to reduce functionality of the existing program we had BOUGHT. Within weeks of him telling me that, Ebay screwed things around & changed categories, so the program wouldn't work right anymore. Unless I subscribed for a monthly fee! This is a very untrustworthy company.

What eBay's Investment in Magento Means   What eBay's Investment in Magento Means

This user has validated their user name. by: Ming the Merciless

Tue Feb 15 22:15:07 2011

If I recall correctly, at least one of those hot shot Wall Street analysts asked The Ho what plans he had for all the millions and millions in cash ebafia has stashed away in offshore banks safe from US taxes.

The answer is a PacMan like spending spree that is llikely not produce many results except possible -- all together now -- in mobile apps.

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