The stunning news that eBay had purchased Magento entirely (it already had a sizeable shareholding) certainly sent the eCommerce wires buzzing this week, but what do we think will be the likely implications of such a move?

The purchase certainly improves the profile of the Magento platform. It represents an attempt by eBay to enhance their offering to retailers, and start to take on Amazon in this area. They now have a the beginnings of a platform that can take a retailer from ‘Mom & Pop’ to conglomerate, rather than losing retailers just as they start to become successful. Magento is likely to benefit from a wealth of smaller, but retailers, who, as they become successful need improved catalogue management, promotional and order management facilities, assuming that a seamless integration between eBay and Magento is possible.

What Might Ebay’s strategy be?

eBay is trying to compete with Amazon and Microsoft. Amazon’s Seller Central facilities have become a major channel for most retailers over the last few years. Microsoft, with their Commerce Platform, have long been strong with SME retailers, with developer agencies acting as resellers. eBay, while it has long had strength with small sellers, have struggled to shift the perception that the  platform is primarily a ‘Clearance Channel’. The acquisition of Magento will give then a technology and a developer base that will help improve this perception. In addition the “Open source” nature of Magento will give it a perception of flexibility and modernity. Perhaps the greatest strength of the merger is how it will effect the aspirations of the retailers. For the first time there will be a platform that can truly take an organisation from ‘Garage Sale’ to ‘High Street Chain/Department store’ – and that is a powerful vision.

Of course there is also the obvious synergy between Magento and eBay’s payment Gateway, Paypal, which is also well integrated into Magento, and will add to capability to provide all the tools that Merchants and retailers need to evolve and scale their businesses.

What’s in store for Magento?

Pros

• Increased profile  should improve platform take up, which has a positive (network) effect on the whole community
• Increased investment clout that eBay brings will increase Magento’s speed of evolution and increase ‘Momentum’
• eBay is a traffic generator – anything that makes seamless integration easier will help increase retailers potential traffic
• Should mean easier integration with eBay – which could be useful for retailers – especially as a clearance channel

Cons

• Uncertainty is always a risk
• Changes in strategic direction – It is imperative that Magento remains a solution suitable for larger retailers, otherwise it will suffer from a lack of real credibility
• eBay’s perception as a clearance channel

Williams Commerce’s View

From our point of view an increase in Magento’s profile improves the value of all the technology we have developed for the platform, and should ensure that momentum remains behind the platform.

What are your thoughts on Ebay buying Magento?