Monday, May 24, 2010

Buy.com Makes Its Biggest Sale Yet: Itself - Bits Blog - NYTimes.com

Buy.com Makes Its Biggest Sale Yet: Itself - Bits Blog - NYTimes.com: "Buy.com Makes Its Biggest Sale Yet: Itself
By CLAIRE CAIN MILLER
Advertising and E-Commerce

Rakuten, a Japanese company that runs the biggest e-commerce site in Japan, said on Thursday that it had agreed to buy Buy.com, the online shopping site, for $250 million.

The sale is the next chapter for Buy.com, a company whose life mirrors the ups and downs of the dot-com era. Rakuten hopes that the acquisition will make its marketplace, Rakuten Ichiba, more competitive internationally with e-commerce giants like Amazon.com and eBay.

“Rakuten Ichiba is very, very competitive against a very powerful company like Google or Amazon or eBay, but that was a pretty domestic business,” said Hiroshi Mikitani, founder and chief executive of Rakuten and the sixth-richest person in Japan, according to Forbes.

Both companies were started in 1997, the year that Amazon.com went public. Buy.com, which is based in Aliso Viejo, Calif., went public in 2000, and its stock price soared and then crashed. Its founder, Scott Blum, took it private a year later.

Since then, it has grown to 14 million customers. It directly sells half its products. The other half are sold by other e-commerce businesses that use its online store.

Buy.com is also the largest seller on eBay, which has frustrated some of eBay’s smaller sellers. It is unclear how that relationship will change after the acquisition becomes final.

“We’ve had a strong partnership with eBay and we believe we’ll continue to have a strong partnership with eBay,” said Neel Grover, chief executive of Buy.com.

Rakuten has 64 million customers and reported $3.2 billion in sales last year. For the most part, except for books, DVDs and some individual sellers in Japan, the marketplace hosts virtual storefronts for other companies to sell their goods.

In the last five years, it has made acquisitions and struck partnerships with e-commerce companies in Taiwan, Thailand, China and the United States, where it bought LinkShare, an affiliate marketing company.

Mr. Mikitani said Rakuten’s marketplace model offers sellers a better experience than Amazon and eBay. Sellers can choose the design of their shops, do their own marketing campaigns and communicate directly with their customers.

Rakuten also adds a gaming element to shopping through its points program, which rewards shoppers for things like making purchases or if the local baseball team wins a game.

Some of those elements might arrive on Buy.com, Mr. Mikitani said. “If we can get together, we will be able to create a very competitive business model,” he said.

Together, they will sell 60 million products from 35,000 merchants, according to Rakuten.

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