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Breaking News: Rakuten Acquires Buy.com

May 20, 2010
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In a move that will have significant ramifications in the affiliate industry as well as the online retail space Rakuten, owner of Japan’s leading web portal and LinkShare, has acquired Buy.com. According to a press release on BusinessWire the acquisition is valued at $250 million dollars.

The combined retail inventory of Rakuten’s Ichiba online shopping mall and Buy.com represents 60 million products from close to 35,000 manufacturers with a combined 78 million customers. The acquisition significantly increases Rakuten’s reach now making it a more significant competitor to Amazon.

Rakuten is already the top e-commerce site in Japan and they have been looking to grow overseas. The latest acquisition of Buy.com will add expand Rakuten expansion into U.S. and spur their aggressive growth which saw an operating profit of ¥12.9 bn in Q1 2010. “As we evaluated how to accelerate our global expansion, it became clear that a partnership with Buy.com made perfect sense,” said Hiroshi Mikitani, Founder, Chairman and CEO of Rakuten.

The purchase will undoubtedly have major impact on the affiliate industry. The current successful affiliate program that Buy.com manages is being hosted on Commission Junction. Given Rakuten’s ownership it is inevitable that Buy.com will migrate to LinkShare in the future for cost saving purposes and to keep revenue within the Rakuten umbrella. The move would represent a significant boon to LinkShare who also hopes to capitalize on US advertisers’ interest in China from the joint venture with China’s top search provider, Baidu Inc. that Rakuten announced in Q1 of 2010.

In the states the acquisition does beg the question how the recent so-called Amazon Tax legislation in various states will impact Rakuten’s plans and whether Buy.com will be more aggressive in combating the legislation.

Filed under: Affiliate Marketing + News + Online Marketing + Performance Marketing + Taxes
  • http://www.jeffmolander.com Jeff Molander

    I doubt Linkshare will see any revenue. In the eyes of any retailer (certainly one you own) Linkshare is tracking. Nothing more nothing less. But this is a really interesting event. Interesting in that Linkshare has been a disastrous acquisition for Rakuten — and is showing no signs of improving.

  • http://www.revenews.com Angel Djambazov

    Hi Jeff,

    I agree LinkShare is just a tracking tool in this case for Rakuten. Where LinkShare will benefit as a company is in CJ's loss of revenue and the affiliate relationships that might migrate. Taking away a major advertiser from a competitor is always a coup.

    LinkShare also stands to benefit from the Baidu agreement.

    But your comment is valid…when will Rakuten itself see a return from the $425 million acquisition of LinkShare? That's $125 million more than what they spent on Buy.com, which is truly mindboggling.

    Angel

  • http://www.jeffmolander.com Jeff Molander

    Another interesting aspect: Buy.com's revenue sources. Namely, advertising and arbitrage. Now is absolutely NOT the time to buy Buy.com. The company sexed itself up very nicely and sold itself. I've gotta hand it to 'em.

    Rakuten, again, missed the revenue opportunity by not paying attention to basic digital economy macro-economics. I mean, we give this stuff away for free here at Revenews!!!

  • http://www.ericewe.com Eric Ewe

    Although many people see Linkshare as a mere tracking tool and a liability to Rakuten, it gave Rakuten a foundation to enter the U.S. market and morph into other avenues. i.e. FreeCause.com, a loyalty site which is a pretty lucrative market was developed in 2006 and plays together in the world of affiliate marketing.

    The online properties are growing and based on some of the financial on http://corp.rakuten.co.jp/en/ir/, they are seeing a strong double digit growth.

  • http://www.eaccountableopm.com Durk Price

    If anyone was at the SF LinkShare Symposium in January and saw the presentation by the President of Rakuten you would know not to underestimate Rakuten or LinkShare. The presentation of the Rakuten capability and reach (and now in China with Baidu) was brilliant and awe inspiring. Just as it is taking time for Google to absorb, restructure and reinvent The Google Affiliate Network, so turning around any company the size and complexity of LinkShare is going to take time.

    The fruits won't be far off.

    Great post Eric

  • http://www.eaccountableopm.com Durk Price

    Another thing: what is Rakuten especially strong at: marketplaces. Ask ChannelAdvisor about the potential marketplace opportunity with Buy.com and now the reach into Japan and China.

    I doubt Amazon or EBay are shaking in their boots yet, but again do not underestimate Rakuten.

  • http://www.affiliatefairplay.com Kellie Stevens

    Buy.com used to be one of LinkShare's biggest merchants (at least visability) and then moved to CJ. I doubt any move back to LS from CJ will have any more lasting impact than when they moved to CJ.

    FreeCause is not a Rakuten company. OneCause (CauseLoyalty), which is owned by Rakuten, changed the software developer for their rebated reminder app (in place from when branding was under the name of SchoolPop) from TopMoxie to FreeCause. Having the software wasn't new, just the third party providing the software.

    The real impact for affiliate marketing will be how well everyone is able to manage the wearing of multiple hats. There are now several companies under the Rakuten umbrella that play on all sides of the affiliate marketing channel.

    But even that isn't new to this business.

  • http://www.jeffmolander.com Jeff Molander

    Great analysis, Kellie. I look at the 'potential conflict of interest' stuff as cost savings.

    At the end of the day a Japanese company doesn't invest nearly a half billion dollars in a $60-80 million/annual company (Linkshare) to just have something in the U.S. They expect a billion dollar company within 3-5 years. Linkshare is simply not going to be that springboard. The numbers don't lie and don't cause anyone any worry (re: underestimating Rakuten).

    Will Buy.com be the company to springboard them? I simply do not see it but I've not dived into the financials.

    But the same dynamics are here, Kellie. That is they play both sides of the fence. And if I had to bet my life on it the media business has booked bigger margins than the sales and/or marketplace side for Buy.com.

  • http://davidlew.is David Lewis

    First, a minor clarificationirst, a minor : Rakuten acquired Freecause in August 2009. It could be an interesting play in many ways, including giving Rakuten insight into ecommerce sites to acquire. I wouldn't be surprised to see Rakuten attempt to buy Magento.

    To the main point of the devate, we've all seen too many massive companies make acquisitions that didn't pan out. How many companies has Carol Bartz killed in the last year? I still think eBay's acquisition of Skype was a great idea. The list goes on and may be longer than examples like eBay's acquisition of Paypal (it's second in that space if anyone was counting).

    I don't think that Rakuten has gotten all it wanted from Linkshare but maybe it wil turn out to be a cheap education into the US marketplace.

    I can list out myriad reasons why buying Buy.com makes sense for Rakuten. Invest a few hundred million to really make Buy an equal to Amazon. Use that in conjunction with Japanese properties to be ready for China. How about a jump to Latin America?

    Can a massive company integrate an acquisition well? Only time will tell.