While I wasn’t invited this year, I’d still highly recommend ChannelAdvisor’s Catalyst Conference April 1-3, 2008. There will be a session on comparison shopping: Why, What, How? – Ask the Comparison Shopping Engines and representatives from the usual suspects (Amazon, eBay/PayPal, Google) will be in attendance.

Last week ChannelAdvisor acquired Marketworks. The purchase price was undisclosed.

According to the press release, the combined company will have 5,500 companies on a global basis. I believe ChannelAdvisor had aprx. 3,600 customers before the acquisition, so Marketworks added about 1,900 customers to the mix.

According to Scot Wingo, ChannelAdvisor CEO, this acquisition “gives us an entry-level product that we haven’t had until now. So we have a real cradle-to-grave solution, where as before we only had adolescent and up.” (from newobserver.com)

This acquisition follows a $30m venture capital round led by NEA.

A popular question of late has been why ChannelAdvisor hasn’t gone public yet. One hypothesis is that Wall St. liked, but didn’t love what they saw. None of the following ideas have been confirmed by ChannelAdvisor, they are just my thoughts after talking to a number of Analysts.
-A majority of ChannelAdvisor’s clients (maybe 3,300 out of 3,600?) were small eBay sellers paying ChannelAdvisor almost nothing in fees. Even though the company has done an incredible job of moving past eBay, the company is still known as the eBay seller helper. And for all the talk that eBay sellers are graduating from eBay onto marketplaces and comparison shopping engines, this is not happening quickly as the vast majority of eBay sellers are not sophisticated enough to move on at this point.
-ChannelAdvisor had already up-sold or attempted to upsell the majority of its 300 or so larger merchants multiple services - search marketing, marketplaces, comparison shopping - and therefore the company wasn’t going to significantly grow revenue from its current client base.
-ChannelAdvisor (for the most part) charges merchants a flat rate + % of sales. As merchants perform better, they expect a discount on the % of sales which means that as ChannelAdvisor grows revenue for its clients, it doesn’t participate fully in that growth.

So what is this acquisition all about?
-ChannelAdvisor quickly grows its client base and revenue.
-ChannelAdvisor becomes a bigger piece of the eBay, Amazon, Adwords, AdSense, Shopzilla, Shopping.com, etc. pie, thereby potentially achieving pricing power in some channels (although not all marketing channels work this way) or at least getting better attention/customer service in some channels.
-Marketworks primes the up-sell pump for ChannelAdvisor as ChannelAdvisor’s search marketing and comparison shopping solutions (at least) seem more sophisticated than Marketwork’s solutions which start at a very low $29.95/month.

So what’s next for ChannelAdvisor? I have a feeling it will take a bit to swallow the Marketworks acquisition, but if I were Scot Wingo, I’d look to other online marketing channels which I’m not currently selling to my client base - either developing new systems in-house or acquiring service providers in the following areas: email marketing, graphical advertising, video advertising, affiliate marketing, lead generation, domain parking.

As I mentioned a couple weeks back when ChannelAdvisor (CA) announced its funding, the company is launching its ‘no IT help needed’ data feed management tool at Internet Retailer (IR) next week. Today CA broke the news to the press. See the release and read the blog post.

The company is hush hush on pricing for the service, but the word at the Catalyst conference was $1000 + a % of sales. This is a big improvement from the aprx. $500/feed the company usually charges. I’m supposed to get a demo next week at IR, so I’ll have more to report then.

Congrats to the CA team on the launch!

A belated congratulations to Scot, MJ, and the entire ChannelAdvisor team on raising a $30m round of venture capital, “led by New Enterprise Associates (NEA) with participation from current ChannelAdvisor investors Kodiak Venture Partners, Advanced Technology Ventures, Southern Capitol Ventures and eBay.”

From the release:
“The company also announced that Bill Brown has joined the company as Chief Financial Officer to manage all of the company’s financial activities.”

“Bill, a 25-year financial and accounting veteran has served as Chief Financial Officer at several Massachusetts-based Software-as-a-service (SaaS) on-demand companies, including Lightbridge, a Burlington, MA company Bill helped take public in 1996. Bill received a Bachelor of Science Degree in Business Administration from the School of Management at Boston University.”

A snipet from Newsoberver.com:
“the business has 3,900 customers, revenue that’s on track to grow 67 percent this year”

Good interview at Business 2.0 Beta.

ChannelAdvisor is set to launch it’s self-service shopping feed program at Internet Retailer. Gotta love this space!

So when’s the IPO?

Related Posts:
SingleFeed Closes its Series A Financing - April 5, 2007
Channel Intelligence Rasies $15m - November 29, 2006

Briefly, what is ChannelAdvisor?
We help companies from large to small manage online sales channels. In particular, we focus on 3 areas: Search, Comparison Shopping Engines, and Marketplaces (eBay Amazon, etc.).

What shopping comparison engine related services do you offer? How long have you been doing this?
We offer two services. They are not mutually exclusive. Most customers have both, but they don’t have to.

The first service is Data Feed Management. We’ve been doing this for 2 years. After talking to our customers, we learned there’s a lot of need from retailers to help them manage data feeds. We were working with them on other things and learned their IT departments were bogged down. We start with a data feed or some internal mechanism to get the data. We can do database to database communication. Once we have the data, we run a series of transformations on that data to make it as optimized as possible for the comparison engines. [An example of this optimization:] we did a lot of research and found that any retailer might have 5-25% of products out of stock, but those products were still showing [on the comparison engines]. We get an inventory level [from our retailers] and if they have less than a certain number of items, we don’t publish. This is also relevant for holidays or very surgical promotions when retailers need to drop prices on certain SKUs. We spend a lot of time getting up-to-date pricing information refreshed as quickly as possible. What if [a product] comes off promotion and the price goes up? If the old price is listed on the comparison engine, it’s a very negative customer experience. We also do a lot of QA.

We’re also a leader in category mapping. The retailers typically have their own taxonomy. However, when you publish to comparison shopping engines, many have recommended categories. We have software that does a first pass at the mapping, but also have a human look at it the first time. This is all foundational work, if you don’t have great data going out, you’re ROI is in trouble.

The second service is Automatic Bid Management . The system was originally developed for PPC clients, but we’ve now implemented the system for BizRate, NexTag, and Smarter.com. We’re working on Shopping.com and a couple others. We’re able to get down to the SKU click and cost data and then run an automation engine. The retailers give us some threshold (CPA, effective % of sales, etc.), and we manage the bidding for you. If products are doing well, we keep them active, if they are not doing well, we’ll change the title or bid, but eventually, we’ll cut it. A good example of the need for bid management is for a merchant selling digital cameras. The CPC for the category is relatively high, but the retailer might have a wide range of cameras selling from $50 to $2000. Read the rest of this entry »