In a move that could help eBay improve its tools for online store developers, it has acquired Magento, the maker of an open source e-commerce platform.
The online auctioneer last year acquired a minority stake in Magento, which is based in the US and has about 290 employees, along with tens of thousands of merchant customers.
The deal is expected to close in this year's third quarter. The plan is for Magento to remain in Los Angeles and continue supporting its partners and customers, as well as keep developing its product roadmap, while leveraging eBay's additional resources and helping eBay develop X.Commerce, according to a FAQ about the deal.
Magento's platform is designed to be modular and flexible, so that e-commerce developers can have more control over how they build their online stores than if they use software where the source code can't be modified.
"The feedback we've heard from external developers has been clear, they don't just want payments or an ecommerce site. They want access to a full set of commerce capabilities to build complete shopping experiences for merchants," said eBay CEO John Donahoe.
In addition to tools for creating the design, content and functionality of an online store, Magento's software also has a management console with marketing, merchandising and content management features, according to eBay. Magento will become part of eBay's new X.Commerce group, whose mission is to create a vibrant developer ecosystem around what the company calls "an open commerce platform."
"eBay is evolving to become a strategic commerce partner focused on delivering new ways for merchants of all sizes to drive innovation. As a centerpiece of this strategy, they are building a global, open commerce platform that leverages the worldwide developer community. And Magento will be at the core of this new, open commerce platform, called 'X.Commerce,'" wrote Magento CEO Roy Rubin.
Magento may prove to be an integral component of eBay's collection of commerce capabilities, said Leslie Hand, an IDC analyst.
"It ties the mobile, payments and order management components together and may very well enable eBay to deliver an online/offline commerce application for small retailers," Hand said. "I am not sure that the capabilities will scale to larger organizations, if this is even being considered by eBay."
In the past year, eBay has struggled to grow the revenue of its core business, the auction and fixed priced marketplace, but it sees greater growth in the PayPal online payment unit, and is seeking to capitalise on emerging e-commerce trends, like mobile commerce and the increased synergy between online and offline shopping.
However, the Magento software is more suited for smaller merchants that have outgrown the eBay Marketplace but whose annual sales are usually under $2 million, and rarely larger than $10 million, said Gartner analyst Gene Alvarez.
"eBay's move to buy this company is in line with its strategy to capture more and more of commerce occurring in smaller enterprises, kind of e-commerce for the masses and driving payments to PayPal," Alvarez said. "Magento customers are bigger than the typical eBay individual merchant, but not big enough to support the costs of more industrial strength e-commerce solutions."