Yahoo Inc. announced this week that it will acquire online-store hosting firm Viaweb in a stock swap valued at $49 million.
Launched in July 1995, Viaweb's systems allow nontechnical operators to create, access and update online stores through an ordinary browser. The company's systems and services cost $100 a month for up to 50 items, $300 a month for up to 1,000 items and $100 a month for every 1,000-product increase above the first 1,000. There are no additional charges per transaction.
Yahoo plans to keep rates the same for what is now called the Yahoo Store at http://store.yahoo.com. According to Yahoo, all of Viaweb's 21 employees have been offered jobs at Yahoo's headquarters in Santa Clara, CA.
“We've locked in the key five or six employees,” said Ellen Siminoff, vice president of business development and strategic planning for Yahoo.
Paul Graham, president of Viaweb, Cambridge, MA, likened the acquisition to “the nerdy guy on the block getting befriended by the biggest guy on the block.” As to why he agreed to the purchase, Graham said, “It's not like a computer company has acquired some banana merchant and we have to explain why. E-commerce runs on traffic a lot like cars run on gasoline, so the synergy here is obvious.”
Viaweb claims more than 1,000 mostly small- to medium-size business tenants. Its clients include cataloger Hanover, gourmet food store Dean & DeLuca, Frederick's of Hollywood, the Houston Astros, NASA's Kennedy Space Center and Rolling Stone magazine.
Melissa Bane, senior analyst with the Yankee Group, Boston, downplayed the value of the merchants already in Viaweb's portfolio.
“Yahoo is buying two things: a software solution that's easy for [merchants] to set up and [Viaweb's] experience at making this model work,” she said. “That way, when Yahoo starts driving traffic to [Yahoo Store], they can hand it off [to Viaweb] and say 'Here, you already know how to do this.' ”
Yahoo clearly made the purchase with an eye for the long haul rather than immediate cash gains. Viaweb says its merchants' gross sales are $3.3 million a month.
“I have a feeling that number's going to go up,” Graham said. “I think they bought us because they can make a lot more of us than we could make of ourselves.”
Siminoff would not estimate how much of a traffic increase Viaweb's merchants will get as a result of the deal other than to say “it will be exponentially more. We announced [the Viaweb purchase] on the front page of Yahoo and that's the most trafficked front page on the Internet.”
Yahoo says it reaches 83 percent of online shoppers and that it receives 32.9 million unique visitors a month and more than 95 million page views a day. Siminoff said Yahoo considered other companies similar to Viaweb but would not name them.
Among the firms that Yahoo probably considered was Viaweb competitor iCat Corp., Seattle. iCat recently made a run at Viaweb by offering small businesses free hosting services for stores of 10 items or fewer. Executives at iCat did not return calls for comment.
Siminoff cited three reasons for the Viaweb acquisition:
* Alternative revenue.
* Access to a large number of small- to medium-size businesses.
* Improved online retail services for consumers.
“We already have major relationships with Amazon.com, Cdnow and some of the other really big merchants,” she said, adding that the money in turnkey store hosting and managing lies in the small- to medium-size business market.
Siminoff estimated that 1,000 business each day apply for a listing in the company's well-known search engine that should result in an opportunity to grow the Yahoo Store quickly.
