The president of Viaweb Inc., a 21-person ecommerce company in Cambridge, Massachusetts, sounds more than a little tickled about selling the farm to Yahoo (YHOO) –- for about US$49 million -- and moving West to work for the Web-wide wonder.
"It’s like a little band getting a recording contract with the world’s biggest record company," said Paul Graham, Viaweb’s president. And getting a pretty sweet deal, too. Yahoo is handing over 455,000 shares of common stock, currently trading at about $107, for complete ownership of the privately held company.
The acquisition, which apparently has been under discussion for several months, gives Yahoo the technology to enable would-be electronic shop owners to set up a virtual storefront in a matter of minutes.
"We get a lot of calls about easy access to distribution and ecommerce," said Ellen Siminoff, vice president of business development and strategic planning at Yahoo. "As a media company we see this like a catalog business, a logical extension of what we’re doing."
But Chris Charron, an analyst at Forrester Research, said he sees the deal as a more logical extension of the boom in search-engine stocks.
"With stock valuations being what they are, portal sites would be foolish not to acquire interesting technology right now," he said, wondering aloud if portal site executives would be paying such big bucks for their acquisitions if they had to come up with cash.
Viaweb's technology, developed over the last three years by a gang of Harvard computer-science doctorates, guides merchants through an easy-to-use store-building process that takes about 20 minutes. Graham says his firm is the oldest maker of online store software and serves about 20 percent of the market. And the company’s relatively petite client list, which includes such notables as Cirque du Soleil, Dean & DeLuca, and Frederick’s of Hollywood, saw a spurt today, going from 1,064 to 1,071 after the Yahoo announcement.
Viaweb allows merchants to quickly organize product offerings, register a domain name with the Internic, enable secure transactions, and sign up for real-time credit-card processing.
Graham said the only reason to offer the last feature is for people selling soft goods, like software that can be downloaded at the time the sale is completed, "unless you’re charging a percentage" for the service. He was taking a stab at GeoCities, which takes a cut of each credit-card purchase transacted in its GeoShops. When the homepage builder announced in March the availability of ecommerce tools for its members to build retail sites, it said it expects the service to bring in $10 million annually.
Yahoo’s Siminoff was far more candid, saying only that the company did not expect any big bump in revenue right away.
"For the next two quarters our goal is to build market share and integrate the business," she said.
In the short term, she said the Yahoo Store, which went live this morning at 8 am, will continue with the start-up's pricing strategy. The cost is $100 per month for sites with less than 50 items for sale, or $300 per month for sites with up to 1,000 items. GeoCities, by comparison, charges $24.95 per month, plus a monthly charge of $80, or $40 plus 5 percent, of the transactions for credit-card processing.
"The Internet saw $2.4 billion in retail sales in 1997," said Forrester's Charron, "and the portals are trying to capture some of that pie." So far, however, the shopping space has not generated significant revenues for any of the portal sites.
As part of the contract, all of what Yahoo describes as Viaweb’s "critical technical people" will move to Yahoo HQ in Santa Clara, California, while the rest of the company has been invited to join them. Graham sounded pleased. "We’re going to Santa Clara to keep what we’ve been doing," he said.
