EBay Buys GSI for $2.4B in Bid to Manage E-Commerce for Big Retailers

Deals Opens Another Front in War With Amazon

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EBay has agreed to acquire GSI Commerce, the e-commerce technology and marketing services company, for $2.4 billion in cash and stock. In its second-largest deal to date, eBay is making a play to manage the e-commerce operations of other large retailers and brands, opening another front in its competition with Amazon.

"Retailers need a partner, not a competitor," John Donahoe, eBay's president-CEO, said during an investor call on the acquisition. To contrast, e-commerce giant Amazon's relationships with retailers has been under recent strain. Target , for one, is building its own e-commerce site, ending its partnership with Amazon, whose other products often come into competition with the big-box retailer's business.

Ebay is angling to be the next major channel for retail distribution for large and small businesses, said Bob Swan, the company's chief financial officer. GSI will meet large retailers' needs, while other products such as PayPal and eBay will serve local merchants. To date, GSI clients include Aeropostale, Adidas, Toys R Us and Dick's Sporting Goods.

GSI's e-commerce services accounted for $700 million in 2010 revenue, with global marketing adding another $200 million, Mr. Swan said. GSI will contribute $1.2 billion by 2013, Mr. Swan said. The deal is expected to close during the third quarter.

"These large merchants are looking for help," Mr. Donahoe said. "They're saying: 'We need help with more than just payment.'"

Chris Saridakis, GSI's head of marketing services, will lead the GSI unit at eBay. As part of the deal, eBay will divest GSI businesses not core to its strategy. All of GSI's licensed sports merchandise business and 70% share of ShopRunner and Rue La La will be sold to a new company, with GSI founder and CEO Michael Rubin at its helm. GSI acquired the flash sales site Rue La La in 2009.

Traditionally an e-commerce and warehouse provider for retailers, GSI has made recent strides into marketing services. It has acquired a number of smaller shops over the last few years, including San Francisco-based website design and marketing firm Silverlign, email firm eDialog and affiliate-marketing firm Pepperjam. The agency unit GSI Interactive, which was rebranded True Action in late 2009, had $109 million in U.S. yearly revenue that year, coming in at 15 on Ad Age DataCenter's U.S. digital agency ranking.

These agency services will dovetail with current eBay properties to get retailers into social and mobile commerce, Mr. Saridakis said. Last year, eBay purchased Milo, a search engine for local shopping; mobile barcode scanning and price comparison app RedLaser; and app developer Critical Path. In 2006, eBay acquired internet phone company skype for $2.6 billion

Last fall, former MRM CEO Rueben Hendell landed at GSI to head its 350-person agency unit, which includes True Action and Silverlign. He reports to Mr. Saridakis, who joined GSI from Gannett Co., where he was chief digital officer and head of marketing services.

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