I cover the recommendation engines space for online retail and got a call recently that one of the better-known players in the space Rich Relevance acquired a smaller but specialized player in the space CNET Intelligent Cross-Sell. It’s a bold move and one that strengthens Rich Relevance in the consumer electronics vertical, and it also seems to be a trend. We’ve received a lot of these kinds of calls recently — eBay acquiring GSI Commerce, Nordstrom acquiring HauteLook, Shutterfly acquiring Tiny Prints, and Walgreen’s acquiring drugstore.com. And this follows a slew of acquisitions over the past few years by players like IBM, Oracle, and Adobe trying to enrich their retail suites. Rich Relevance didn’t tell me specifics like deal terms, but it seems to point to bigger factors affecting eCommerce these days:

  • Wicked competition. There have just been too many point solutions in eCommerce. Walk the exhibition floor at Shop.org or Internet Retailer, and it’s dizzying to see how many niche needs that eCommerce platforms don’t serve are delivered by third-party players. It’s overwhelming for anyone tasked with managing an RFP to make sense of it all. On top of that, there are all sorts of inexpensive (even free) solutions that promise a good-enough solution for everything from analytics to recommendations, so the need to partner up and go to market as a united front just makes sense for so many smaller players.  As for traditional (and even established web retailers), they struggle with being nimble. As the expression goes, “When you can’t beat ‘em . . .” 
  • A competitive hiring environment. It’s known in the Valley that one of the main reasons that Google acquires companies is for their people. During a time where eCommerce isn’t nearly as sexy as virtual goods and it’s just plain hard to compete with aggressive startups that have tempting stock options packages, acquisitions may just be the best way to acquire some strong developers. 
  • Great valuations. We’re in a bubble, of course, and that usually means a premium for any company being bought, which means that there are lots of bankers knocking on doors trying to get deals done. The LinkedIn IPO this week is the Netscape of this decade — the bubble is official. 

What this likely means is that there will undoubtedly be more of these announcements to come.  I wouldn’t be surprised if we see announcements for companies like The Find, Bazaarvoice, and ASOS  in the months to come. 

Who else do you think could be a likely acquisition target in online retail in the coming year?