GoTo.com Spins Off Online Auction Services Arm

GoTo.com (Nasdaq: GOTO) announced Monday that it will spin off its auctions unit into a self-contained auction service provider called ChannelAdvisor.

Most recently, ChannelAdvisor has operated within GoTo, helping create e-marketplace brand presences on such sites as eBay (Nasdaq: EBAY), Yahoo! (Nasdaq: YHOO) and Amazon.com (Nasdaq: AMZN).

If the outlook for business-to-consumer (B2C) and consumer-to-consumer (C2C) online auctions is as bright as research firm Jupiter Media Metrix foresees, auction services from companies like ChannelAdvisor are likely to proliferate rapidly. By Jupiter’s count, the B2C online auction market will grow from US$3.9 billion in 2001 to $9.9 billion in 2005, and the C2C market is projected to leap from $7.2 billion in 2001 to $12.3 billion in 2005.

“As more large companies see online auctions as viable ways to liquidate more merchandise, services like those from ChannelAdvisor will become even more needed in the future,” Jupiter Media Metrix analyst Jared Blank told the E-Commerce Times.

‘Nontrivial’ Pursuit

Under the terms of the transaction, the current ChannelAdvisor management team will assume financial and operating control of the Morrisville, North Carolina-based company. GoTo will remain in the wings, however, holding a minority interest of 18.5 percent as well as a position on the ChannelAdvisor board of directors.

“It’s nontrivial for a company to sell in a new channel like eBay,” ChannelAdvisor president and chief executive officer Scot Wingo told the E-Commerce Times. “There are lots of variables that determine success, and we help customers navigate through these variables.”

Enterprise Focus

While ChannelAdvisor services individuals and small businesses with its ChannelAdvisor Pro product, its primary focus is its ChannelAdvisor Enterprise product for large companies.

ChannelAdvisor will continue to offer two main types of services to enterprise customers: branding and auction sales strategy consulting, and technology integration. The company aims to create brand packages for auction sales channels, and at the same time to integrate with existing technology infrastructures, including inventory databases and payment and fulfillment systems.

Citing the example of customer Omaha Steaks, Wingo said that listing a company’s auction items on a marketplace like eBay does not create a user-friendly environment for buyers. A large part of the value ChannelAdvisor claims to provide is in packaging products on the block.

Multiple Services

Wingo added that friction in the supply chain is eliminated by the back-office integration that ChannelAdvisor offers its customers. ChannelAdvisor incorporates a company’s existing product data and technology into its own software.

ChannelAdvisor also assists companies with decisions on when to list certain items, how long to list them, and how to design compelling auction templates.

Jupiter’s Blank was not surprised by the ChannelAdvisor spinoff, noting two similar firms gunning to capitalize on the growing demand in the auction services space: Andale and AuctionWatch.

On July 23rd, AuctionWatch revealed a new suite of products designed to help larger retailers and manufacturers dispose of excess inventory at eBay and other online auction sites.

eBay Approval

eBay, where ChannelAdvisor claims 20 of the marketplace’s 30 corporate sellers as clients, recently named Auction Watch as one of its “preferred vendors.” However, eBay said that this distinction will not be reserved for a single auction services provider, and that ChannelAdvisor meets eBay’s preferred vendor criteria of appropriate technology and customer critical mass.

“ChannelAdvisor’s services and solutions help our sellers efficiently offer their merchandise in the eBay marketplace, which enables buyers to have a broader selection of items to purchase,” said Jeffrey Housenbold, vice president of eBay’s B2C Group.

ChannelAdvisor customers include West Marine, Memorex, Omaha Steaks and BargainBuilder.