Omniture Mercado
October 30, 2008
A reader provided me with a summary of a research report prepared on October 26, 2008, by a consultancy identified as IVC, which is an acronym for Israel Venture Capital. You can learn more about the firm here, and you can sign up for the company’s reports. The report was “Mercado Software Ltd. I worked through the document and I found it useful, but like most consultants’ reports, a number of questions went unanswered. Three points in the report caught my attention:
- After five years, Mercado seemed to hit a revenue ceiling of US$ 7.0 million.
- The purchase price paid by Omniture–if I am reading the summary correctly–was about US$ 8.0 million, which is a modest premium over revenues for a company that went through several rounds of financing.
- The board of directors had one Mercado member, and the other five board members were financiers or lawyers.
Mercado competes with Endeca, SLI Systems in New Zealand, and Progress Software’s EasyAsk, among other ecommerce vendors. Mercade had a number of high profile accounts. I recall that one of its major account wins was at Overstock.com. The company’s Web site here provides a list of customers.
Several observations are warranted:
First, the purchase price of $US 8.0 million, if that figure is accurate, may suggest that fire sale prices could be slapped on certain search, content processing, and text mining companies. Mercade has customers and cash flow, but the costs of maintaining and enhancing search systems can be significant. I think the investors punted.
Second,the ecommerce sector is one of those niche markets that on the surface seem attractive to search companies. Ecommerce may be attractive, but it’s clear from Mercado’s struggles that technology AND marketing are essential. Despite Mercado’s reasonably high profile, the company seemed to struggle to generate substantial new sales. I wonder if the licensing deals were too relaxed. Selling complex software at a low price may create cash flow pressures, not relieve them.
Third, will other players in the ecommerce sector run into similar problems? The number of options for a retailer seeking ecommerce systems is large. Older technology may find itself stretched to compete with newcomers, bundles from companies such as Oracle, and hosting vendors who offer an ecommerce solution as an add on to core data center services.
I will continue to track Mercado as it moves forward with a new owner, Omniture here, a firm that has a core competency in Web site metrics.
Stephen Arnold, October 28, 2008
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One Response to “Omniture Mercado”
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I found out some interesting things at a recent e-commerce show in London. Search, in the world of e-commerce, is very much behind the times compared to some other sectors.
A lot of sites don’t bother with things like automatic spelling correction that are reasonably easy to implement. Some sites won’t even let you search using multiple words. There’s a lot of mixed-up thinking with regards to SEO as well, where sites publish content on items they don’t actually carry in a desperate attempt to grab potential customers from Google. Even some major vendors, carrying millions of items, have broken site search.
I would expect more shakeups in this sector in the months or years to come.