As reported by AuctionBytes, ChannelAdvisor laid off around 50 employees, or 19% of its workforce, earlier this week. This is CA’s second cut in the last 5 months, the first one being back in September when CA laid off 70 employees, 20% of its workforce at the time. With these new layoffs, the company is now down to around 225 employees, after having cut 123 or about 35% of its staff in total.
You can find out a little more from Jeff Buechler and definitely read Ina’s post as it contains some comments from Scott Wingo.
In this completely crappy economy, cuts don’t surprise me. Every player in the data feed management space – CA, CI, Mercent, and SingleFeed – has had layoffs, and I’d expect more to come. And if you look at the retail carnage, you’ll know why.
The interesting question to ask is where ChannelAdvisor goes from here. CA’s last round of $20m came right before the shit really hit the fan for the economy and CA has raised over $80m in venture capital, which means it has a fairly lofty valuation and will need an incredible exit to make its investors happy. Vator TV, with Erik Stuart (eBay’s Director of Corporate Strategy) as a guest, ponders what an exit might look like.
I think that at one point, ChannelAdvisor might have looked like an attractive acquisition opportunity to eBay, and that explains why eBay has participated in CA’s rounds of financing. eBay has a ton of sellers who need help selling their products across multiple channels in order to grow their businesses, especially when their businesses on eBay are under pressure. ChannelAdvisor has a platform that can help merchants do this. eBay has shifted some resources/made acquisitions to help sellers extend beyond eBay (ProStores, Shopping.com), so CA could be a natural extension.
However, I think the talk about an acquisition has come and gone. I’m sure it’ll come again, but 2009 is a buyers market, not a sellers market. eBay can take its pretty little time, continuing to develop its strategic partnership with CA at the same time it continues to develop its own tools. No one is going to jump on CA right now because no one is buying. And CA will not be able to go public anytime soon.
So what’s CA to do? Well, with all the cuts and the significant war chest, the company now has time. That’s a great thing in this economy. And the company recognizes a strong opportunity with Amazon. It’s where merchants want to be right now. As Scot Wingo says “I don’t think it makes sense for anyone to try and innovate on a platform that’s decreasing the way eBay is. Now, on Amazon, we are going to shift a lot of resources…” (from the AuctionBytes post).
My main recommendation for CA (not that they want to hear anything from this ‘blogger’) is to focus. It’s extremely hard to be all things to all merchants. I strongly believe that a successful company needs to focus focus focus. And with all the acquisitions CA has made, the focus has become too broad or has been too erratic. CA has done a good job of listening to its merchants and changing direction as needed, but I hope these layoffs are a way of tightening the focus of the company. Yes, there are going to be attractive acquisition targets in other areas of online marketing where CA is not yet an expert (email, affiliates, multivariate testing, reviews, etc.), but I hope the VCs are demanding discipline to continue tech innovations in core areas of the business.
The overarching goal of CA has always been to be the one stop shop for the merchant – there are many channels for merchants to participate in and going through one source is an extremely attractive value proposition. But it’s also a huge challenge. ChannelAdvisor allows a merchant to get up on eBay, create a real store, buy PPC ads on Google, accept Google Checkout and PayPal, sell through Amazon, market on the shopping engines, make use of rich media, and more.
While all those channels are tied together in lots of ways and should be looked at in conjunction with one another (heard of Omniture?), just tying them together is not good enough. CA needs to continue to focus on innovation. Many merchants will flock to ChannelAdvisor, but many merchants are going to demand the best of breed solutions, not just the one stop shop.
Posted by Brian Smith 
