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Rakuten buys cash-back shopping site Ebates for $1B

The purchase will allow Rakuten to break into the American e-commerce market

Financial trends and news by Steven Loeb
September 9, 2014
Short URL: http://vator.tv/n/390f

The self described goal of Japanese e-commerce giant Rakuten is "to become the world’s No.1 Internet services company." As such, the company has spent the last couple of years making some very high profile, and targeted, acquisitions to expand its capabilities.

Its latest purchase is its largest yet, though, and could be one of its most important. It’s almost certainly a sign that the company now has its sight set on the e-commerce market in America,

The Tokyo-based Rakuten has purchased Ebates, the provider of the largest cash-back shopping web site in North America, for $1 billion. As per the deal, which was announced on Tuesday, Rakuten will be acquiring 100% of Ebates' outstanding voting stock.

The San Francisco-based Ebates is a website where users can earn cash back on their online purchases; getting anywhere between 1% to 26% cash-back on the items they buy. The company is currently partnered with over 2,600 merchants. That includes Amazon, Zulily, Barnes and Noble, Banana Republic, Hotels.com, Groupon, Target, Staples, Walmart, Priceline.com and Home Depot.

In 2013, Ebates members spent over $2.2 billion shopping through the site and its affiliates, and the company generated $167 million in net revenue.

For Rakuten, scooping up Ebates will help it expand its e-commerce capabilities, and help it give shoppers on Rakuten better deals. 

“The combination of Rakuten and Ebates is entirely unique and will revolutionize e-commerce,” Hiroshi Mikitani, founder and CEO of Rakuten, said in statement. “Combined, Rakuten and Ebates will be able to offer our members access to what will undoubtedly be the world’s largest selection of products across the broadest range of categories. It will also give our members the greatest incentives to keep shopping.”

Ebates, meanwhile, gets the tools and resources that come from a being part of company of Rakuten's size and scale.

“Rakuten and Ebates have a unified vision of empowerment: empower our members with the best loyalty incentives possible; and empower our merchant partners by providing them with the tools and know-how they need to succeed at e-commerce," according Ebates CEO Kevin Johnson.

Plus, he noted, combining forces with Rakuten will help accelerate Ebates' own growth, both in the United States, and internationally.

Founded in 1998, Ebates has been backed by venture capital investors August Capital, Canaan Partners, and Foundation Capital.

Rakuten acquistions

In its efforts to be a global leader, Rakuten has now made a total of 18 purchases in less than two years.

In February, Rakuten made its largest purchase yet when it acquired messaging app Viber for $900 million—just one of a string of acquisitions Rakuten has made over the years. Last year, Rakuten seemed to be honing in on video startups with the acquisition of Spanish video streaming company Wuaki.tv, as well as video streaming platform Viki for $200 million. In 2011, Rakuten acquired the flailing e-reader Kobo for $315 million.

In 2013, Rakuten generated more than $5.1 billion in revenue, up from $4 billion in 2012, and $429 million in net income. By comparison, Amazon saw $74.45 billion in revenue and $274 million in net income in 2013. 

(Image source: bloomberg.com)


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