EBay builds new division to woo developers

Inside the mysterious X.Commerce.

Ebay is building a new division to woo developers and attract more merchants as the company tries to emulate the success of Apple Inc's iOS platform in the e-commerce world.

Ebay's main business is still its giant online marketplaces, which bring shoppers and sellers together.

The company's other big division is the payment business PayPal and it acquired GSI Commerce earlier this year to add a third division.

But a fourth business has emerged in recent months called X.commerce. The website for the division, X.com, revives a name from the early days of PayPal, when it merged a competing online payments business called X.com started by Elon Musk.

X.commerce is trying to persuade outside developers to create applications, or apps, for merchants looking to sell more online.

The apps can be designed to work on eBay's marketplaces. They may also include payment capabilities from PayPal and work with websites built on Magento, an open-source e-commerce company that eBay bought in June.

The more useful apps that developers build through X.commerce, the more likely merchants are to use eBay's marketplaces, PayPal's payment technology or GSI's e-commerce services.

"The idea is to indirectly monetize eBay's main assets PayPal, GSI and Marketplaces," said Matthew Mengerink, the eBay veteran who runs the new division.

"X.commerce is in a unique position. I don't have to drive revenue, I have to drive traffic."

Ebay has about 725,000 developers registered with its various developer programs and there are roughly 4600 Magento apps active on X.com, up from 3800 at the start of the year, according to Mengerink.

Omniture, a unit of Adobe Systems, Kenshoo, an online marketing software company, and Outright, which makes a financial-management product for small businesses, are among companies that have signed up to develop apps on X.com.

"They're pulling an Apple, calling on the collective power of the developer community," said Bill Smead of Smead Capital Management, which counts eBay as one of its largest holdings.

Apple iOS is the operating system for the iPhone and iPad. The company has a massive following of developers who churn out thousands of apps for those gadgets, making them much more useful for customers.

Mengerink reckons X.commerce can be more attractive for developers than iOS because merchants are willing to spend more money on useful e-commerce apps.

Mengerink said he will measure X.commerce's success partly on how much money developers make selling apps.

"Apple's iOS isn't profitable for most developers," he said. "On Magento, for every $1 we make, the developer makes $20."

"If developers are making the money, you can't shake the platform," he added. "We believe we can create the largest ecosystem."

Smaller merchants will not have to hire lots of in-house developers if a wide variety of e-commerce apps are available to buy and plug into their online stores, Mengerink explained.

The success of eBay's new division will depend on how large and attractive the pool of end-users is to developers, according to Stephen O'Grady, principal analyst at Red Monk, a technology industry analyst group that focuses on developer communities.

Other specialty online marketplaces have sprung up in recent years, such as Etsy, cutting into eBay's dominant position, O'Grady noted.

"But eBay is still a major center of gravity," he said. "For developers that's still attractive."

Another important ingredient for attracting third-party developers to a technology platform is ease of use.

Dan Shahin, a former comic book store owner who has developed an online storefront management system, went with a Google Inc payment system a few years ago, rather than PayPal.

That was because PayPal had several different application programming interfaces, or APIs.

APIs are sets of rules and specifications that help different software programs communicate with each other. PayPal's APIs were "scattered around," making it more difficult for Shahin to develop payment features to include in his storefront management system, he said.

Shahin told Mengerink about this and the eBay executive got to work fixing the problem.

"Third-party developers had to register for each API," Mengerink said. "The X.commerce goal is to have one place to register for developers and partners. There are security and other issues with this, so it takes a while."

X.commerce is promising a lot, but Shahin reckons eBay has the technological chops to pull it off.

"If anybody can do it, they can," Shahin told Reuters. "Matthew is not one of those suits. He's the real deal."

(Reporting by Alistair Barr, editing by Matthew Lewis)