Inktomi announced Thursday that it had acquired Burlingame startup
Impulse Buy Network, further consolidating its hold on the market for portal software and services.
Impulse Buy makes systems that merchants use to place retail offers on highly trafficked Web sites. The two companies already share a number of portal customers, including Yahoo -- an Impulse Buy investor -- and Infoseek.
QUICKIE WEDDINGInktomi will issue 900,000 shares in exchange for all outstanding shares of Impulse Buy, valuing the year-old startup at approximately $112 million.
"If shopping is going to be successful on the Web, the merchant is the linchpin," says Inktomi CEO Dave Peterschmidt. "They have to believe that they can be successful. We believe that Impulse Buy gives the merchants the tools they need."
Impulse Buy will be combined with Inktomi's existing e-commerce division, formed when Inktomi bought the shopping-comparison search engine company C2B last year.
The latest acquisition may not have been an impulsive decision, but time was of the essence. "Inktomi paid a premium for the company, because they valued it from the standpoint of time to market," says Impulse Buy board member Charley Lax, a general partner at Softbank Technology Ventures.
"[Impulse Buy CEO] Mark [Goldstein] and his team bring something we didn't have, which is an orientation and sensitivity toward the merchants," says Inktomi's Mr. Peterschmidt. "The whole architecture of the software that has been developed matches our standards of scalability." (That's high praise coming from a company that built its reputation around a scalability technology developed at the University of California.)
OPEN PORTALSInktomi's purchase captures two trends: the emergence of third-party software vendors selling primarily to Web portals and the popularity of pooling transactions.
In the past, portals have acquired software companies to add to their features. Excite led the trend with its purchase of banner advertising campaign manager MatchLogic in January 1998. Yahoo has made a number of small buys, like Viaweb for its Yahoo Store e-commerce site and Four11 for its Yahoo Mail product. Infoseek acquired Quando in August 1998, hoping to make use of its e-commerce features.
Meanwhile, Inktomi, which counts several portals among its customers, has been able to concentrate on developing its technology. The success of its neutral strategy was shown in a recent deal in which Infoseek abandoned its proprietary Quando technology to use services from Inktomi and Impulse Buy to launch a shopping channel on the Go Network.
INTERNET WAMPUMAcquisitions in the technology industry have accelerated of late, driven partly by high-flying stock prices. A kind of accounting, known as pooling, also makes it easier for companies with relatively few hard assets to be bought without weighing down the acquirer's earnings.
On Wednesday, the Financial Accounting Standards Board voted unanimously to stop allowing pooling transactions. According to Inktomi's Mr. Peterschmidt, the FASB is already having an impact on high-tech mergers. "This acquisition was six times more difficult administratively than the acquisition of C2B [last year]," he says. "The difficulty has already begun."
Mr. Peterschmidt says Inktomi could make more acquisitions in the future, but is also developing new products internally. The FASB's decision wouldn't make Inktomi rush to complete acquisitions by the end of the year, he adds.