Rakuten confirms Ebates acquisition, Ebates CEO admits Alibaba threat encouraged his decision

Hiroshi Mikitani, founder and CEO of Rakuten, speaks at the press conference

At a press conference in Tokyo today, Hiroshi Mikitani, founder and CEO of Rakuten, Inc. (TYO:4755), confirmed reports that his company will acquire American online coupon firm Ebates. The ticker price comes in at JPY 105 billion (US$1 billion).

Founded in 1998, Ebates offers coupons or cash-back incentives to drive online shopping. Stores register on Ebates and post coupon codes or cash-back terms. Shoppers registered at Ebates can then copy the coupon link, click on the product they want to buy, and make the purchase. For cash-back offers, Ebates will send the user a check four times a year or more.

According to its most recently released data, as of 2012, the company had partnered with 2,600 stores, including Amazon, and, according to 4-traders, saw US$2.2 billion in purchases during 2013. Mikitani further confirmed that this purchase power came from a comparatively scant 2.2 million active users in the same year.

Rakuten is ostensibly driven to acquire online retailers, but Ebates will not facilitate that mission. Instead, the newest member of Rakuten’s global family would seem to slide most comfortably alongside Rakuten Marketing and Rakuten Loyalty, which handle business support functions like affiliate marketing, advertising optimization, website monetization, and loyalty programs.

Anchored by Rakuten LinkShare, the top affiliate service in the market, online business support has quietly become Rakuten’s leading presence in the United States. The entrance of Ebates, however, could signal that business support is poised to become a fourth pillar of the conglomerate’s revenue structure, following ecommerce, financial services, and digital content.

The Ebates deal, unlike the US$900 million acquisition for the monetization-challenged Viber acquisition, will immediately buoy Rakuten’s bottom line.

Looking at the company’s global ecommerce picture, Ebates revenue already comes in at approximately 10 percent of the JPY 2.08 trillion (US$19.5 billion) pie. All of Rakuten’s non-Japanese ecommerce concerns together only add up to six percent.

Ebates alone outweighs the ecommerce offerings of Rakuten’s international branches

Though Ebates CEO Kevin Johnson acknowledged that his team had been working towards an IPO, Mikitani was able to change his mind. Ebates was familiar with Rakuten for seven years, ever since the Japanese company acquired the New York City-based Linkshare so the two sides were not starting from scratch.

Making Johnson’s decision easier? The appearance of Alibaba. “Ecommerce is getting more competitive all the time, especially internationally with Alibaba entering the US and expanding beyond China and entering the US. We would rather compete with a partner like Rakuten than on our own.”

See: Alibaba vs. Amazon in an infographic

Disclosure: The author is a former employee of Rakuten. Please see our Statement of Ethics for further details.