Yahoo says bienvenue to Kelkoo

The company agrees to acquire the Paris-based e-commerce provider for about $575 million.

Matt Hines Staff Writer, CNET News.com
Matt Hines
covers business software, with a particular focus on enterprise applications.
Matt Hines
3 min read
Yahoo said Friday that it agreed to buy European e-commerce provider Kelkoo for around $579 million to widen its worldwide shopping services and generate new advertising opportunities overseas.

The addition of Paris-based Kelkoo, which specializes in online comparison shopping, gives Yahoo the world's broadest e-commerce network, Yahoo said. Kelkoo is the largest online shopping service originating in Europe, with an average of 30 million site visitors per month. The company provides comparative product information on a range of items, from books to electronics devices, through a network of roughly 2,500 retailers.

The Kelkoo deal is the latest in a series of moves by Yahoo meant to expand the Web portal's marketing and advertising prospects. The company has profited from paid search listings through its acquisition of commercial search provider Overture Services. Using commercial search, Yahoo drives revenue based on the number of times Web surfers click on an advertiser's ad and the performance of those ads. Kelkoo's merchants also pay referral fees to the company when consumers click through to merchant Web sites from its service.

The acquisition also strengthens Yahoo's position against rival Google, which is testing its own comparison shopping service, known as Froogle.

Under the terms of the deal, expected to close during the second quarter of 2004, Yahoo will pay cash for privately held Kelkoo, which will become a wholly owned subsidiary of Yahoo. The companies said they do not plan any job cuts as a result of the deal. All 250 of Kelkoo's European employees are expected to stay on after the acquisition closes.

Kelkoo was founded in 1999 and later merged with companies in the United Kingdom, Spain, Norway and France. The company now has operations in nine countries. Kelkoo manages its own network of branded sites, as well as technology for other shopping networks and an affiliate distribution network. The company has been profitable since the fourth quarter of 2002.

More of Europe
Yahoo executives said the deal will give the company a much larger base of European end users, merchants and advertisers, as well as new technology to support both shopping functionality and paid search results.

"Fundamentally, this makes us the worldwide online shopping leader, which is a key part of our global business strategy," said John Marcom, senior vice president of Yahoo International. "Kelkoo gives us the ability to expand our presence with shoppers and offers another way for merchants and advertisers to reach exactly the audience they are looking for."

Kelkoo also will provide Yahoo with its own algorithmic search technology, dubbed Shopping Popularity. Kelkoo Chief Executive Pierre Chappaz said the combination of Kelkoo's product search technology and Yahoo's network and Web search technology will create a strong package.

"We think we can bring a lot to Yahoo to that end and gain a lot of search technology from them in return," Chappaz said. "We've had a lot of success with the same sort of services Yahoo provides through its existing shopping network."

Marcom said he expects the Kelkoo acquisition to dovetail nicely with Yahoo's Overture business.

"Kelkoo has specific expertise in helping marketers find shoppers; Overture helps consumers find a product," he said. "This is a golden opportunity to grow both revenue schemes and to work with clients who want to develop both sides."

Olivier Beauvillain, an analyst for Jupiter Research, said the acquisition marks a departure for Yahoo.

"It's in line with Yahoo's other activities--like the buyout of Overture--and it shows that Yahoo is moving away from its original media product line with banner advertising and so on," Beauvillain said. "It's now in direct competition with Google--on the Yahoo portal, search is marketed like it is on Google. Two to three years ago, search and shopping were hidden away inside the portal."

Jo Best of Silicon.com contributed to this report from London.