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Marketplace launches AI-powered matchmaker for ecommerce M&A
Flippa's recommendation tool is designed to make it easier for buyers to find the right sellers.
AI is being harnessed to power a new tool designed to support the M&A process for ecommerce businesses.
The news: Flippa, a marketplace where people can acquire online businesses and digital assets, launched an AI-powered recommendation feature that is designed to match buyers and sellers. Leveraging data gathered about user activity on the marketplace, the tool is designed to speed up the M&A process.
How it works: The recommender is designed to help business owners, advisors and brokers find prospective buyers within Flippa’s marketplace.
The algorithmically-based tool matches the buyers with suitable listings based on their actions and behavior within the Flippa marketplace. This process discovers what is known as latent intent in potential acquirers. Flippa Head of Product Tony Xu said the feature has gone through “a significant amount of training to help the model understand the intricate connections and interdependencies within our platform.”
On the marketplace, buyers can click “Invite to Deal,” and will be notified when a potential match is identified by the AI recommender. To date, Flippa said the AI-powered invite emails sent to potential buyers from the tool reached an 85% open rate, and a clickthrough rate (CTR) of 40%.
Key quote from Flippa CEO Blake Hutchinson: “Expectations are rising in today’s fast-paced online business M&A market, and buyers and sellers want to find the right deal partners fast. When business owners decide to exit, they want to quickly find qualified buyers who are likely to buy their business. Prospective buyers, especially institutional investors and family offices, want access to high-potential deal flow on tap. Flippa’s new AI-powered recommender tool uses machine learning to get even more specific about surfacing potential M&A targets, with high accuracy and at scale.”
AI for the aggregator? The tool arrives amid an active period for M&A in ecommerce businesses. Seeing the power of scale and shared resources at companies like Procter & Gamble and Colgate Palmolive, a new generation of consumer goods companies is aiming to create a portfolio of brands that have operations backed by data and technology, while being optimized to thrive on ecommerce marketplaces, particularly Amazon. Others are acquiring direct-to-consumer businesses. After a fast rise of this aggregator model in 2021 amid the pandemic ecommerce boom and frothy venture capital market, funding declined by 80% in 2022 when the market turned, according to Marketplace Pulse. However, the firm also found that the number of acquisitions declined by only 10-20%, even though valuations came down.
It means that aggregators still see opportunity, but they will need efficiency to keep growing. After all, more ecommerce brands are emerging, and many will go through the cycle and seek an exit.
Data-powered M&A: Flippa doesn't only cater to ecommerce brands looking to sell. With an aim to democratize M&A, the marketplace is also a destination to find websites, blogs, apps and even social media accounts. It is also seeing an influx of activity, as 300,000 new buyers entered the ecosystem in 2022. In the digital marketplace, M&A is built on speed and scale. That means dealflow volume is important, but the ability to find the right companies in a host of options also matters. M&A has long run on relationships, but it is increasingly also being powered by data. Flippa is showing how AI can be employed for this landscape.
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This Week in Commerce: Nike earnings, Fed rate decision
Check out the agenda for March 20-24.
Welcome to a new week. Earnings offer a bellwether for the consumer economy this week, as key brands like Nike and General Mills will report results. Elsewhere, all eyes will be on the Federal Reserve as it announces its latest decision on interest rates.
Fed interest rate decision: The Federal Reserve Open Markets Committee announces its decision on whether and by how much to hike benchmark interest rates following its two-day meeting. The Fed has been hiking interest rates rapidly in an effort to bring down 40-year-high inflation, but slowed the pace at the February meeting with a 0.25% increase. (March 22, 2 p.m.)
Durable goods orders: The U.S. Commerce Department releases data on orders from manufacturers for goods that are designed to last more than three years. This is considered an indicator of business activity. In January, orders dropped at the steepest rate since April 2020. (March 24, 8:30 a.m.)
Monday, March 20: Boxed, Foot Locker
Tuesday, March 21: Nike, GameStop
Wednesday, March 22: Petco, Chewy
Thursday, March 23: General Mills, Express