Yahoo Australia and New Zealand has confirmed the takeover of Fairfax-owned auction portal, SOLD.com.au, ending widespread industry speculation.
The AU$30 million dollar deal - in which 80 percent will be paid in cash - includes Yahoo's acquistion of SOLD, on top of a content deal with Fairfax's f2 network sites.
"This is an excellent return on our investment of SOLD.com.au which total investment was in the order of AU$12 million...The economic value of the deal to Fairfax is in the order of AU$30 million, of which will be paid in cash," John Fairfax Holdings CEO Fred Hilmer said in a statement.
Yahoo Australia hopes to leverage its global network with SOLD's local auction expertise.
"It is an awesome business however, we believed it could probably use a global partner," Yahoo! Australia & NZ CEO Tony Faure said.
In regard to the cost of maintaining an online auction site, one industry source said, "AU$30 million...that's going to take them 30 years to get their money back."
Former General Manager of rival Murdoch-owned auction site Gofish, Menno Veeneklaas believes the cost of acquiring the appropriate scale of customers is so high, "you need to invest huge resources to be successful.".
"SOLD is going as well as it could be," he said. However, Veeneklaas believes to build a successful online business that is profitable, a lot of money has to be invested to achieve a global brand.
"Yahoo translated nicely into the Australian market, it has already made that investment [in building its global name]."
Veeneklaas told ZDNet, the sale of SOLD by Fairfax is evidence a business needs economy-of-scale for a chance of being successful in an online venture.
"It makes sense, as it would have cost Fairfax a fortune to build the brand to stand on its own two legs."
"Just because you own a newspaper doesn't mean you don't have to invest a lot of money in building a successful online brand."
Industry speculation in recent days around the online auction marketplace was rife, with sources claiming f2 was about to sell SOLD as it could no longer compete with global auctioneer eBay.
AC Neilson/Consult Principal Analyst Ramin Marzbani said "If SOLD was doing extremely well, f2 would've continued to compete with eBay and kept the business."
Marzbani added the Yahoo auction site did not have a lot of 'traction' here in Australia.
Yahoo's CEO Faure said the company is currently working on an integration plan to transfer SOLD's business, including the auction sites employees to Yahoo.
"I think we are well positioned to add dramatic impetus."
No job losses have been foreshadowed at SOLD.
