Now Where Goes Alibris?
Oak Hill Capital Partners recently purchased online bookseller Alibris.
By Michael Stillman
On May 8, 2006, online bookseller Alibris announced the company had been sold to venture capital firm Oak Hill Capital Partners. Naturally, such a major acquisition set off a chain of questions, concerns, and rumors in the bookselling world. We went to Alibris' Director of Direct Marketing and Sales to answer some of these questions surrounding the purchase. Before looking at the answers, here is a quick review of events.
On May 8, Alibris announced its sale to Oak Hill. Oak Hill is a private investment firm with a stated $4.6 billion in capital. We will assume this is plenty to take care of Alibris' financial needs with money left over for other ventures. Among the companies Oak Hill is already invested in are Washington Mutual, The Container Store, Oreck, TravelCenters of America, and Proquest. The latter raised a few eyebrows because they are involved in the on-demand printing of out-of-print material. The lead investor in Oak Hill is Robert Bass, son of a legendary Texas oilman. However, Bass' fortune was not all a gift, but has grown through the years based on his own shrewd investing. Robert Bass currently shows up as number 200 on Forbes Magazine's list of the wealthiest people in the world, with an estimated worth of $3.4 billion. Certainly Mr. Bass has made a lot of wise investments, more good than bad, a most hopeful and promising sign for Alibris.
One of the most commonly heard rumors was that Oak Hill was some sort of a creditor, effectively foreclosing on Alibris. Alibris has long had outside capital invested, and when its plans to go public two years ago fell through, it turned to the markets for additional capital. However, Alibris' Director of Direct Marketing and Sales, A.J. Kohn, explained that Oak Hill was not one of those earlier investors. This was a new investment for them. "They had no prior financial involvement with Alibris as investors or creditors," Kohn explained. "What they do have is a strong view about the growth potential of our company." He went on to say, "Oak Hill invested in Alibris because we are profitable and have opportunities to use additional capital to help us grow overseas, to extend into movies and music, and to provide additional services for our sellers and customers."
While Alibris does plan to expand the movie and music part of its business, this does not signal a wholesale shift in its selling strategy. The intention is to stick with books and these other related businesses, rather than follow Amazon in selling all kinds of merchandise. "Our focus remains on connecting sellers with buyers, and on media products," Kohn says. "We have no plans to expand into lawn mowers!"
Kohn believes Alibris' focus on connecting buyers and sellers of "media products" will accrue to the benefit of Alibris' sellers. He predicts, "The upshot of this will be more sales for our sellers as we attract additional customers. We expect to attract customers by doing more of the kind of marketing we do today: search engine marketing, affiliate programs, and targeted email. We will also add business partners and library customers, which increase sales for our sellers."
Now Where Goes Alibris?
Does Alibris or Oak Hill have any additional corporate purchases in mind, we enquired? Kohn had no certain answer or specifics, but did leave the door clearly open for expansion. However, he did seek to quell any rumors of Alibris becoming combined with ProQuest and its print-on-demand business. "We may also purchase or combine with other businesses," Mr. Kohn said, "although we have no plans to combine with any Oak Hill owned companies. We would only do so if they add to the long term prospects of Alibris." Kohn pointed out that Oak Hill does not own ProQuest. ProQuest is a public company in which Oak Hill holds an interest.
Asked specifically about booksellers' concerns about print-on-demand listings filling up customer searches, Kohn had this to say: "We recognize but are not overly concerned about print-on-demand listings. Our concern revolves around professionalism. Professional sellers are welcome to list any book at all on Alibris and our customers can decide which of them are worth buying. It is important to us, however, that when our customers buy a book, they are buying from a seller who is as reliable and trustworthy as we represent them to be."
For all the changes underneath, Mr. Kohn emphasized the visible changes will be small. For sellers and buyers alike, it is essentially business as usual. "Although this is an important event in the life of Alibris," Kohn told us, "it is not one that is likely to be visible to most sellers or customers. We will continue to grow sales and services. We will continue to bring in new retail customers, business partners, and libraries. With Oak Hill behind us, we will become more successful by making our sellers successful."
We would certainly agree that despite the lack of visible changes, this is an important event in the life of Alibris. Going back to its early days as a private booksellers' database known as Interloc, Alibris has been a leader in the field of online bookselling. However, it became a crowded field, and while it is second only in sales to Abebooks in the area of used books, the reality is that the giants Amazon and eBay are competitors too. Particularly after their failed public offering, we have heard the predictions of Alibris' ultimate demise under the pressure of larger and better-financed competitors. Now, the whole equation has changed. Alibris has joined the ranks of the well-financed, larger competitors. What, specifically, Oak Hill has in mind for Alibris is unclear. Most of the comments we have seen could be described as "general," promises of growth and improvement without detailed specifics being laid out. However, we find it difficult to believe an investor such as Oak Hill would purchase a company like Alibris without something specific in mind. Only time will tell exactly what this might be, but we suspect this a new ballgame. Backs to the wall, Alibris just hit a home run in the bottom of the ninth. Now we can all sit back and watch what happens in extra innings.