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Digital River’s Destructive Acquisition Strategy

Most of us have grown weary of Digital River’s acquisitions and are no longer shocked when the announcements are made. How many of us have considered the implications involved in the volume of “takeovers”? I, like almost everyone in the industry, have been fairly complacent about the acquisitions, but now I’m seeing limited choices for developers and the fact is the “little guy” can no longer compete.

I looked the other way when RegNet, FileBasket and SiliconRealms were bought by Digital River this past summer. I didn’t really mind when DR acquired RegSoft, or Simtel though I was a bit disappointed about RegNow. PsL and Digibuy were first on the list, and long forgotten to most. Most developers are not even aware that Digital River purchased CCNow, Beyond.com, Freemerchant.com and NetSales. The count in early 2003, was eleven acquisitions in 3 years.

Of all the acquisitions the one that disturbs me the most is the recent acquisition of Emetrix, Qwerks and FileKicker. They were *my* registration service and the things that were great about them was that they were not corporate. They were great at what they did and I was important to them, or atleast I felt as if I was.

Obviously there is industry growth and Digital River has come a long way from their humble beginnings in 1996. The number of registration services specific to software registrations have dwindled. There are only three reputable registration services that come to mind that are not (yet) part of Digital River’s network, eSellerate, ShareIt, and SWREG. I don’t envy these three companies because they will likely find it very difficult to compete against DR’s falling commission rates and their established network. Lets face it DR can afford to provide services beyond the general scope. They can offer further distribution opportunities because of their vast network.

As much as I feel the remaining registration services are facing an uphill struggle, I think that Digital River is in a much more difficult position. In order retain the customer bases of the acquired properties DR needs to strike a balance between leveraging new offerings while still allowing each of the properties to maintain their small business look and feel. They must combine the networks to leverage the power of the acquisitions, this must be done without disrupting existing services, control panels and the responsive personalized service that is currently provided. RegSoft customers should be able to take advantage of RegNow’s affiliate network or Emetrix’s control panel. Integrating the technology, equipment and consolidating the staff of the properties to leverage the power of the acquisitions is not going to be an easy task.

Where does this leave developers?
The number of registration services has been greatly reduced but the services available now, exceed that of those offered in the past. eSellerate’s affiliate program has developed some great relationships acknowledging the need to move away from a traditional “cookie” tracking system. ShareIt has developed an amazing international presence and understanding of European markets. SWREG has just undergone a verified by Visa process. The fact is, as much as I hate the virtual monopoly that has been created, DR’s acquisitions have in fact improved the services available to developers (while admittedly reducing their choices).

Who is to Blame?
There is always someone to blame, when something like this occurs, right? Is it Emetrix’s fault for selling out? Do I blame Ben Reser, one of the former owner’s of RegNow, for becoming a multimillionaire at 21? Good business sense is to blame! I can assure you that if Digital River was knocking on my door offering me boat loads of cash, I would sell out too. Who wouldn’t? This isn’t personal, it is business and the reason most of us do what we do, is to make money. All of these acquisitions are industry success stories.

Challenge to these companies for 2004 -
I would like to challenge the remaining companies and Digital River in 2004 to make their mark. ShareIt, eSellerate and SWREG improve your services to a level that will compete with Digital River’s network. Offer something that Digital River doesn’t, treat me like a somebody not a number.

Digital River attempt to reach your potential, strive to combine technology and leverage the power of your network while not losing sight of the small business feel that developers desire.

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Sharon Housley
About Sharon Housley
Sharon Housley manages marketing for NotePage, Inc. http://www.notepage.net a company specializing in alphanumeric paging, SMS wireless messaging software solutions.

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