Aussie eBay competitor OZtion acquired by Jumbuck Entertainment

Australian online auction company OZtion has been acquired by listed digital media company Jumbuck Entertainment for $2 million in cash and shares.

OZtion has experienced rapid growth in recent weeks as Australian consumers turn their backs on eBay, after the auction giant announced it would force customers to use its wholly-owned payment company PayPal.

OZtion’s sales increased 50% in May compared with March, and 28,000 new members have joined in the last six weeks, taking total member numbers to 275,000. Over the same period, the value of merchandise traded increased 65% and the number of items up for auction hit a record 670,000.

OZtion, which is currently operating at breakeven, expects to post revenue of $1.2 million for the 2008-09, double this year’s figure.

Jumbuck’s chief executive Adrian Risch and chief financial officer Mark Doughty were alerted to the existence of OZtion in January, when they learnt that the wives of several Jumbuck staff members were using the site. “We started looking at the site and were impressed with the community they had built with virtually no marketing,” Risch says.

Shortly after, Jumbuck started negotiating with OZtion. “We were excited about OZtion before [the eBay decision]. Their numbers have been growing for some time, but this is a real opportunity,” Doughty says.

Risch and Doughty’s focus is to boost OZtion’s marketing activities by promoting the site through its own network of mobile phone and online users and in a mainstream media campaign. “The intention is to put some real marketing power behind the business. We can afford to do that, whereas OZtion had a more limited budget,” Doughty says.

OZtion founders and shareholders Philip Druce and Kelvin Yip have committed to stay with the company for two years, although Doughty is hopeful they will stay for much longer.

Druce says that while he and Yip were not actively looking to sell the business, they were aware they could only take the business so far by themselves. “We knew that OZtion would need a strategic partner to grow at a faster rate and create massive awareness. We’re on the same page as Jumbuck, and with all their experience and track record… it made sense.”

Druce is looking forward to working in an enlarged group. “We’re going to be able to leverage off their resources in terms of technical resource and people as well. We are going to be able to leverage their development team, their administration team and of course their management team.” Users of the site will see little change, although Druce expects new features will be able to be implemented much quicker.

Risch and Druce say they have already seen strong support for the deal, particularly through OZtion’s forums. “And it’s been amazing the amount of emails I’ve got from people who are disgruntled eBay users,” Risch says. “There’s a real groundswell of support out there.”

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