eBay's Acquisition of Where Could Drive PayPal's Mobile Future

Chalk up another $100 million-plus purchase of a Boston-area mobile technology company. First there was m-Qube, then Third Screen Media, Starent Networks, Quattro Wireless, and now, Where. Their acquirers read like a who's who of tech giants: VeriSign, AOL, Cisco, Apple, and now, eBay (Nasdaq: EBAY  ) .

Indeed, Boston-based Where's purchase by eBay, announced yesterday, is at least the fifth big mobile acquisition around town in as many years. Financial terms weren't given -- the deal is expected to close later this quarter -- but a source with knowledge of the deal confirmed the price was about $135 million (as first reported by Mass High Tech). I've also learned that Where was considering other options -- including an acquisition bid from Research In Motion (Nasdaq: RIMM  ) , the BlackBerry maker, as well as further financing from venture investors.

Where (formerly called uLocate) started in 2003 with the idea of providing location-tracking for GPS-enabled cell phones. The company re-launched in 2007 around a new set of location-based services, with backing from Venrock, Grandbanks Capital, and Kodiak Venture Partners. (The firm has raised around $20 million since the relaunch.) In recent years, Where has released a local search and recommendation app for mobile devices, and rolled out a location-based advertising network. More recently, it has gotten into daily deals and merchant services. The company has grown from 30 to 120 employees since early 2010, and in February, it said it had been profitable for the preceding six quarters.

Where's management team didn't reply to a request for comment yesterday (the eBay PR clamps must be tight), but eBay spokeswoman Kathy Chui confirmed that Where will report to the PayPal division of the San Jose, CA-based e-commerce giant. The acquisition is part of eBay's bigger strategic plan to strengthen its position in mobile and local commerce, Chui says. And the deal builds on eBay's recent acquisitions of local shopping start-up Milo, barcode-scanning mobile developer RedLaser, and online retail giant GSI Commerce. Meanwhile, the Where team will stay in Boston and "plans to grow," Chui says, but she declined to give specifics.

A little more background on the deal: According to Chui, Where's CEO Walt Doyle was meeting with the PayPal team over the past few months, working on a possible integration between the two companies' services. The transition to acquisition talks "happened very quickly," Chui says. "There may have been coffee and beer involved." (And, if my sources are accurate, competing interest from RIM and VCs probably upped the urgency of the deal -- and the price.)

For its part, PayPal said in a blog post, "As a first step, we plan to integrate PayPal into the Where mobile app to make it even easier for PayPal customers to take advantage of the local deals." That's a boring way of saying PayPal wants to use Where to turn your smartphone into a mobile wallet -- a long-standing goal of digital payment technology (and an increasingly urgent one, with tech giants like Google and Apple jumping in). As I see it, Where understands the pain points of local merchants and consumers and can give PayPal a stronger foothold in mobile; PayPal, meanwhile, understands e-commerce and, of course, payments. So although the fit isn't obvious at first, the two companies are complementary, and each wants to move toward the other's strengths.

The chief executives of other mobile startups in the area agree. "Where is a clear example of PayPal's acquisition strategy to dominate the convergence of online/offline payments," says Andrew Paradise, CEO of Boston mobile commerce firm AisleBuyer, in an email. "We're excited to see Boston-based mobile location startups closing deals with major Silicon Valley companies."

Where will certainly face challenges in integrating with the PayPal machine. But "if they are looking above and beyond local search to local value," the deal has promise, says David Rochon, CEO of Waltham, MA-based SavingStar, a mobile grocery-couponing firm. PayPal's large reach should also help Where's service, he says. More broadly, "what will ultimately end up happening is some consolidation" in mobile commerce, Rochon adds. "Here is an example of a mobile play being gobbled up by someone much bigger."

It's always interesting to look back on an acquired start-up's life and see where the tide turned. Xconomy first profiled Where back in 2007, when the company (then called uLocate) was promoting its platform for software developers to create location-based apps that help consumers find local businesses and attractions. My colleague Wade was in Where's office in November 2009 when news of Google's $750 million acquisition of AdMob hit; Where's CEO, Walt Doyle, said at the time, "It's a very good thing that Google, or any company, is willing to pay close to a billion dollars for a company involved in mobile."

Where didn't fetch anywhere near that amount, of course, but $135 million is nothing to sneeze at. Still, I couldn't help but lament the fact that another promising Boston-area mobile technology platform has fallen under the ownership of the West Coast.

Other leaders around Boston are trying not to think that way -- and they might have a good point. "We need to worry less about acquisitions, and more about bringing the next one along," says Jim Schoonmaker, CEO of Newton, MA-based EveryScape, a local-search and imaging firm. "What matters is ideas and [companies] coming to life. If we stay focused on that, the rest of the stuff works out for itself."

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Gregory T. Huang is Xconomy's National IT Editor and the Editor of Xconomy Boston. You can email him at gthuang@xconomy.com, call him at 617-252-7323, or follow him at twitter.com/gthuang.

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