Web 3.0 & eBay (Part 4)

Acquisition Strategy

eBay acquired online ticket marketplace, StubHub for $307 million in May 2007. It also acquired social bookmarking discovery service, StumbleUpon, for $75 million. These are mostly acquisitions by eBay to strengthen its verticals and community features. Going forward we could see eBay making many more acquisitions to strengthen its key verticals, but also to strengthen the user experience within the verticals that it is already strong in, to enhance the stickiness and customer loyalty. Another motivation for eBay would be in reducing the amount of customer acquisition investment that it pays to the Comparison Shopping and Vertical Search players today, since those sites have captured a lot of market share in the entry points into shopping.

In other words, instead of investing in properties like Skype, it should acquire more businesses like Shopping.com.

Today vertical search engines like Retrevo, Wize, TheFind, etc. are becoming increasingly popular among the online shopping community. eBay can use these vertical search engines to drive traffic to vastly enhance its user experience with some serious innovations like thefind’s image search and matching engine, or Wize’s scoring engine.

Wize and Retrevo focus primarily on Consumer Electronics. TheFind focuses on Lifestyle shopping. There are many others. The user experience these sites offer, have unique value propositions, and could also be great new entry points into eBay’s shopping engine. It will help eBay to move Shopping.com up the value chain and also circulate a large amount of the ad dollars within the Company.

Retrevo is a web service that helps consumers with shopping and support of tech products. Retrevo has received $3.2 million in second round funding from Norwest Venture Partners. The Company had earlier raised less than $1 million from Alloy Ventures in last fall.

Wize, a San Mateo, CA-based product reviews startup, has received $4 million in first round funding, from the Mayfield Fund and Bessemer Venture Partners.

Mountain View based shopping search site TheFind raised $15 million in a third round of venture capital, in July 2007, bringing their total capital raised to $26 million. Bain Capital Ventures led the round. The Company has previously raised $11 million from Redpoint Ventures, Lightspeed Venture Partners and Cambrian Ventures ($7 million Series A, $4 million Series B). Redpoint and Lightspeed also participated in its third round.

My main concern is that if Google buys up a lot of these Vertical Search engines, then eBay’s dependence on Google for Customer Acquisition goes up further. As it is, eBay is Google’s largest advertising customer, and the relationship between the two companies is complex, underlined by mistrust and hostility, based on Google’s CheckOut attempts to compete with PayPal.

eBay could also consider acquiring a few synergistic media properties that can absorb some of its advertising budget, and check the leakage to Google or Yahoo. The one’s that come to my mind are Entrepreneur.com, a site that has a very strong readership among entrepreneurs and wannabes, a very likely audience for eBay to access their next series of Power Sellers through. Auction Bytes, the independent trade publication for online merchants could be another good acquisition target for eBay, offering a strong forum for merchants to be showcased and issues to be reported and discussed.

Other acquisitions to consider are Trulia (Real Estate Search), ZipRealty (Real Estate Portal), CarGurus (online auto community) and Autobytel Inc., which operate MyRide.com and Autobytel.com (online auto sites). This would strengthen their market share and user experience in two large categories they are already present in: Auto and Real Estate.

(To Be Continued)

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This segment is part 4 in the series : Web 3.0 & eBay
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