Archive for the ‘M&A’ Category

Ebay at the crossroads (part 5)

Thursday, November 8th, 2007

Having looked at the various options for Ebay to grow organically, let’s consider the final growth path: growth through acquisition.

This has been a controversial area for Ebay, as discussed in the introductory post to this series. It missed out on Paypal, then overpaid for Skype. M&A is a challenging area for Ebay due to the lack of any serious contenders in its marketplace. It could try a roll-up model buying all of the minority players, but this would not deliver anything like the growth needed to maintain its early trajectory.

This leaves Ebay in a position where M&A activity can only be about gaining capabilities or changing markets. Assuming, again, that it doesn’t want to change markets, what capabilities could it buy in?

One possibility is to buy in a site with the Amazon-style algorithms mentioned above. A more intriguing one would be to buy a web aggregator such as Netvibes or Pageflakes (it wouldn’t need to buy a widget-maker because this is relatively simple programming). It could do two things with this: firstly, it would be a very quick way to build the drag-and-drop functionality into its site, allowing users to tailor their own welcome page to the site, and therefore their own experience. This would be far more likely to make people creative in the things that they looked for in the site, and would therefore encourage people to buy more (as well as to return more). The other use would be to build web users more generally, be more creative on the widgets that it could bring out, and most importantly study how people are using the web (and what sites they are interacting with). That would be a fantastically useful facility for Ebay to build knowledge on interests and online behaviour.

If Ebay is to venture into M&A in a significant way again, it will need to ensure that there is a clear rationale for its purchase and an easily justifiable price for whatever it buys. Adding capabilities such as these would enable it to tick both of these boxes.

Ebay at the crossroads (conclusion)

This has been a long analysis of Ebay’s current position and options as I see them. I hope that it has been interesting and will present some valuable insights. Whatever happens with Ebay now will be interesting to observe. It is at a crossroads in its life – it was a pioneer and a great company. It has not pioneered for a long time. Let’s hope that the decisions that it makes now will let it become a great company again.