Barney Pell's Weblog

Analysts in several articles emphasize the acquisition as a way to attract more merchants and a community platform. For example, Motley Fool writes:

The deal certainly expands the business of eBay. It gets new customers, a sophisticated community platform, and a large merchant base. What's more, eBay now has two more strong brands -- Shopping.com and Epinions.com.

Similarly, from an article in Forbes:

POTENTIAL MATCH. But the purchase has the potential to plug a longstanding hole for eBay. Its own marketplace appeals mostly to small merchants, who sell a wide variety of second-hand and overstock goods at auction and for fixed prices, and to customers seeking unique items and deep discounts. eBay has been trying for years to appeal to merchants that want to sell new and in-season merchandise as well -- with middling success.

The result of this acquisition could be a new venue for merchants that want to sell products to eBay's more than 60 million active buyers. "I can see things that [the purchase] brings to eBay -- mainly targeted buyers," says Derek L. Brown, an analyst with Pacific Growth Equities, which has an underperform rating on eBay. "If eBay can match that targeted demand to its listings, that could drive sales."

This all makes sense. However, if it were just a matter of acquiring merchants, then Ebay could have bought one of the private companies (e.g. nexttag, bizrate/shopzilla) who also aggregate many merchants, and could have done this at at a much lower price. I think additional value comes from Shopping.com’s faceted user interface and deep product normalization capability. These can greatly improve search on eBay's site and multiply eBay's revenue through improved browsing and discovery.

This transaction also provides further validation for the potential valuations for vertical search Ecommerce plays. It will be fun to discuss this at the upcoming Vertical Leap Vertical Search Workshop on June 28th.