Business

eBay Dips Toe Into Social Networking Waters

eBay has bought community-based Web search tool StumbleUpon for US$75 million. The auction giant is once again reaching outside its core business for a strategic acquisition — one that straddles search and social networking.

Along with StumbleUpon’s technology, eBay said the purchase provides an established user base of 2.3 million people who turn to the site to discover new Web-based content based on personal preferences and recommendations from others.

As eBay was built on the notion of fostering commerce-based communities, the addition of the social search site is a “great fit” for eBay, said Michael Buhr, a senior director at eBay.

eBay shares were down more than 2 percent on Thursday afternoon to $32.45.

Similarities in Approaches

While San Francisco-based StumbleUpon provides a “unique experience” for users, the auction company found many “similarities in our approaches to the concept of community,” Buhr added.

StumbleUpon will maintain its current headquarters and management team, eBay said, adding that the deal will not impact its financial outlook.

StumbleUpon has seen rapid growth, more than doubling its user base over the past year. Those users turn to StumbleUpon, which works through a browser plug-in, to discover new Web content — from news stories to YouTube videos — with users evaluating content as they come across it and then evaluating each user’s own choices to help direct content he or she might most want to see.

Getting Social

StumbleUpon says its members add 5 million Web-related recommendations each day, creating a vast and rapidly expanding database of shared knowledge about what’s worth seeing on the increasingly crowded Internet.

StumbleUpon, which was formed in 2001, reportedly was financed with about $1.5 million in early-stage funding. Rumors that eBay would buy the firm began circulated several weeks ago, with various reports at the time pegging the acquisition price at between $40 million and $75 million.

eBay may be able to continue to operate StumbleUpon as a standalone site that helps users discover the Web, a use that could generate significant advertising revenue if past growth rates continue. It could also use the site to enhance the way users search its own platform for products being sold on eBay.

Though true social networking is a new business line for eBay, the StumbleUpon purchase may fit more logically than earlier eBay buys, such as the purchase of peer-to-peer calling firm Skype.

Expanding Content

Because users employ StumbleUpon to help them discover Web content they might not otherwise come across, eBay could use it to expose its vast community of buyers to items for sale on the site, borrowing a page from Amazon.com and other e-tailers that use information about a shopper’s past buys to recommend other items they may be interested in purchasing.

eBay already has such features, but could use StumbleUpon to expand the content users find on eBay beyond commerce.

Last year, eBay announced a partnership with Yahoo that included long-range integration of that company’s search technology into the auction platform.

Google had already launched its answer to StumbleUpon, adding a dice logo to its search toolbar that takes users to a randomly selected Web site, search engine expert John Battelle told the E-Commerce Times. Its personalized recommendations seek to leverage the same knowledge of a user’s likes and dislikes to refine search results, he added.

Google’s personalized search recommendations borrow from the same idea as StumbleUpon — that users might be interested in more than what they are actively and narrowly searching for, Sterling Market Intelligence analyst Greg Sterling told the E-Commerce Times.

“In StumbleUpon the community surfaces sites and content that you might never have discovered on your own but are very interesting and potentially worthwhile,” Sterling said. “We need search as a tool to get us from here to there online or for quick information lookups. But we also need alternative mechanisms to help us discover content and information we otherwise might not have known.”

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