Shopping.com Purchase Could Boost EBay's Stagnant Growth

EBay Inc. plans to strengthen its position as the de facto online marketplace by purchasing comparison-shopping site Shopping.com for $620 million in cash.

The move is expected to give eBay sellers a wider audience to which it can market goods and enable visitors to Shopping.com's line of sites to see items up for auction on eBay when searching for goods using Shopping.com's comparison engine. It also is likely to result in comparison-shopping capabilities appearing on eBay in the future.

The addition of Shopping.com's sites could provide eBay with a much-needed shot of growth. The total number of unique visitors to eBay during April was up only 6% from a year earlier, whereas Shopping.com's unique visitor traffic grew 15% during the same period, according to market-research firm comScore Networks.

EBay has been limited by a search engine that crawls through only what's up for sale on the site, comScore VP James Lamberti says. With the acquisition, eBay visitors will have more products to choose from, creating a bigger marketplace. "Having this search portal as an asset will extend [eBay's] ability to engage consumers, and offer a way to monetize traffic where it might not have products or service currently," Lamberti says. "I think eBay's really smart to take advantage of the network effect of the eBay experience."

With a business model that emphasizes advertising, Shopping.com brings a new kind of revenue stream to eBay. To get that new revenue, eBay paid $21 a share for Shopping.com, a 20% premium over the $17.44 it closed at Wednesday for a market capitalization of $517 million. The company expects the acquisition to dilute its 2005 earnings due to incremental charges for stock-based compensation and the amortization of acquired assets.

The Shopping.com acquisition comes just two weeks after eBay acquired two European classified sites, Gumtree.com and Loquo.com, in its latest move to expand its global line of Web sites.