Mark Evans

eBay-StumbleUpon: Where’s the Strategic Fit?

Since eBay decided to take a $1.4-billion write-down on its acquisition of Skype, there’s been plenty of people more to happy to talk about how the deal made no strategic sense. What was eBay - a leading e-commerce player - thinking when it wildly overpaid to get into the VoIP business? For all the talk a couple years ago about how Skype’s technology could be used to give eBay a foothold in the emerging click-to-call market, the marriage was a strategic bust right from the start.

A fluffy feature story in today’s New York Times about StumbleUpon got me thinking about why eBay spent $75-million to acquire StumbleUpon - a service that lets people discover (or stumble upon) new Web sites. StumbleUpon has lots of registered users (3.5-million) but where’s the strategic fit with eBay? The NYT suggests that down the road, eBay “plans to let users stumble through eBay’s vast database of items up for auction”.

Come on! You’d expect a NYT reporter would be smarter than to swallow this kind of PR mumbo jumbo. Most consumers don’t stumble around eBay looking for deals. Instead, consumers pretty much know what they want on eBay. And this behavior isn’t going to change just because eBay has StumbleUpon in the fold.

Interesting note: When the eBay-StumbleUpon deal was announced, GigaOm suggested there was some kind of fit between StumbleUpon and Skype based on the idea Skype could use StumbleUpon’s toolbar to “do an end around Google’s dominance of the search business”. Let me know if you can figure that one out!

At the end of the day, eBay’s decision to buy StumbleUpon may be grounded in the same strategic reasoning that it bought Skype: to keep it out of the hands of Google. While eBay-StumbleUpon makes little strategic sense, Google-StumbleUpon makes a lot of sense. If Google had acquired StumbleUpon, there would have been three options underneath the search box: Google Search, I’m Feeling Lucky and StumbleUpon.

Don’t be surprised if StumbleUpon follows the same path as Skype within the eBay empire. Over the years, eBay has made some savvy acquisitions (PayPal, Shopping.com, 25% of Craigslist and StubHub) but it’s also stumbled strategically by making some strange non-core moves such as StumbleUpon, Skype and Meetup.com.

Update: MSNBC.com has acquired Newsvine - making it the third high-profile acquisition this year of a company that had raised less than $2-million in venture capital (Mozy and StumbleUpon being the others). Paris Lemon has some thoughts on the deal, Newsvine and what Yahoo might do.