The Magic of eBay, the Incubator

The Magic of eBay, the Incubator

eBay is selling StubHub, a ticket exchange and resale company which it acquired many years ago. Looking at all the deals eBay had executed over the last few years, including Skype and PayPal, the company has proven to be a far better venture capital firm than an e-commerce operator. It began before Amazon but lost the category-king title to the Seattle-based ecommerce juggernaut. There is something amazing in running an action site (price haggling done via clicks over spoken words as done in African open markets) that propels you to see the digital world from a different angle: live human optimization of pricing for the best possible value for money. Simply, eBay is a better tech incubator than what it is known for today.

The $29 bln firm is a shadow of Amazon in e-commerce, but selling StubHub for $4 bln shows prowess at incubating a business acquired for less than a tenth of that. Off-loading its classified operations could be similarly successful. And eBay’s biggest gains have come from PayPal.

Simply, eBay is a better tech incubator than what it is known for today. The problem here is that eBay has never used these companies for anything more: eBay’s valuation is about $29 billion (was $25 billion before the news of selling StubHub). Yes, it buys them, incubates them and later sell them because it cannot just make them something great. Today, Paypal is worth $127 billion, many multiples to eBay’s market cap. But if you can be buying startups for nothing and turning them into mega-hits, you would be fine over long time.

Meanwhile, eBay has owned StubHub since buying the company in 2007 for $310 million, as a way to more directly invest in the secondary market for tickets, many of which were being resold on eBay itself. The company also in 2016 acquired Spain’s Ticketbis with the goal of further expanding StubHub’s footprint outside the U.S.

As of Q3, StubHub drove $306 million in revenue and gross merchandise volume of $1.2 billion. At the time of its earnings announcement, eBay said it anticipated an update on the StubHub business before the next quarterly earnings.


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