Jun. 6, 2007

eBay has reportedly acquired community-based Web search tool StumbleUpon for US $75 million. The online auction company is once again reaching outside its core competency for a strategic acquisition; one that straddles search and social networking at the same time.

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

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

Overall, eBay’s stock was down more than 2 percent on May 31, the day the news was made public.

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

However, eBay said StumbleUpon will still maintain its current headquarters and management team, adding that the transaction will not impact its financial outlook in any way.

StumbleUpon has seen rapid growth, more than doubling its user base in 2006 alone. 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.

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

Founded in 2001, StumbleUpon reportedly was financed with about $1.5 million in early-stage funding. Rumors that eBay would acquire the company began circulating several weeks ago, with various reports at the time pegging the price tag 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. Also, it could use the site to better 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 acquisitions, such as the purchase of peer-to-peer calling firm Skype .

Because StumbleUpon users employ it 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 eTailers that use information about a shopper’s past buying experience 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 Internet commerce.

In 2006, eBay announced a partnership with Yahoo that included long-range integration of that company’s search technology into its own auction platform.

Last year, 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.

Google’s customized recommendations seek to leverage the same knowledge of a user’s likes and dislikes to refine search results, Google says.

Sterling Market Intelligence even says that, in fact, its 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 added “in StumbleUpon, the community surfaces sites and content that you might never have discovered on your own, but are very interesting and potentially worthwhile. 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,” he was quick to point out.