Update: Press release is here. It is surprisingly brief, reinforcing the rumor that eBay hastily accelerated the announcement due to the rumors.
It looks like the rumors forced eBay’s hand and they are announcing the deal earlier than expected - they are acquiring San Francisco-based StubHub for $285 million plus the cash on StubHub’s books, which is about $25 million. The deal has been signed and should close in 30 days or so. eBay will be releasing a press release shortly.
The original source of the leak may have been one of the StubHub founders who left the company over a year ago.
StubHub is rumored to be doing $10 million or so in profit on $400 million in gross annual sales, implying just over a 30x multiple to EBITDA. That’s quite a valuation.
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Oh wow, didn’t see this one coming!
I guess we’ll see what happens from here - I’ll be watching.
Nice post Mike. well if ebay buys stubhub it will be good for their ticket sales
Another successful web 1.0 acquisition - and a big one at that.
eBay should now buy up Target or Walmart and the world will be an easier place. I will pay with my PayPal debit card or charge with my Visa/Discover/Amex/MC that’s processed by a PayPal gateway and then I can check my eBay feedback to make sure that my daily karma is still up and then call up my buddies with my Skype phone to see if they want to go to a Yankees game with the tickets I just bought from scalper.
eBay is just crazy. Their valuation method is some what absurd. A huge company and website like eBay bought skype for $2.6 billion while they could produce their own product for like $10 mil and distribute it via their website? Now they’re buying this another site while they could just start their own and advertise it via their ebay site. Bah…
The part I still don’t get (as I noted in my post) is why these companies can sell tickets for ungodly amounts of money but Vito at Yankee Stadium can’t sell sh**.
eBay couldn’t get billpoint to work so I guess now the policy is to buyout instead of build
Didnt see that one coming either.
It’s easier to acquire a business that already has users than to build it yourself and try to promote it. eBay might have tons of users, but people still think of it as an auctioneer, NOT a ticket scalping system. Therefore, many users have found another option - StubHub.
There are plenty of niche markets that a company could leverage to outdo eBay (at least in specific areas). See Etsy, for example. eBay already has a crafts section, but Etsy simply focuses on that aspect, making it more appealing. Doing too many things at once can be detrimental.
Good point Robert.
Robert - not sure I agree with “easier” - it might be better than trying to compete with a leader, but if systems can’t be integrated, HR issues, other corporate issues, pulling together two companies can be more work than just creating your own.
I have been a part of several multi-billion dollar mergers and each time the integration has been more involved than the initial estimates thought.
But I agree if “easier” is just spending cash and buying out a market leader then yep, it absolutely is easier. Otherwise it “might” only be easier.
How does an internet-based company run up $390-ish million dollars per year in cost of sales and expenses? Do they inuslate their office walls with cocaine or something?
This actually makes total sense… I predicted this would happen in May last year:
Why eBay will acquire StubHub
eBay can’t afford to lose marketplaces like this, and once a marketplace is taken even a company like eBay will find it nearly impossible to win it back. Therefore they were on a path with a single possible outcome - acquisition.
@ginchy
I actually laughed out loud when I read that comment (no sarcasm, either).
As far as the price, I’m not sure how eBay valuated it… But that number is close to the companies gross revenue.
How about having a team of engineers working on a new project like stubhub instead of spending $310 million? Guys we are talking about millions of dollars not just numbers..just imagine what you can do with $310 MILLION DOLLARS!
Looks like this will fit well with other marketplaces owned by eBay! Besides this probably the most reasonable acquisition I’ve heard of in awhile.
The userbase and brand was key here for eBay. Good purchase.
Guk - you’re missing the point. A billion dollars wouldn’t have won back the ticket marketplace for eBay. It’s not about features nor technology. It’s about owning the marketplace. No seller will go to a marketplace where there are no buyers, and vice versa. The best engineers in the world cannot solve that. And amazingly, eBay understood that…
Imagine in future all tickets will be market priced.
Good move by ebay IMO. 310 million to buy the business. It is not just software. It takes lot more efforts to build a good business than just write software.
How old are you im like your youngest fan im 11. damnit why did i say im 11
The valuation is fairly rich, but at least there are some obvious synergies with eBay’s business (unlike with Skype).
By the way…
ginchy: how’d you know about the cocaine-insulated walls? Are you involved with YayoHub, their new stealth marketplace for yayo?
Interesting that some folks on this (including Mikey) think the valuation is “rich”, while at the same time raving about acquisitions being done of web 2.0 companies with little to no revenues, definitely no profits, and sketchy business plans. Seems like a fair acquisition to me, but certainly not overpaying. Who would you rather have, StubHub for $300M or Slide for $80M? hmm…
@Robert:
On your post #9 you said something that definitely has a ring of truth, “Doing too many things at once can be detrimental.” Its kind of funny that I kept thinking about this comment and had to come back, log on and share what thoughts crossed my mind:
1. Michael’s semi-recent posts on Google’s various new ventures tripping over or simply falling flat on its face. Google is gigantic - especially after the IPO - and already you can see that doing too much at once is hard even for the giant web search dominating Google.
2. Startups that try to do too much just during launch and dip their toes into too many markets… I mean, com’on you only have two feet - you can’t separate and dip into ten waters. Be realistic!
3. Ebay, and other big web companies will buy out smaller ones simply because they don’t have to devote the human resources and organizational brain power that established web firms already have. That saves them capital to invest elsewhere. They also retain some form of anonymity among the masses (people who don’t visit TechCrunch, Digg, or Slashdot all that often like you, me, or the guy posting above and below me) and can still manage to slice off some of their own overhead by injecting a bit more revenue into their books.
4. From an economical standpoint I think big companies really can’t do too much too well simply because most companies peak and begin to decline in their lifetime when they get too big or reach their apex, and begin to be outmaneuvered by smaller, more efficient companies. Much like how the Roman empire fell after obtaining all that territory, but they did fall slowly - and leave remains that we still respect today.
I personally feel that this was a good move by Ebay. They should go around and not be afraid to chomp up the niche market bartering, niche market auctioneering, and niche market whatever sites. Kudos to them.
Overall this makes a lot sense, but this is a bit dangerous. I know team sport owners are cracking down (or getting into it themselves) on the “ticket resale market” (aka scalping).
For example, The New England Patriots are going after these websites by offering their own resale website. However, that’s a complete conflict of interest (selling the tix, then reselling them), but that’s another topic.
As for the valuation, remember - like YouTube - this is a pretty much stock only deal. It doesn’t really cost eBay much, just the shareholders.
- Chris
Not sure how many people know how to build a company from the ground up. It may seem like a lot of money but if you are getting good technology, a captive market, good management and staff, contracts that are in the works, substantial hard assets…the price may not be all that bad.
Also bear in mind this is web 2.0 which would carry a much higher multiple….
I would not knock this price without the benefit or more information.
chris, i believe it’s actually in cash -> here’s the AP article and its says in “cash”
woops -> here’s an article: http://sfgate.com/cgi-bin/arti.....1/EBAY.TMP
#12 and #14, the $400m is ticket sales volume, not StubHub revs. StubHub only earns a small percentage on that (apparently around 2.5%; but that sounds low).
#25, it’s *all* cash (surprisingly; not sure why some stock wouldn’t be involved).
To the people who think eBay or anyone could duplicate StubHub given $400m: no, you can’t. It’s not that easy. Success involves *far* more than money.
@anon
$1b how much is 2.5 %
you dont know much about money
enough said
I agree with Yaron.
Why wouldn’t eBay buy StubHub? Even if eBay invested 100MM it trying to build what StubHub already has it would not guarantee that they would achieve it.
As a former eBayer with history in their Ticket business, I can tell you that the task of building a thriving ticket marketplace as a subset of a broader multi-purpose marketplace was extremely challenging. There were some basic product changes specific to the Tickets vertical that were glaringly necessary if eBay expected to accelerate in the category. Due largely to opportunity cost, those planned modifications have been languishing in the development queue. Or tabled by a rather tidy user agreement. Meanwhile competitors grabbed share with a hyper-focus on the unique needs of a secondhand tickets marketplace.
We can debate the valuation all night, but there was no way eBay was going to dominate the Tickets category without an acquisition.
Chuck Schick: this valuation is rich, the Web 2.0 valuations are insane. It’s a no-brainer that StubHub’s valuation, while rich, can be justified. Some of the valuations being given to Web 2.0 startups, like Facebook and Slide, cannot be. I think it’s a decent acquisition for eBay and a big improvement in strategy after they bought Skype.
@30
$10m profit on $400m total ticket sales = 2.5%.
Enough said.
@ Drama.#33
Web 2.0 valuations are insane. But some aren’t. Some of the few of the few of the few that will really catch on and become successful. Sooner or later, I would say in the near future, theres going to be a startup that will become the Web 2.0 market defining definition.
Just wait for it. It’ll come.
Jonathan Jiang: we’re not debating whether Web 2.0 startups will catch on. A number will (and already have). The problem is that the ones that do seem to have a warped sense of “success” and what their value is. Case in point: Facebook. A $50 million/year (reported revenue) business with a finite market, fickle audience and many vulnerabilities (non-defensible technology, unpredictable ad market accounting for most revenue, etc.) is not worth $8 billion. I measure real success by profits (or successfully getting some idiot to overvalue your business and selling it to them).
First: “StubHub is rumored to be doing $10 million or so in profit on $400 million in gross annual sales, implying just over a 30x multiple to EBITDA.”
That should probably read “…$100 million or so…” (The short is that StubHub’s “profit” per sale is roughly 25% so $400M * 25% = $100M. In reality it is actually less because of overhead including the large payouts to teams to become the “official” reseller of that team.
Second: My company is one of StubHub’s largest suppliers - we’re in the top 5 and I have to say that StubHub is probably the WORST of all of the large secondary market ticket resellers. They have absolutely no idea how our industry works and ZERO understanding of the ticket business.
Third: You can save lots of money from buying from other ticket resellers because StubHub’s “market price” is always above what it is for other brokers in the secondary market. For example, my company adds the 15% sellers fee to our prices (so that we net out the same as our “asking” price) PLUS StubHub adds an additional 10% on top of that. Therefore if you buy my tickets on StubHub you’re paying at least a 25% premium than if you bought them from my company directly.
Crazy J, Of course you can always save by going to the source instead of a broker. How is an ordinary customer going to find a small broker in Arizona that isn’t on the first page of results and doesn’t spend on PPC. 2nd how can you say they are the worst of the big suppliers? I’ve never heard of them being late paying their suppliers. RazorGator leaves invoices open for 2 months and still doesn’t pay them. Every broker I talk to has the same problem. It’s hard to believe that a company that has received almost $50 million in funding the past 2 years can’t pay its bills.
Is not this selling of tickets for profit usually called “scalping ” and is illegal in many places ?
Goes to show you when ebay makes a profit all is fine.
Lets hope that ebay is not as abusive with these paying customers as to their previous financial customer base !!
@Amy Goodmann
I don’t think someone who links to a forex spam site should be lecturing EBay about ethics. Reselling tickets is legal in most places. Usually scalping laws control the resale of tickets on the site of the event. If a willing buyer and seller agree on a price for an item of limited quantity, I don’t see how that’s any different than any other product in the marketplace.
Imagine how the people who actually sell tickets on ebay will feel after ebay steals their market from underneath them
atleast in PA, theres a percentage thats the maximum tickets can be legally resold for, 1.5x face value i think it is? this seems to be regularlly ignored on ebay though, i’ve never sold tickets on there so I dont know if it prompts for the face value or what
I’d never even heard of StubHub before this.
It might be cheaper to build your own site, but in the long run it is cheaper to just buy the competition.
Competition gone = raise prices on eBay even more.
Pay fee on ebay, pay fee on paypal. They get you on both ends.
In my opinion, this helps eBay alot. eBay has acquired a TON of marketplaces now. Before you know it people WILL be seeping through the walls with StubHub. I haven’t even heard of StubHub either before, but I bet alot will find out soon.
It builds up eBay’s reputation if they acquire more marketplaces. Maybe it’s for the publicity and the profit… idk?
Be careful. StubHub sold me invalid tickets; the same could happen to you too. Read more:
http://www.stubhubsoldmeinvali.....gspot.com/