Buy It Now: Why Facebook Should Acquire eBay

Facebook is in the business of making connections. They connect you with your old classmates, your favorite celebrities, and the companies you use the most. They can even connect you with a person who is willing to buy your unwanted items. In fact, on June 22, 2017 Facebook changed their mission statement to “Give people the power to build community and bring the world closer together.”

But Facebook isn’t the only company that helps people make connections. In 2016 alone, online companies connect sellers and buyers to the tune of $1.915 trillion. Three companies immediately come to mind when thinking about eCommerce – Amazon, Alibaba, and Walmart. These are the giants of online retail.

Facebook has a unique opportunity in expansion into eCommerce; they already have nearly two billion daily active users and the own the next two largest social networks (WhatsApp and Messenger). They have already attempted an entrance into the field through their popular Marketplace platform. However, expansion could be achieved much more rapidly by acquiring an established leader in the industry – eBay Inc. By gaining access to eBay’s Classifieds system and various other platforms, Facebook can soon enter the same conversation as the giants of the online retail world.

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Marketplace and eBay Classifieds

Facebook launched Facebook Marketplace on October 3, 2016 in the United States, the United Kingdom, Australia, and New Zealand. Originally available only on mobile devices, Facebook users can now use Marketplace on their desktops or laptops. Marketplace is essentially a large classifieds system like Craigslist; anyone with a Facebook account in a participating country can post an item that they have for sale. Interested users them message the originally poster and they negotiate over price. Customers arrange who travels to pick up the item – the hosting company does not provide fulfillment or logistical support.

So if Facebook already has the ability to offer a classifieds service, why do they need eBay? eBay offers twelve classified brands in over fifteen countries across the world. One of their brands, GumTree, is the number one classifieds system in the U.K., Australia, Singapore and South Africa, while mobile.de is the top classifieds brand in Germany. All of these brands have a dedicated user base with a significant market share in their region. Adding these brands to their portfolio will allow Facebook to integrate these current platforms into their Marketplace system while immediately gaining new Marketplace users.

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eBay.com and Other Websites 

Despite their strength in the classifieds industry, eBay is predominantly known for their main website, eBay.com, which allows customers to bid in online auctions or purchase items immediately (Buy It Now).  This platform currently has 1 billion live listings and 171 million active users. eBay.com is different than their classifieds segment since the transaction is completed using the eBay platform – rather than the two parties contacting each other to negotiate on a price, payment method, and a way to receive the item, the eBay system acts as an intermediary, providing sellers a reliable way to receive their proceeds and providing buyers a reliable way to receive their items.

So, how does acquiring the eBay website benefit Facebook? It takes their current Marketplace system and creates even more value for their customers while providing Facebook with a steady stream of revenue and allowing them to gather more data on their users spending patterns. In addition to getting eBay.com, Facebook would also have control of eBay’s other popular sites such as Shopping.com. Although eBay has a reputation for selling used or strange items, 81% of items that are listed on eBay are New. A customer’s eBay purchases can provide a lot of data to Facebook about the customer’s overall shopping patterns, not just what they buy when they are looking for something weird. And by using Facebook’s customer data, eBay will be better able to target their selection towards certain customers.

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Stubhub

eBay also owns the “world’s largest marketplace for online ticket sales,” StubHub. Acquired in 2007, StubHub connects buyers and sellers of tickets to events ranging from World Series tickets to Hamilton on Broadway to a Bruno Mars concert. Simply put, StubHub sells tickets to events where people connect in real life.

Facebook could integrate StubHub with their Event pages – customers can let the world know they are going and buy tickets on the world’s largest secondary ticker market with just one stop. They will also have more data on their users – who actually goes to events they say they are going to, how much they are willing to spend on that event, etc.

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Feasibility of Acquisition

Now, how likely is it that Facebook will make an offer for eBay?

The largest disclosed Facebook acquisition was their $19 billion 2015 purchase of WhatsApp. How does this compare to eBay? As of October 1, 2017, eBay has a market capitalization of just over $41 billion. Since eBay is a public company, Facebook would probably have to offer an acquisition premium on top of this price, likely bringing to total price somewhere north of $50 billion, easily making an acquisition of eBay their largest yet.

Can Facebook afford this price? According to their 2016 Annual Report, the company has about $29 billion in Cash and Marketable Securities. Additionally, Facebook currently has zero long-term debt, meaning the company has the capacity to raise debt capital if they need to. This acquisition is definitely possible for Facebook.

What about on eBay’s end? Due to their steady stream of cash flows and low correlation to political events, eBay is considered a potential target. Seeking Alpha believes that eBay is currently undervalued based on their predictability of cash flows and suggests that Alibaba is their most likely acquirer.

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Altogether, the facts suggest that Facebook can indeed purchase eBay if they want to. Integrating eBay’s internet holdings will allow Facebook to take a huge step into the eCommerce industry very rapidly while staying true to their mission of connecting the world. Facebook is all about connectivity and eBay is a company that connects people very well. Their service lines fall easily into Facebook’s current platform and will help Facebook to continue to be the website people always want to be on.

11 comments

  1. I really enjoyed reading about your theory as to why Facebook should purchase eBay. It was very well written and was backed up nicely by facts and numbers. I did not realize eBay’s extent with their acquisitions, but as you shared, with Facebook’s Marketplace, it would be a natural move for Facebook to purchase one of the largest online retailers. Especially for the sake of StubHub. Personally, I use Facebook primarily for events, and being able to purchase a ticket seamlessly through the Facebook platform would definitely improve the consumer experience.

  2. This is such an interesting idea! Facebook’s Marketplace has yet to take off and I think expanding into the reselling business by acquiring eBay would be such an easy way to do so. In my hometown, Basking Ridge, there is a Facebook group for moms called “Basking Ridge Bargain Sale” where moms post sales of hand-me-downs or unneeded furniture. This has existed for many years, and I’d guess that other towns have an equivalent, which is where the idea for marketplace came about since you know that you can trust the seller vs. buying from a stranger on eBay. An interesting integration in the future would be to see if somehow Instagram for brands could act similar to Pinterest, where a user could denote that they like a product’s post and then be directed to Facebook Marketplace where they could buy the product.

  3. This was a great post! I recently joined the BC marketplace on Facebook and am constantly getting notifications from students who are looking to sell furniture, as well as sublet their off-campus housing. Your arguments for why Facebook should acquire Ebay are really strong, I agree that this acquisition would provide Facebook many benefits to support why they should make such a big investment. I really liked your idea regarding the integration of Facebook Events and Stubhub. Often when I get notifications about Facebook events I do not wind up purchasing tickets to the event simply because it requires me to go to another website. By connecting the two websites, I think people would be more likely to purchase tickets, benefitting Facebook by giving them access to more data, and Stubhub by increasing their sales.

  4. I love this post. I really like how you talk about not only Facebook, but how the other competitors match up. I agree that Facebook Marketplace is taking over and that it would be smart for them to acquire Ebay. My mom used Facebook to sell all of the furniture in my grandparents’ house when selling the estate. She sold everything within a couple days of posting it. Doing this could also help them acquire new Facebook users. I also completely agree with Alyssa about Stubhub. I always forget about buying tickets until the last minute, but if Facebook were to remind me I would purchase so many more, all while benefitting Facebook.

  5. Great post! I loved how you incorporated your own recommendation and supported that with evidence. I think acquiring eBay would be a great strategic move on Facebook’s part. It seems like all of the main players are expanding into the e-commerce either through acquisition or organic growth. For example, Walmart bought jet.com to expand their e-commerce presence. In order to compete with Walmart and Amazon, Facebook needs to make some moves in the e-commerce area!

  6. This is a very creative idea with such deep analysis on it! I love your research on Facebook and eBay’s performance and financial status, trying to prove your points. FB as the largest social media in the world, is very likely to strategize acquire eCommerce to expand their business. Besides, they have developed ‘marketplace’ in FB for people trading used things as a trial on eCommerce. They probably have thought about expanding into eCommerce for the future plan. While as you mentioned that eBay has a steady cash flow and seems doing well now, will they consider to be acquired? I guess the hardest part is here: how to make an offer that will be accepted by eBay. :) Anyway, if someday these two companies were merged, it would be a huge news in digital world.

  7. Wonder what would happen if Alibaba were to attempt to purchase eBay/if the government would allow this to happen. Do you think the data/marketplace available through eBay is worth $50B? What if Amazon were to create a similar auction platform on their website? I could see eBay loosing a lot of members to a similar platform offered on Amazon.

  8. Interesting argument! It’s not one I had considered before. I’ll have to think about it more deeply. Nice work!

  9. Interesting idea. The two companies derive their revenues from quite different streams so there would also not be much overlap. The size of the acquisition could definitely be a barrier, especially considering the financial value of eBay and that Facebook has 17,000 or so employees and eBay has roughly 12,000, which would nearly double the employee base of the combined company. Facebook’s interest in purchasing data could be useful here as they could apply it more directly to purchases rather than just advertising. The StubHub aspect is also interesting because it could keep users on Facebook for ticket purchasing rather than leaving the site for tickets. More time on the site is better for Facebook!

  10. This was a really interesting proposition to read. I think it would be a really bold move for Facebook to buy eBay, but it could prove to be fruitful. I think it would all be dependent on Facebook’s execution of the acquisition, and the integration into their platform. I think to avoid looking like a huge scary monopolizing tech giant, they would have to focus the integration on community connections like you said. I wonder if Facebook would consider buying Craigslist before eBay, as it would more seamlessly coalesce with their existing marketplace.

  11. This was a really thought-provoking article, and definitely a proposition I haven’t previously considered. A big fan of both platforms (eBay and Facebook Marketplace), I agree in the value that one would provide the other, and vise versa. With the whole slew of companies Facebook has acquired over the years, I don’t think eBay joining the lineup would be all that surprising — especially with the recent separation from parent company PayPal.

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