EBay to Bolster Classifieds as Craigslist Trial Looms

EBay Inc. (EBAY), facing a legal fight with Craigslist Inc., is talking to other sites around the world in a bid to get more revenue from classified listings.

EBay is considering partnerships and acquisitions in smaller countries where classifieds are the preferred way for buyers and sellers to connect, Chief Executive Officer John Donahoe said in an interview. EBay—which owns less than 25 percent of Craigslist, the most visited U.S. classified site—is suing that company for diluting its stake by issuing stock.

EBay, based in San Jose, California, has classifieds sites in more than 20 countries such as Denmark and the Netherlands. The company expects classified revenue to double between 2008 and 2011. As a Delaware court prepares to hear the Craigslist case next week, eBay is stepping up efforts to expand that business.

"I'm going to be very aggressive looking for opportunities to strengthen that portfolio, either organically or through acquisitions," said Donahoe, 49. "We have the financial strength and capacity to do a sizeable acquisition. When we see an opportunity that will really strengthen the portfolio, we'll move."

Kijiji SiteThe Craigslist dispute became public after the site said eBay used its investment to steal confidential information, which helped eBay start a rival U.S. service called Kijiji. EBay denies that claim. Craigslist diluted eBay's stake in the company to less than 25 percent, a move that eBay says was an unfair attempt to limit its power as an investor. That case is scheduled to begin Dec. 7.

Susan Best, a spokeswoman for San Francisco-based Craigslist, declined to comment.

EBay, whose shares have risen 70 percent this year, fell 24 cents to $23.76 at 4 p.m. New York time in Nasdaq Stock Market trading.

In the U.S., eBay faces competition from newspaper publishers such as Gannett Co. (GCI), in addition to Craigslist. Outside the U.S., eBay competes with companies such as Schibsted ASA, Norway's biggest media business. To crack those markets, eBay will have to figure out a way to generate revenue beyond advertising sales and listing fees, said Peter M. Zollman, founder of consulting firm Advanced Interactive Media Group LLC in Altamonte Springs, Florida.

Collecting FeesClassifieds sites are increasingly moving toward a model where the consumer pays once the transaction is complete, Zollman said. That's an area eBay isn't interested in, Donahoe said. It's difficult to know when classified transactions are completed because buyers and sellers often meet up in person. That makes it harder to collect fees on those sales, Donahoe said.

"In the long run, if eBay does not get in the middle of the transactions, it's going to be the loser," said Zollman, who has done consulting for eBay. "Ultimately, classifieds is moving away from paying for listings and paying for advertising to paying for results."

Last year, eBay acquired the Danish classified sites Bilbasen and DBA.dk. The company, which estimates that the global classifieds business is worth $100 billion, also has sites in Canada, Spain, Italy, Germany, the U.K. and Australia.

EBay reported $8.54 billion in total sales last year. The company said it will have about $5 billion in cash by year-end.

Since taking over as CEO in 2008, Donahoe has tried to reignite sales at eBay by improving its main site and taking the company beyond its roots as an auctioneer.

"The Internet is dynamic enough that how buyers and sellers connect is going to continue to evolve," Donahoe said. "We're trying to build the biggest portfolio of formats and give the buyers and sellers choice."

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