EBay's Belated Challenge To Amazon

I read with some small interest that EBay bought GSI Commerce earlier this week. The title of one Wall Street Journal piece on the acquisition was entitled EBay Buys Allies For Amazon War.

If only. Didn't that ship sail years ago?

As I noted on a recent Groupon post, EBay has a particular market segment. It's good if you find what you are looking for, but it's not a good place to simply buy what you may need, because there's no guarantee that you'll find it.

Granted, Amazon's book selling facility has lots of used book merchants to fill demand, but, beyond that, I can't personally vouch for product availability across a wide spectrum.

From what I read about GSI, EBay seems to be committing the old sin of buying something to which it adds little or no value with its own business. Take a look at the nearby five year price chart for EBay and the S&P500 Index. EBay has been stalled for the past five years, unable to out-perform the index. So why is it now going to ignite shareholder value by buying a business it isn't actually already in? Especially when it's paying a 51% premium for the privilege?

Will the amateurs who make a living selling chachkas and other assorted items actually process orders and ship via GSI? Well, wouldn't that mean they'd have to send all their merchandise there? It's simply not the same model.

 Meanwhile, here's a picture of the same five years, with Amazon added. EBay and Amazon aren't remotely in the same performance league.  So there's the added problem for EBay of taking on a more successful, well-capitalized competitor.

Put another way, this isn't like Apple or Google is coming into a new product space. EBay has had problems for years, including the over-priced Skype acquisition. I reread my posts under the "EBay" label, and they weren't good omens for EBay's success with this acquisition.

I would bet it's another case of a CEO and his senior management hanging on for dear life to high-paying jobs at a has-been company. Well, hanging on by using shareholder equity to overpay for an acquisition that isn't going to change the true owners' fortunes very much at all.

Post Script: Here's a very interesting blog post that my reader and commenter, Henrietta, sent me regarding Meg Whitman's early blunders, both pre- and while at EBay. Worth following the link.