Ebay and Stubhub
Today eBay closed its acquisition of online ticket reseller Stubhub. Less closing costs and fees, the deal, which was announced on January 10th closed at a purchase price of $307m with approximately $21m of net cash.
The purchase, unlike many that have followed since eBay’s shrewd acquisition of Paypal in 2002 for $1.5b, seems a natural fit to eBay’s core retail/auction business lines. Stubhub, which was founded by two classmates from Stanford’s GSB (who held approximate 25% of outstanding shares at the time of the sale), acts as a middle market for for person to person resale of event tickets. It has market-leading position in the growing market for secondary sales of event tickets. (IAC’s Ticketmaster is the leader in primary sales and MusicToday, which is owned by Live Nation, dominates the sale of Direct-to-Fan ticketing)
In December, 2006 the Stubhub site was the 5th most visited ticket vendor with 2.1m unique visitors according to ComScore Networks. (The Top 4: Ticketmaster with13.3m, Moviefone with 12.8m, Fandango with 5.4m and Movietickets.com with 4.8m). For the prior fiscal year, Stubhub’s revenues were close to $100 and earnings (EBIDTA) were approximately $10m. Those numbers puts the transaction price at a rich multiple of approximate 30x revenue. That’s a big premium, arguably too much of one, but compared to the purchases of Skype ($2.6b) and Shopping.com ($685m), it’s modest, and more importantly, it fits immediately into eBay’s business offerings without begging the nagging questions of: Why did they buy this? and What is there strategy? (Calculated per/head with regards to potential customer value, the price of $150 per visitor is still rich, but more understandable.)
Over the past few years, eBay had at times been criticized for failing to gain a bigger share of the ticket resale marketplace. It was arguably a business eBay could have dominated, and should have been a bigger player in, but eBay’s faltering left room for Stubhub to grow. Now eBay has a chance to make up for its mistake, even if the penalty was a costly one.
Note: Eric Baker, one of Stubhub’s founders, left the company in 2004 and now runs a European ticket reseller called Viagogo.
