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January 10, 2007

eBay Buys Online Scalper for $310 Million

posted by MR WAVETHEORY at 1/10/2007 11:01:00 PM
eBay is paying $310 million for StubHub which is a place for online scalpers to sell their tickets to unsuspecting or hapless buyers who just have to buy the latest football, baseball, and Broadway tickets.

StubHub generated about $100 million in sales in 2006 on $400 million gross ticket sales, according to spokesperson Sean Pate. EBITDA was $10 million so eBay paid 30x EBITDA.

I wrote about these guys earlier in the year - that StubHub was being shopped - and compared StubHub to RazorGator which is half the size. Looks like they took their time and got shopped around quite a bit. eBay tried to buy StubHub for $20 million in 2002, when the company was two-years-old. But talks fell apart.

EBay has its own ticket marketplace as well but it does not have traction.

If traffic is any measurement, however, StubHub's business is far more active than eBay's. StubHub saw 2.1 million unique visitors and generated 22.3 million page views in August, according to Nielsen//NetRatings. EBay's ticket section saw 309,000 unique visitors and 875,000 page views.

eBay was downgraded to $25 earlier this week because of decelerating growth in listings so I'm not suprised they paid up for this company. 30x earnings is a big price tag for a company that sells $100 million in tickets and puts just $10 million on the bottom line. It certainly isn't the type of economics of eBay's marketplace. Then again, eBay's got to do whatever it takes to keep delivering growth and you've got to believe that Piper Jaffray downgrade probably did the trick to get them moving.

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