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eBay announced that it has acquired Berlin-based Brands4friends, a European online retailer that sells significantly discounted merchandise to its members, for $200 million.
It’s another move away from eBay’s once-iconic auction service — but eBay has been distancing itself from auctions for some time now. For the first time in more than a year, eBay has not seen any significant revenue growth from its core marketplace business. That has left PayPal, which continues to grow at a healthy rate, as the flagship revenue stream for the once-leading online auction site, according to its most recent earnings reports released in October.
eBay already allows European shoppers to buy directly from retail outlets through its outlet store. Rather than using auctions, the outlet store focuses on a “daily deal” philosophy that sites like Groupon have taken advantage of with some pretty significant success. eBay is likely picking up Brands4friends to divert its 3.5 million members to eBay’s own retail outlets, since Brands4friends offers a similar service. Daily deals in fashion also account for around 20 percent of all fashion sales in Europe, eBay said in its announcement today.
eBay’s auction activities have slowed to a crawl. Revenue from its auction site — which charges a fee to let users post things they’d like to sell — was up a paltry 3 percent when compared to the same quarter last year, from $1.182 billion to $1.186 billion. The company has tried exploring a number of other revenue sources — such as picking up voice-over-Internet provider Skype and subsequently dumping the service.
So far, most of the success has come from the company’s online payment system PayPal and a stronger focus on retail. The turnaround in eBay’s strategy began when John Donahoe took the reigns in 2008. eBay decided to shift its focus to PayPal and to model Amazon’s online marketplace model with eBay’s “buy it now” option for most of its auctions. The Brands4friends acquisition seems to be just another nudge in the same direction.
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