eBay and StumbleUpon Unite to Take on Multi-Billion Dollar Social Shopping Industry

If Michael Arrington and Om Malik are to be believed, StumbleUpon has just been acquired by eBay, possibly for around $40 million to $45 million. Here's a look at what eBay stands to gain from this acquisition.

With eBay's dominant position in the online shopping industry along with PayPal's unique position in the e-commerce (or online transaction facilitation) market and StumbleUpon's strengths when it comes to using collaborative filtering methodologies to determine opinion and distribute content, this buyout could effectively be used to create a unique service that could easily capture a dominating chunk of the social shopping market.

Until a little over a year ago, online shopping was a lonely endeavor. But then came the rise of the social web, which led to the explosion of social networks, and ultimately to the development of social shopping services. These services allow users to incorporate the wisdom of crowds (or their peers) while making buying decisions. I took a look at this growing trend of social shopping back in November 2006, and wondered why social networking services weren't taking advantage of their unique advantage in this up and coming space.

According to an American Marketers Association survey conducted around the same time,

...47% of consumers said that they would be open to using social networks (such as MySpace, Orkut, Facebook) to find and discuss holiday gift ideas. Furthermore, 51% of them said that they would look for discounts [on] social networking sites, 51% said that they would download coupons form theses sites, and another 18% said that they would participate on such sites by (reading or) writing product reviews. Most interestingly though, 29% said that they would actually make purchases through these sites.

If you ask me, Pete got it right with possible reason number 3 on his list. As Nancy Costopulos, chief marketing officer at the American Marketing Association mentioned, sites with social networking capabilities can "provide some of the most powerful word-of-mouth-marketing opportunities there have ever been".

All things considered, when you think about the the potential to know what someone wants to buy, and then the ability to link the person to that very thing, which has also reviewed and recommended by the person's peers, eBay's decision makes absolutely perfect sense. Now they have a marketplace, a service to facilitate monetary transactions, and a platform to determine consumer preferences, opinions, demand, and so on. The circle has been completed.

Note: According to StumbleUpon's founder, the acquisition is just a rumor.

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Loren Baker, April 18, 2007

Yeah, in terms of social shopping, eBay can now suggest stores which use Paypal cart system to SU users in the shopping channel. I'd like to see what they gear up for the holiday season.

How do you think eBay will take advantage of StumbleUpon Video, which has escalated the use and adoption of the service?

John Jackson, April 23, 2007

Not sure if I trust ebay with stumble upon. I guess,I will have to wait and see.

Gina, April 23, 2007

StumbleUpon would be ruined by ebay. That would be awful. Let ebay figure out for themselves the secrets to collarbative filtering methods, and keep SU from being a sellout. Thank goodness it's just a rumor. phew!

Demonrind, April 24, 2007