Earlier this month we reported on eBay’s spinoff of StumbleUpon, a company it owned for a little less than two years. Ebay bought the company for $75 million in May 2007. Unknown until now, though, was the spinoff value of StumbleUpon. According to a source close to the transaction, it was $29 million.

New investors Sherpalo Ventures, Accel Partners, and August Capital joined StumbleUpon founders Garrett Camp and Geoff Smith in purchasing the company back from eBay. Outside investors put in 85% or so of the $29 million, we’ve been told, with Camp and Smith making up the rest.

eBay was paid $25 million in cash for StumbleUpon and retains a 10% interest in the spun off entity. $4 million remains in the company to fund operations.

StumbleUpon’s revenues are estimated at $5 million – $10 million annually.

Source: TechCrunch

After earlier reports that Skype’s founders were trying to buy back the company from eBay, the company has now released the news that it plans to spin off Skype as a separate company and file for an initial public offering. The IPO is intended to be completed in the first half of 2010.

As we reported earlier, eBay has been having trouble finding ways of using Skype across its other products (which CEO John Donahoe admits in a quote from the press release). eBay removed Skype co-founder and CEO Niklas Zennstrom in October 2007, reportedly due to frustration at the financial performance of Skype. Ebay also negotiated down the huge earn-out due to Skype stockholders and took a $936 million one-time loss around the transaction.

Last year, Skype generated revenues of $551 million, up 44 % from 2007, and eBay recently announced that it expected its subsidiary to top $1 billion in revenue in 2011. Registered users reached 405 million by the end of 2008, up 47 percent from 2007. Skype now accounts for 8 percent of all international calls by one estimate, and that number is going to keep on growing.

The company also puts much emphasis on the achievements of the current management team, and also touts the fact that Skype for iPhone has been downloaded so many times (1 million times in the first 36 hours alone, to be exact), while I think its recent announcement regarding opening up for SIP, and thus for business users, was much more significant in my opinion.

With both this move and yesterday’s announcement about StumbleUpon’s founders buying back that company after having sold it to eBay for $75 million in 2007, it’s obvious that eBay is doing what it’s supposed to do in a recession (and arguably, should have done long before): return to its roots as a pure online marketplace with one strong, related company under its wings (PayPal).

The fact that it is opting for an IPO instead of considering a private sale back to the founders suggests that the founders were unable to raise the necessary cash or that there is so much bad blood between there that Donahue decided it isn’t worth the reputation risk of selling it back and watching them succeed. Meanwhile, Skype’s founders and eBay are embroiled in a legal dispute over Skype’s license to certain peer-to-peer technologies which Skype’s founders still control through a company called Joltid, and which form the technological foundation of Skype.

For the most part, announcing plans now for an IPO that won’t take place until 2010 is mostly for the benefit of Wall Street. eBay announces earnings next week, and these divestitures show that it serious about getting rid of distractions. But if Skype all of a sudden begins contributing meaningful profits to eBay or it cannot resolve its dispute with the founders, eBay has plenty of time to pull the IPO or find another buyer. Setting the IPO date does nothing more than set the clock for other parties to put in their bids.

EBay stock was up 4.4% in after-hours trading – it closed at $14.38.

Full release:

eBay Inc. (Nasdaq: EBAY) today announced that it plans to separate Skype from the company, beginning with an initial public offering that is intended to be completed in the first half of 2010. Specific timing of the IPO will be based on market conditions. “Skype is a great stand-alone business with strong fundamentals and accelerating momentum,” said eBay Inc.’s President and CEO, John Donahoe. “But it’s clear that Skype has limited synergies with eBay and PayPal. We believe operating Skype as a stand-alone publicly traded company is the best path for maximizing its potential. This will give Skype the focus and resources required to continue its growth and effectively compete in online voice and video communications. In addition, separating Skype will allow eBay to focus entirely on our two core growth engines—e-commerce and online payments—and deliver long-term value to our stockholders.”

The decision to separate Skype is based on a timeline outlined by Donahoe when he became eBay’s CEO in April 2008. At the time, the company said it would spend a year evaluating Skype and its potential synergies within the eBay Inc. portfolio before making any decisions about Skype’s future. Donahoe also installed a new management team at Skype led by Josh Silverman, which has driven stronger momentum and improved performance. In 2008, Skype generated revenues of $551 million, up 44 percent from 2007, and segment margins of approximately 21 percent. Registered users reached 405 million by the end of 2008, up 47 percent from 2007, and user metrics improved significantly throughout the year. The company recently announced that it expects Skype to top $1 billion in revenue in 2011, nearly doubling 2008 revenues.

“Under the leadership of Josh Silverman and his management team, Skype has become a stronger business in the past year, and I expect it will be even stronger a year from now,” Donahoe said. “Skype has accelerating global user growth and strong fundamentals, diversified revenue streams and is competitively positioned in a large market. We expect Josh and his team to continue delivering results as we prepare Skype for an IPO.”

Most recently, the release of the Skype for iPhone application has generated a great response. More than one million people downloaded Skype for iPhone in the first 36 hours after it became available—and Skype immediately became the No. 1 downloaded free iPhone application in more than 40 markets, including the U.S., UK and Japan. In just over a week, downloads passed the two million mark, putting Skype on more than 6 percent of all iPhones and iPod Touch – and adding almost half a million new Skype users.

Source: TechCrunch

Via @BreakingNews

SAN JOSE, Calif. – EBay Inc. is exploring whether to require customers to use its online payment service PayPal, a move that has angered users and prompted antitrust scrutiny in Australia, where a PayPal-only rule takes effect next month.

It’s unclear whether eBay will institute a similar policy in the United States and other countries. However, the online auction company often tries big changes in smaller markets before expanding them worldwide, and says it is open to that in this case.

“We are going to take learnings from it and apply them accordingly,” said eBay spokesman Usher Lieberman.

EBay says it wants to reduce disputes and restore trust in its marketplace with the PayPal-only plan. Because eBay and PayPal can share information on each transaction, eBay says use of PayPal allows it to stop fraud more efficiently than outside payment services. Pressing that safety argument in a heated discussion with Australian users, an eBay executive compared the new rule to banning the sale of heroin on street corners.

But critics lament that PayPal is costlier than other payment options, and they suspect eBay is just interested in increasing PayPal’s revenue. Australian banks say the plan will eliminate competition for the sake of exaggerated benefits.

“Competition will be restricted, innovation and development will be constrained, new entry will be discouraged and PayPal will be able to increase fees and charges to eBay users,” the Australian Bankers Association said in a filing with regulators Thursday.

Because eBay sellers are commonly independent merchants who don’t accept credit cards, PayPal acts as a go-between. Buyers use their credit cards and bank account information to make payments, and PayPal relays the funds to sellers’ PayPal accounts, charging them 30 cents plus a commission — up to 4.4 percent in Australia. The second-most common method of payment on eBay Australia, bank transfers, cost 20 cents each.

Australia’s bankers group says PayPal is not as immune to fraud as eBay claims. While PayPal does keep bank and credit card account information secret between trading partners, the bankers group decried that it does not verify identity as banks do.

EBay’s financial reports indicate that PayPal, while hardly fraud-proof, is getting better at cracking down. Its loss rate is 0.24 percent, down from 0.33 percent a year ago. That means that for every $100 transacted with the service, PayPal has to eat 24 cents because of fraud. That is slightly lower than the rates seen in credit and debit card transactions involving the top 20 online retailers, said Avivah Litan, a payments security analyst with Gartner Inc.

EBay contends that when users opt for methods like bank transfers, their transactions are four times more likely to result in a disputed payment. EBay says reducing that risk will attract new buyers to the site.

And, the company adds, it doesn’t stand to profit directly from the PayPal rule. It claims its investments in new buyer protections could outweigh any gains from increased PayPal fees. For instance, under Australia’s new plan, if a buyer doesn’t get what he or she paid for via PayPal, eBay will refund the buyer up to 20,000 Australian dollars ($18,600).

To make the PayPal rule possible, eBay has applied for — and automatically gets — immunity from Australia’s anti-monopoly Trade Practices Act. But the Australian Competition and Consumer Commission, which is investigating, could revoke that immunity if it finds the plan will harm the marketplace. A decision is expected soon.

Critics say eBay is just trying to fatten its bottom line. Growth in eBay’s core auction listings has slowed in recent quarters, pushing eBay to expand other parts of its business, which includes PayPal, classifieds sites and online telecommunications service Skype. And eBay has already taken other steps viewed as protecting PayPal, such as banning Google Inc.’s rival Checkout service on alleged safety concerns months after it was launched in 2006.

Sellers in Australia are “absolutely furious” and resent that they are subjects of an experiment, said Phil Leahy, president of the 600-member Australia chapter of the Professional eBay Sellers Alliance.

Leahy sells DVDs, movies and CDs through eBay, a high-volume, low-margin business. He says using PayPal instead of bank transfers would cost him $4,700 per month, based on his January sales numbers of $332,000. “It’s the difference between making money and not making money,” he said.

Leahy estimates Australian buyers use PayPal about 50 percent of the time — eBay would not confirm the figure — versus an 85 percent rate in the United States. He said bank transfers are used in 30 percent of transactions. The rest are conducted with bank and personal checks, money orders, or cash on delivery, all of which are banned under eBay’s new plan unless the payments are exchanged in person. That happens rarely.

Shaun O’Brien, a seller of home theater accessories, said many Australians trust their banking system more than online services like PayPal. He worries buyers will leave when they are deprived of a choice.

“Australians here have been heavily educated against putting credit card details online,” O’Brien said. “There are plenty of customers out there that refuse to use PayPal.”

The Australian experiment could lead to a less-stringent step: Perhaps eBay will require all sellers to at least offer PayPal as a payment choice. No matter how it turns out, however, eBay surely has more big plans for PayPal, which has grown steadily since the auction company bought the payment service in 2002. Last year it accounted for $1.9 billion in revenue, 25 percent of eBay’s total.

In fact, eBay’s top e-commerce executive, Rajiv Dutta, PayPal’s former president, said last year he was convinced PayPal would someday be bigger than eBay’s better-known auction and marketplace business.

Yahoo!

The online auction giant eBay is suing the popular internet community ad site Craigslist to “safeguard its four-year financial investment”.

In a statement, eBay claimed that in January, Craigslist executives took actions that “unfairly diluted eBay’s economic interest by more than 10%”.

No details of those actions were given by eBay.

In its company blog, Craigslist said it was surprised and disappointed by eBay’s “unfounded allegations”.

The company said eBay’s legal action “came to us out of the blue”.

The case, which is sealed, has been filed in a court in Delaware, where Craigslist is registered.

In a press statement, eBay claims that Craigslist’s founder Craig Newmark and its chief executive Jim Buckmaster adopted unspecified measures in January that have disadvantaged eBay and its investment.

Preserve our investment

EBay’s general counsel Mike Jacobson said: “Since negotiating our investment with Craigslist’s board in 2004, we have acted openly and in good faith as a minority shareholder, so we were surprised by these recent unilateral actions.

He continues: “We are asking the Delaware court to rescind these recent actions in order to protect eBay’s stockholders and preserve our investment.”

Craigslist, the seventh most popular English-language page on the Web, hit back in a blog.

“We have always treated eBay fairly as a minority shareholder, and plan to continue doing so, despite this unfortunate development,” it said.

“EBay has absolutely no reason to feel threatened – unless a hostile takeover of Craigslist, or the sale of eBay’s stake in Craigslist to an unfriendly party, is their ultimate goal.”

Uneasy relationship

The relationship between Craigslist and eBay has not always been an easy one.

Online auction site eBay acquired a 28.4% stake when it bought shares from a former employee who had been given equity by Mr Newmark.

Mr Newmark and Mr Buckmaster give away for free most of the services that Craigslist provides.

They have always appeared to have little ambition to milk profits from the popular site, which offers everything from houses for rental to nannies for hire.

A year after the deal was completed, eBay, which had said it wanted to learn from Craigslist, started Kijiji.com, a rival international network of classified ad sites that now sells ads in all 50 US states.

BBC