Can Ebay (EBAY) Takeover Craigslist?

Ebay (EBAY) has sued Craigslist for diluting its 28% interest in the classified ad website.

The odd thing about the suit is that it does not disclose what Ebay paid for its interest nor does it detail the reasons the it believes its ownership has been diluted. It has asked that the court keep that information "confidential".

Ebay is not doing all that well now. Its PayPal division is growing rapidly and making a lot of money. But, the company’s core auction division is not doing growing fast especially in the US. It may have reached a point of saturation. Only so many people are willing to sell things to strangers.

Craigslist, on the other hand, seems to be doing quite well. It is the largest classified network on the internet. It does not charge for many of its listings which does dent its potential revenue. Its model of offering classified ads at low rates has almost single-handedly sunk the newspaper industry.

Craigslist is now the No. 25 website in the US, according to comScore. It has almost 29 million unique visitors which would be a nice addition to Ebay’s 82 million.

Ebay specializes in accommodating large numbers of transactions on the internet and has the largest e-commerce payment system in PayPal. Craigslist does not have deep pockets. If the Ebay suit has merit, the auction company should be able to pick up some damages. And, that might be just enough to get Craiglist to sell Ebay a big piece of its equity. Maybe the whole thing.

Douglas A. McIntyre