Why eBay Should Steer Clear of AOL

It was announced yesterday that AOL (TWX) was acquiring social networking site Bebo for $850 million. Knowing that many in the United States have probably never heard of Bebo and if they have, it is far far behind Facebook and Myspace (NWS), perhaps AOL's purchase of Bebo was a prelude to being acquired by Google (GOOG). After all, Google has their own social site, Orkut, that lags very far behind as well, and would love nothing more than to combine the two.

There have been rumors circulating that AOL and eBay (EBAY) would be a very good fit. My personal thoughts is that the union would be a disaster. AOL has been plagued with problems since their merger with Time Warner. AOL has been on an acquisition phase for the past several years. However, their acquisitions has seen Time Warner price continue to plummet.TWX closed yesterday at the very low price of $14.51 share.

Why would eBay even want to attempt to combine with AOL? The legal headaches would be huge and would take eBay away from their core business. eBay has the capabilities to build a huge social site, however thus far they have lost their creativity. They can combine Stumbleupon with Skype and Rent.com and built their own community. They can even have a contest to come up with a really catchy name.

It boggles the mind why eBay hasn't build a search engine to date. You can search for videos on Stumbleupon, you can search for things on Skype. Why not come up with something, anything that searches the entire internet? Why not build a dating site similar to eHarmony. It can be called eHeart, for all those lonely eBay sellers and buyers, and can utilize Skype's video features. How about a feedback system for dating?

Please get with the innovative program, eBay, and get those brain waves humming. Why is it up to me to continue to submit my ideas? After all, you are not paying me a penny but yet reward the majority of your employees with lucrative options and salary.

So, the moral is: stay away from AOL; after all, Bugs Bunny and the other characters were flying high near $70 to $100 per share before they ran into the AOL truck that was out of control.

Disclosure: Author has a long position in EBAY

Comments

[zoee1957:]

The thought of ebay and AOL partnering in anything makes me think I should sell both ebay and AOL stock first thing in the morning. ebay is a mess right now, my sales have dropped 70% since they launched the "new & improved" version of ebay. I can't afford not to be selling and holding onto what I see a soon to be valueless stock. AOL literally improved themselves right out of the market, ebay will join them soon enough.

2008 Mar 16 10:12 PM