It is one of the few Internet companies that has become synonymous with the
market it dominates. That is, almost no one merely mentions “online
auctions.” Instead, they talk specifically about eBay .
Now eBay is shrewdly leveraging its superior brand awareness to develop
revenue streams that will run through the capital of “old media”: Hollywood.
The Internet auction leader is negotiating with several major television
networks to air a show revolving around “some form of auction-style
bidding,” Inside.com reports. eBay even has engaged the quintessential
showbiz talent agency – William Morris – to help create a winning program.
And on Monday, Walt Disney Internet Group turned on the switch to a new site
that links users to auctions on eBay. Disney is offering 90,000 separate
items for sale to the top bidders. Already there are 17 bids for the witch’s
outfit worn by Bette Midler in the movie “Hocus Pocus,” with the high
submission reaching $1,009 (though the reserve hasn’t been met yet).
The four-year partnership with eBay sure is a great way for Disney to empty
its warehouses of dusty movie memorabilia and promotional merchandise, but
more significantly, it underscores the unique power eBay has as the leading
online auction site.
Disney’s Go Network actually launched its own auction site in October ’99,
but abandoned the solo effort when the eBay deal was announced last
February. (Go and eBay unveiled a joint site in May.) Disney also plans to
have eBay host auctions for its other online properties, ABC.com and
ESPN.com.
Why not go it alone and keep all the proceeds? Because, like any seller of
goods, Disney wants to find the largest number of potential buyers, the
biggest bazaar. And when it comes to Internet auctions, eBay is downtown
Manhattan, while everybody else is the local strip mall.
The auction-style network television show in the works could be the ideal
interactive program uniting the two most powerful mediums in the world.
Until now, most interactive efforts involving TV and the Internet revolve
around less-than-compelling features such as instant polling. Auctions will
get the money flowing – which, after all, is the goal of e-commerce.
These and other recent similar moves (such as an agreement to host auctions
for the National Football League) should reassure investors concerned about
eBay’s depressed stock price that the company is working hard to avoid its
one potential Achilles’ heel: complacency. As long as the company isn’t
lulled into sitting on its 70%-80% market share, its position as the leading
online auction site should remain unassailable.
Given that position of strength and consistent profitability, eBay is a
company worth looking at, even though shares are still pricey. Trading at
$53 early Tuesday afternoon, EBAY has a market cap of $14.2 billion, giving
it a valuation of 45x trailing 12 months revenue of $315.6 million. However,
if eBay can reach $115 in revenues for Q3 – just an 18% increase over the
year-ago quarter – its valuation at the current stock price falls to 38x TTM
revenues.
eBay should be announcing Q3 numbers next week. If recent market trends hold
up, shares could well drop if the company only meets or barely beats
earnings estimates of 4 cents per share. Then investors could be looking at
a better deal than Bette Midler’s witch dress.
