American e-commerce veteran eBay is letting go of one of its original business units and selling it to Norway's Adevinta for $9.2 billion. eBay announced this week that it will be selling its online classified ads business to Adevinta as part of its restructuring strategy that has already seen it shed off a number of its non-core business units.
With the advent of social media platforms such as Facebook and the dominance of major online search engines, revenues generated from online classified ads have significantly diminished. According to the Interactive Advertising Bureau, online classifieds only accounted for about 3 percent of the $125 billion global internet advertising market in 2019.
When the internet first became mainstream more than 25 years ago, online classified ads were the primary source of revenue for most budding internet companies, including for big-name internet startups such as Craigslist and eBay, which was previously called AuctionWeb. eBay eventually became one of the world's largest online classified ads platform operator after it had acquired a number of other competitors. The various mergers and acquisitions eventually led to the formation of its subsidiary, eBay Classifieds Group, in 2008.
As part of its current strategy to optimize its operations and shed off its less profitable businesses, eBay is letting go of its classifieds business. The non-core unit only attributed about 10 percent of the company's total revenues for its first quarter this year.
The e-commerce company originally announced the new strategy in March last year, after it was pressured into action by activist investors Elliot Management. Since then, the company had sold its StubHub business to Viagogo. The $4 billion transaction was completed in November last year.
With its acquisition of eBay's classifieds business, Adevinta will now become the world's largest online classifieds platform operator. Adevinta reportedly managed to outbid private equity firm Blackstone and South African media company Prosus for the acquisition. The purchase will include all of eBay Classifieds Group's assets such as Gumtree, Motors.co.uk, and Autotrader.
Under the deal, Adevinta has agreed to pay eBay $2.5 billion in cash along with 540 million Adevinta shares. The shares will effectively give eBay a 44 percent stake in the company, which means that it can still generate cash from the continued operations of its classifieds business.
eBay CEO Jami Iannone mentioned in a statement published on Tuesday that the transaction should provide both long-term and short-term value to all of the company's shareholders and customers. He added that it should also allow the company to retain its exposure to the classified ads business.
