We seem to be in the age of Web2.0 consolidation with new rumors doing the rounds that online auction powerhouse eBay is trying to negotiate the purchase of web-surfing aid StumbleUpon for $75 million. Earlier in the week it was announced that MySpace will buy PhotoBucket for $250 million.

The deal is still being negotiated, and may not be announced for weeks, according to an unnamed sources speaking to Reuters and the Wall Street Journal. According to the sources, the deal could still fall over. Neither Stumble Upon nor Ebay was prepared to comment on the rumors. Similar rumors were reported by TechCrunch and GigaOM in mid April.

StumbleUpon is a web browser plug-in and web site that allows Internet surfers to ”discover” webpages, videos, and photos, and give content a thumbs up or a thumbs down. Web pages are presented to users on the basis of previously visited pages, and the ratings by “friends” and other users with similar interests. The emphasis is on users finding sites that they might not overwise think to look for, hence the name StumbleUpon.

StumbleUpon has around 2 million users, which means, that should the deal go ahead, eBay will be paying $37.50 per user.

StumbleUpon was started by Garrett Camp (who is now the president), Geoff Smith and Justin LaFrance, while Camp was in Graduate School. Until now StumbleUpon has received just $1.5 million in seed funding from a group of investors, which includes Google director, Ram Shriram and Lotus 1-2-3 spreadsheet creator, Mitch Kapor.

eBay has made a number of acquisitions and investments in recent years; its most notable being PayPal, Skype, Shopping.com and Stubhub. So where would StumbleUpon fit into Ebay’s empire. Om Malik has an interesting theory:

By marrying the toolbar to Skype client, eBay can do an end run around Google’s dominance of the search business. A simple search box inside Skype client is all it would take. It is not that far fetched: Skype has been slowly integrating various different services (including PayPal) into its client, and slowly becoming eBay’s desktop backdoor.

Malik’s theory does make sense. Perhaps eBay does see this acquisition as a way of mitigating against the risk of being overly dependent on Google for some its traffic. What ever the true motive for the acquisition, it’s becoming more apparent that it’s a good time to cash out if you have a popular Web 2.0 web site.

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Entry was posted on Wednesday, May 9th, 2007 at 12:05 pm under Google, Web2.0.

Read more entries by John Pospisil.
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