EBay Inc. is buying rapidly growing online ticket broker StubHub Inc. for $310 million in cash, further expanding the Internet auctioneer’s electronic bazaar.
The San Jose-based company announced the deal late Wednesday after the news had already been leaked to the media.
StubHub’s sale, expected to close before April, punctuates another improbable Internet success story.
Jeff Fluhr, StubHub’s 32-year-old co-founder and chief executive, launched the San Francisco startup against the dreary backdrop of the dot-com bust 6½ years ago with another former student at Stanford Graduate School of Business, Eric Baker.
“StubHub’s business model is an excellent fit with eBay, a company we’ve admired for a long time,” Fluhr said in a statement. “StubHub exists to serve passionate fans and we feel great knowing our customers will benefit from the power of eBay and its community of users.”
EBay’s market value has plunged by nearly 50 percent, or $37 billion, over the past two years amid investor concerns about slowing growth in its online auctions, prodding management to expand through into other channels of electronic commerce.
Its recent acquisitions have included Internet phone service Skype and online price comparison service Shopping.com, neither of which have become as integral to eBay as its 2002 purchase of online payment service PayPal.
StubHub operates an online market for reselling tickets to major events, creating an alternative market that has been thriving even as its existence incensed some of the sports teams whose tickets are being resold above their face value.
StubHub says buyers paid more than $400 million for tickets sold on its site in 2006, generating more than $100 million in revenue last year. People pay a 15 percent fee to sell tickets on the site, while the buyers are charged a 10 percent commission.
Since its inception, StubHub has brokered the sale of more than 5 million tickets.
Although the privately held company doesn’t disclose profits, StubHub is doing well enough to employ about 350 workers in San Francisco, a Hartford, Conn. call center and 10 other small offices scattered across the country.
Fluhr had been mulling a possible initial public offering but apparently tabled those plans after eBay intensified its courtship.
Ebay has been pursuing StubHub off and on for years and nearly bought the startup for $20 million in 2002 before negotiations fell apart.
StubHub is “a perfect complement to eBay’s tickets business,” said Bill Cobb, president of the auctioneer’s North America marketplace. “Together we can strengthen both businesses and provide fans with more choice and better service.”
Other big winners in the sale include former San Francisco 49ers quarterback Steve Young, one of StubHub’s earliest investors. StubHub’s other financial backers include Frank Biondi, former CEO of Viacom Inc., and Harvey Golub, former CEO of American Express Corp.
Fluhr and Baker founded StubHub after developing the concept under the name “NeedATicket.com” as part of a competition while attending the Stanford Graduate School of Business. Although picked as finalists, they pulled out of the contest because they feared someone would steal their idea.
Baker, 33, left StubHub in 2004 but retains a significant stake in the company and now runs a similar European ticket reseller called Viagogo.com.
Under Fluhr’s leadership, StubHub has tried to position itself as a save haven in the roughly $10 billion market for reselling tickets that have already been purchased elsewhere. Unlike the stereotypical ticket scalper standing outside a stadium, StubHub guarantees buyers all tickets sold on its site are authentic.
The approach has won over about 30 professional and college sports teams that guide fans to StubHub for tickets. The list of teams working with StubHub includes the Chicago Bears, San Diego Chargers and Washington Redskins of the National Football League and the Portland Trailblazers and New Jersey Nets in the National Basketball League.
But other teams have lashed out at StubHub, with the NFL’s New England Patriots and the New York Yankees in Major League Baseball emerging as the most strident critics.
The Patriots sued StubHub in November, alleging the site is encouraging fans to break a Massachusetts law against selling tickets more than $2 above face value. StubHub countersued last month, depicting the football team as a monopolist engaged in unfair trade practices.
The Yankees have gone so far as to revoke the season tickets of fans who sold their seats on StubHub, arguing the activities violate the team’s licensing rights. StubHub believes the Yankees are trying to stifle competition for an online market that the baseball team hopes to operate on its own.
In an interview last month, Fluhr said fewer teams are trying to deter StubHub because they realize that the company is helping them fill seats that might otherwise go unfilled if the original ticket holder can’t attend the event. Although a team doesn’t profit directly from scalped tickets, it can still make money by selling food, drinks and souvenirs to the secondary buyer of the ticket.
“As teams have learned about our business and the early adopters have had real success with us, we have had more and more teams sign on,” Fluhr said. “I feel we have a real tail wind with us.”