• Business Week, Tuesday, April 24, 2007 10:45 AM

Ebay delivered strong first-quarter earnings, thanks largely to growth from acquired assets like PayPal and Skype. As encouraging as growth outside of its core ecommerce business is, eBay is becoming a little too dependent on expansion to previously uncharted waters, like telecommunications, social networking and ad brokering.

Ebay now finds itself in the online payment business (PayPal), which has actually developed some nice synergies with eBay.com, Internet telephony (Skype), ticket sales (StubHub), shopping comparison (Shopping.com) and classified ads (Kijiji). Now it's said to be interested in acquiring the social search site StumbleUpon, according to GigaOm and TechCrunch.

The diversification of the company is similar to Yahoo, which famously ended up accusing itself of being spread thin. Google, meanwhile, has been able to branch out into several new areas, while focusing mainly on its core mission of organizing the world's information. The stretching of eBay may have something to do with its stock's failure to bounce, following its impressive earnings report last week.

In fact, it dropped 3.6% on the news, which is attributed to the slowdown in its auction business, up only 23%. Compare that to the 69% increase in profit Google reported a day later--98% of which came from its core business--and one understands the disappointment.

Read the whole story at Business Week »