Innovation Through Acquisition: How eBay Stays Big, But Also Nimble

The e-commerce behemoth has made 20 acquisitions over the past three years. CEO John Donahoe explains why.

John Donahoe is a student of the game: Before becoming CEO at eBay, he spent over 20 years at mega-consultancy Bain & Company, where he wrote about corporate venturing. In a 2001 brief the then-managing director saw the writing on the wall:

One driver of corporate venturing is likely to endure: It is the ongoing threat of successful start-ups. Many start-ups today spring from new technologies and business models that are fundamentally restructuring industries.

Back then eBay was a "fundamental restucturer"

In 2008 Donahoe was named the commerce giant's CEO. And as he told Norm Pearlstine at last week's TechCrunch Disrupt, the now-incumbent eBay stays vital by bringing founders on.

How? eBay Inc. has made 20 acquisitions over the past three years—which has allowed the company to infuse entrepreneurial talent through its organization and driven a large part of the innovation going on inside of eBay.

"What I've found is we've been able to take the founders of these companies and give them significant roles inside our company," he says.

Putting the "hire" in "acquihire"

Mobile payment startup Zong—and its founder David Marcus—is one example. He came in to run PayPal mobile, and then after a year, Donahoe put him in charge of PayPal, so that "a founder with a founder-like mindset" is leading its 1,200 employees.

Another key acquisition was recommendation engine Hunch, founded by Chris Dixon and Tom Pinckney. While Dixon left for Andreesen Horowitz after a year, Pinckney and the Hunch team now run eBay's merchandising department, making them responsible for the eBay homepage.

"They're taking the technology and vision they had and getting a chance to innovate at scale," Donahoe says.

Now eBay has a full 15 founders in senior roles across the company. That's one way to prevent being "fundamentally restructured."

Bottom Line: Innovation tends to taper off as companies become big—when that happens, bring in small ones, and the entrepreneurs who launched them.

Related Story: Hey Serial Entrepreneurs, Join Someone Else's Company Instead Of Starting Your Own

[Image: Flickr user The Shopping Sherpa]

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2 Comments

  • Philip Cohen

    "Big, but also nimble"? Hmmm, could I suggest that you have a look at Amazon/eBay stock prices ...

    And eBay is the greatest calculated facilitator of wire fraud on the consumers of the world that we are ever likely to know ...The ugly reality for consumers dealing with the clunky, manipulative, unscrupulous eBay complex, and a great many of their equally unscrupulous merchants ...
    "eBay-Facilitated Shill Bidding Fraud on eBay Auctions: Case Study #5" ... bit.ly/11F2eas

  • AidenPorter

    Hi Drake,
    It's just a matter of time before those
    entrepreneurs will leave eBay to establish a new startup… Such as…. www.cazimo.com (hush hush)