EBay Forges Pact with Former Amazon Partner Sotheby's

EBay (Nasdaq: EBAY) said Thursday that it has forged a strategic alliance with legendary auction house Sotheby's (NYSE: BID), apparently hoping to pick up where Amazon.com left off more than a year ago.

Under the terms of the agreement, Sothebys.com auctions will be hosted and run by EBay. New York-based Sotheby's also will use EBay’s Live Auction technology to enable Internet users to take part in traditional auctions at showrooms in New York and London. And EBay and Sotheby's will work together on marketing and advertising.

Financial terms of the deal were not disclosed.

Aiming High

In a note to members on its site, eBay said the move "represents the next step in EBay's evolution of creating an online destination for high-end arts, antiques and rare collectibles."

The joint auction site will replace EBay Premiere, which was EBay's attempt to tap into the market for expensive artwork and antiques. EBay established Premiere largely on the foundation of real-world auctioneer Butterfield & Butterfield, which EBay acquired for US$260 million in early 1999.

Since then, EBay has downsized the Butterfields staff and has backed away from some of its live auction expansion plans.

Sotheby's, meanwhile, has been running its Web site on its own since October 2000, when it parted ways with Amazon after just a year of joint operation. Amazon had sunk $45 million into the partnership.

Wait and See

Morningstar.com analyst Michael Hodel said the deal "could be a good thing for both parties," but added that Sotheby’s failed attempt to work with Amazon should be a "cautionary tale."

"We're hopeful that this deal will open up a new source of revenue for EBay, but we're keeping our expectations low for now," Hodel said in a report.

Meanwhile, Derek Brown, who tracks EBay for W.R. Hambrecht & Co., said in a report released Friday that he expects Ebay's auction listings to experience some volatility in coming weeks as recently announced fee increases take effect.

Still, Brown remains bullish on EBay's longer-term prospects, saying auction listings will rebound quickly despite the price increases.

Name Your Price

EBay said the new Sothebys.com will integrate offerings from Sotheby's offline network of antique and art dealers, from Butterfields, and from select sellers from EBay Premiere. The latter sellers will be required to apply for the right to sell on the site.

Sotheby's said its Web efforts have resulted in the sale of $100 million worth of goods, including a first printing of the Declaration of Independence that sold for more than $8 million and a cornet used by jazz legend Louis Armstrong when he was a boy, which fetched $108,000.

The new site is expected to launch by mid-summer.