Merging Old and New

Mar 12 2001

It was a deal that rocked the clubby auction world. EBay, the company best known for auctioning off Beanie Babies and bogus autographs, buys Butterfield & Butterfield, the venerable 134-year-old auction house. Price: $260 million - just 1 percent of eBay 's $26 billion market value when the deal was announced in April 1999. The partnership would give the brash Internet company the chance to expand into fine art. Says Geoff Iddison, general manager of the eBay unit that includes Butterfields : "The intention was to have Butterfields kick-start the selling of works of art on eBay."

That's not exactly what happened. Two years later sales of high-end items remain a tiny fraction of the activity on eBay. Iddison says that it will take another year or two for the company to bring enough fine-art buyers online to create a viable high-end Internet auction. In the meantime, eBay executives have stopped touting the acquisition. "They hardly ever talk about [Butterfields]," notes Faye Landes, an analyst at investment bank Sanford Bernstein.

Butterfields has also struggled offline, where it faces rising costs and increased competition from new rivals. The San Francisco-based house last year cut its staff by 20 percent and ceased holding auctions in Chicago, one of its three hubs. Beyond the layoffs, several top executives and appraisers left on their own, frustrated by the culture clash between Butterfields' tweedy, old-society ways and eBay's fast-paced Net style.

EBay execs insist they see better times ahead for the auction house. The operation has stopped losing employees. After a stumble launching the Butterfields brand online, eBay put together a new site, Premier, to showcase Butterfields offerings. It has a classier look, better customer support and - to thwart fraud - stricter rules for buying and selling.

More important, eBay has used Butterfields to develop technology that lets customers place bids at live auctions via the Net. EBay recently announced a deal to roll out the system through iCollector, an Internet company that represents dozens of auction houses. All of this could change the way paintings and antiques are sold, but not anytime soon. For now, Butterfields auctioneers should take pride in their best sale ever - taking eBay stock in return for their plodding company.