Auction House Is Going, Going, Gone From EBay

Three years after buying its way into the rarefied world of fine-art auctions, EBay Inc. on Thursday brought down the gavel on Butterfields Auctioneers and sold the venerable institution to Bonhams in London.

Bonhams, founded in 1793, is the world’s third-largest auction house, behind Sothebys and Christies. The sale price was not disclosed.

The sale ends an ambitious experiment by EBay, founded in 1995, to broaden business beyond auctions of Beanie Babies, Elvis memorabilia and other collectibles. The online firm’s purchase of Butterfields in 1999 was hailed as a landmark event for the e-commerce world that in a few short years had built empires to eclipse companies with long and storied histories.

EBay paid for Butterfields, founded in 1865, with $260 million in stock--hardly a problem for the online auctioneer at a time when its share price was about $210. EBay shares fell $1.86 Thursday to $55.23 on Nasdaq.

Butterfields offered the nouveau riche upstart access to a far more refined sector of the auction market.

“It gave EBay credence in fine art and collectibles,” said EBay spokesman Kevin Pursglove. “It gave us exposure to a higher-point marketplace.”

Butterfields Chief Executive Geoff Iddison said the transaction succeeded in bringing a new audience to EBay.

“Now 30% of Butterfield’s sales are online on EBay,” said Iddison, who negotiated the sale to Bonhams but will stay with EBay in an undisclosed job. “Last year it was 10%, so there have definitely been changes in that people are more accepting of buying works of art online. It has evolved.”

But not fast enough for EBay.

“It just didn’t happen at the pace we anticipated,” said Pursglove.

In the first quarter of this year, for which EBay posted a record profit of $47.6 million, its offline auction ventures lost almost $2 million.

Those losses represent the combined financial results of Butterfields and EBay’s other traditional auction house, Kruse International, which deals in antique and collectible cars.

Pursglove would not say whether Auburn, Ind.-based Kruse was on the block.

EBay’s venture into the bricks-and-mortar world saddled it with a problem that had crippled many e-commerce businesses--inventory. Its was used to being the middleman in online auctions, and therefore didn’t have to deal with any merchandise and the expenses involved in its storage, management and delivery.

But bricks-and-mortar auction houses have to handle art and antiques.

“We decided that what we really do best is manage an online marketplace,” Pursglove said.

EBay has not abandoned its sojourns into fine art auctions.

The online auctioneer has a deal with Sothebys to prominently feature its auction offerings on the site.

EBay also has moved on to far larger acquisition ventures. Last month, the firm announced that it was taking over online payment service PayPal in a $1.5-billion stock swap.

Pursglove said the sale of Butterfields would have, for EBay, “on an accounting basis a very immaterial impact on net income.”