eBay's Rental Insurance

Call me crazy, but eBay (Nasdaq: EBAY  ) doesn't strike me as the name that comes to mind when one is contemplating choosing a roof over one's head. However, it's no secret eBay's out to be a dominator in e-commerce. Considering that people can find all kinds of goods and services listed on its site, it's hardly surprising that eBay would tackle a new spin on the same old story.

On Friday, eBay said it is acquiring Rent.com for $415 million. The price tag will consist of $385 million in eBay common stock and $30 million in cash. The acquisition is expected to close in the first quarter of 2005. Although the price tag may sound pretty steep, it's worthwhile to mention that Rent.com is a profitable service.

eBay's illustrious history has continued unabated for a while, with odd or unusual auctions such as an infamous grilled cheese auction or the selling of pesky family ghosts becoming common news items, although a recent snail-mail holiday catalog may have made some wonder whether growth may be slowing.

While apartment and rental listings may seem like an odd way for eBay to go, this service contains the earmarks of its specialties, given the low overhead involved. And of course, given the fact that eBay has recently taken a stake in the popular craigslist service, Friday's maneuver is probably even less surprising.

eBay's gigantic, loyal community gives this strategy more credence as well. Amazon.com (Nasdaq: AMZN  ) and Yahoo! (Nasdaq: YHOO  ) , for example, may be popular Web destinations, but users don't power their product offerings in quite the same way. eBay's entrenched community -- where denizens interact -- is summed up in the company's own marketing tag line: "The Power of All of Us."

Of course, all's not perfect in eBay's bid for world domination. Recent glitches frustrated some community members; other buyers fear the ill effects of fraud. Meanwhile, upstart rival and Motley Fool Rule Breakers pick Overstock.com (Nasdaq: OSTK  ) has been showing a lot of promise in luring bargain-hunting shoppers.

For now, though, eBay is doing exactly what is expected. It's finding more ways to give its virtual halls -- and its community -- all the earmarks of home sweet home for the discriminating shopper and merchant. And that may soon result in eBay going in even more surprising directions.

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Alyce Lomax does not own shares of any of the companies mentioned.