Why does eBay buy foreign auction sites instead of building its own?

Your question reminds me of how I used to think about Microsoft, to be honest. I used to say "they have all these brilliant engineers, but they keep having to buy companies to get innovation? How dumb is that?"

Only later did it dawn on me that in fact Microsoft's strategy is incredibly smart, because it lets the rough and tumble world of startups produce the best of breed solutions, then acquires them and makes them part of the Microsoft corporate portfolio and offering. Instead of trying to compete with caffeine and passion-fueled entrepreneurs, it actually lets the marketplace innovate and simply picks the winners. Sort of like having a free R&D facility, really.

eBay does the same thing with its expansion. It tried to build its own online payment system, for example, but the people at Paypal were doing a better job (and if you remember far enough back, Paypal had a competitor called X.com which it later merged with) and so eBay finally just bought Paypal and integrated it into the auction system completely.

With Internet telephony, eBay didn't have much research going on, and when Skype came on the block, the management team at eBay realized that there was the potential for some great synergy between the two services and bought the company, for rather a large pricetag.

As eBay continues to solidify its ownership of its key market segment, online auctions, throughout the world, it only makes sense that instead of trying to stumble through the unique requirements and nuances of each foreign market, it acquires the winners in those spaces. This gives it a couple of important benefits: an existing presence in that marketplace, a chance to learn from innovative companies that aren't stuck in large, monolithic corporations, and, perhaps most importantly of all, instant access to some of the brightest and most motivated entrepreneurs in that nation.

I hope that helps clarify eBay's strategy. I think it's a very good approach to its expansion into foreign markets and you'll see it repeated time and again with companies large enough to have a mergers and acquisitions team.