ebay is acquiring Hunch, a start up that provides recommendation technology. Hunch analyzes data from social networks and questionnaires in order to make personal recommendations. eBay plans to use this latest acquisition to suggest relevant products for shoppers.

Poor Quality of Recommendation Engines in the Market

eBay’s instincts are spot on: the quality of product recommendations on retailer websites has been declining, at least one survey shows, and if a retailer can offer better functionality it could gain an edge over the competition. According to a ChoiceStream survey, 59% of shoppers said they received poor quality product recommendations from retailer websites in 2009. This is a substantial 31% increase from the 45% of shoppers who reported poor quality product recommendations in 2008.

Response to this question remained virtually flat between 2007, when 46% of shoppers reported poor quality product recommendations, and 2008.

Analytical Reasoning

However, the acquisition, as described by Michael Arrington at Uncrunched, suggests that eBay wants to use the start-up’s analytics capabilities for additional reasons.

Arrington says the Hunch team will also analyze eBay purchase and sales data to predict inflations or recessions that may be on the horizon.

Following Wal-Mart’s Lead

Ebay is following Wal-Mart’s lead. Earlier this year, the company acquired Kosmix, developer of Tweetbeat Firsthand, a plug-in that scans the Internet for references to prominent people or organizations that have Twitter accounts and then provides readers of those pages with their latest tweets.

Wal-mart bought the social media company for its analytical expertise to be used in the newly-formed formed @WalmartLabs unit, with its social media bona fides almost an after-thought to the retailer.