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eBay acquired PayPal in 2002 and has integrated it throughout its website as a ... Ebay premier- showcases fine art, antiques, fine wines and rare collectibles ...

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slide1

EBay Inc.

internet

business models

text and cases

Anup Sharma

index
Index
  • Company Overview
  • Origin and evolution
  • The industry
  • Business strategy
  • Competition
  • GBF..
  • Conclusion
history
History
  • 1995 – founder Pierre Omidyar, graduate from Tufts University, encouraged by his wife’s hobby.
  • Skoll, Omidyar’s partner joined him as first president.
  • 1996 – incorporated in San Jose, CA
  • Sept. 1998 – eBay first IPO. $18 per stock.
  • 97, Meg Whitman, joins as CEO. HBS
company overview
Company Overview
  • An online auction platform that facilitates transaction between buyers and sellers of goods and services.
  • Mission &Vision:

eBay’s Vision is to provide a global online trading platform where practically anyone can trade practically anything.

industry information
Industry information
  • Total value of global e-commerce transactions - $657 b
  • Number of users online 534 m
  • B2B auction transaction growth from 98 to 2OOO was $8 b to $52 b
  • Increased awareness among users towards the potential of internet as a trading platform.
business model
Business Model
  • Seller uploads the picture and description of the item to be sold.
  • Sale ends at predetermined time.
  • High bidder and seller contact each other and make arrangements of shipment.
  • Buyer sends funds to seller {money order, check, PayPal}, seller sends goods.
  • Buyer and seller then grade each other through feedback forums.
revenue model and profit
Revenue model and profit
  • Fees for the seller to post the item, any promotion activities and final sale commission.
  • Advertising revenue- 2% of TR
  • Selling profit is approx 9% of TR
  • Major money comes from listing and trading services -89% of TR
value proposition
Value Proposition
  • Buyer
    • Massive Selection
    • More convenient
    • Saves time and money
    • Value added
  • Seller

- Broadens market

- Lower Distribution Cost

- maximize selling price

- repeat business and clientele

the growth
The Growth
  • In 97, the revenue hit $5.7m
  • 98, Acquires Jump, Inc., the developer and operator of Up4Sale, an online trading service with an auction format.
  • 98, Special strategic alliance with AOL. Revenue grows 724%
  • 99, acquires Kruse, Inc., a company that conducts auctions and performs appraisal services and auctioneer training for classic car auctions.
growth cont
Growth cont.
  • 99, Acquires Billpoint, Inc., a firm that develops centralized turnkey authorization, billing, and payment solutions
  • 99, eBay goes online in the United Kingdom and Canada.
  • 2000, acquires Half.com Inc.
  • Heavy investment in international markets including Spain, UK
  • 2003: Transactions for the year near the $20 billion mark. Sales exceed $2 billion.
  • 2004, International expansion in India-bazee.com and Germany.
  • 2005, buys shopping.com and places a bid for skype.com
financials
Financials
  • A presence in over 20 countries internationally contributes to 40% of total revenue.
  • Main competitors, Yahoo! and Amazon have seen 65% and 61% revenue growth respectively over 6 year period from ‘98 to ‘03
  • eBay’s ’98 revenue was 47.4 million; ’03 jumped to $2.1 billion, a 134% average increase over previous year.
acquisition of paypal
Acquisition of PayPal
  • PayPal uses existing electronic infrastructure of bank accounts and credit cards to allow “small” monetary exchanges online.
  • Its convenient for small businesses and individuals, because they can collect online payments without difficult set-up.
  • eBay acquired PayPal in 2002 and has integrated it throughout its website as a payment option for auctions.
velocity of trading
Velocity of trading
  • Processes a Pocket PC in UK very six minutes.
  • Mobile phone every 3O seconds in Germany.
  • A Volkswagen is sold every 25 minutes in Germany.
threats or issues
Threats or Issues
  • Bargaining power of suppliers.
  • Substitutes product or services such as b2b, b2c service providers.
  • Increasing competition from Amazon and yahoo.
  • No barrier to entry in the industry.
  • Buyer-seller frauds
  • Technology failure or/and change
issue of privacy and trust
Issue of privacy and trust

EBay’s view and approach.

  • Trust is facilitated by fair information and principles.
  • Users should be provided with notice and communication, choice and control, security, authentication and enforcement.
  • eBay has earned this trust in time by consistent service.
ebay s follow up
eBay’s follow up
  • Target key product categories for special users.
  • Continue developing community tools.
  • Enhance the community for women and senior citizens.
  • Stress on adding services and features to make trading easier.
  • Expand value added services.
  • Major focus on trust and safety programs
  • Maximum transparency.
ebay s tackle of security
EBay's tackle of security
  • Feedback forum- check the business practices or reputation of any buyer or seller on eBay.
  • Escrow- inspection of the product purchased before payment is being sent.
  • Fraud protection program- coverage of users up to $2OO.
  • Verified rights owner program- make sure that items do not violate intellectual property rights.
  • Neutral dispute resolution options.
popular subsidiaries
Popular Subsidiaries
  • Half.com- offers an organized online market place to buy and sell high quality previously owned mass market goods.
  • EBay stores- expands the market place for sellers by allowing them to customize shopping destination to merchandise their products.
  • EBay motors: Internet’s largest auction place to buy anything automotive.
subsidiaries services
Subsidiaries services
  • EBay professional services- serving fast growing marketplace by providing a destination on eBay to find professionals.
  • Ebay local trading- allow users to browse items near them and browse through local interests.
  • Ebay premier- showcases fine art, antiques, fine wines and rare collectibles from leading auctions and dealers.
  • Ebay live auctions- real time bidding on items being sold on sale floor.
competition
Competition
  • Major Competitors-
    • Amazon
    • AOL
    • Yahoo
  • Traditional stores
    • Wal-Mart
    • Dell
    • Macy’s
    • Home Depot
ebay vs competition facts
eBay Vs Competition- facts
  • eBay had great first mover advantage and brand name establishment in the U.S.
  • Google could also be a potential competitor but management does not see it as threat.
  • In the International markets though, Yahoo moved in first and EBay is suffering from that still.( Japan and other south Asian markets.
  • Amazon and yahoo stole most of the market share during three ebay crashes during 99.
  • EBay does have its supremacy in the U.S. with yahoo, Amazon and Google following leaders.
slide24
GBF
  • Network effects
    • Sellers want to sell their item on the auction service with the most buyers, so they put their items up for sale on eBay.
    • Buyers want to find the best prices with many sellers, so they go to eBay.
  • Economies of scale

Cost allocation over broader range of transaction being processed.

  • Customer Retention
    • Why would a customer would want to leave the biggest trading platform?
    • Excellent opportunity to find similar interest sellers and buyers.
reason for success
Reason for success
  • Mature and diverse board of directors –

7 outsiders, 1 insider, 1 related insider

  • Strong management team lead by

Meg Whitman. Senior staff consists of experienced managers from companies such as PepsiCo and Disney with an average of 20 yrs. of business experience and a strong vision for the company.

  • Brand name development – eBay has carefully developed a brand name based on ease and trust. They have created the defacto online trading platform.