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  1. EBay Inc. internet business models text and cases Anup Sharma

  2. Index • Company Overview • Origin and evolution • The industry • Business strategy • Competition • GBF.. • Conclusion

  3. 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

  4. 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.

  5. 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.

  6. 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.

  7. 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

  8. 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

  9. 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.

  10. 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

  11. 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.

  12. 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.

  13. 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.

  14. eBay’s Revenue 1998 2003

  15. 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

  16. 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.

  17. 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.

  18. 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.

  19. 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.

  20. 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.

  21. Competition • Major Competitors- • Amazon • AOL • Yahoo • Traditional stores • Wal-Mart • Dell • Macy’s • Home Depot

  22. Ebay Vs Yahoo

  23. 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.

  24. 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.

  25. 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.

  26. Questions are welcome at this time.Thank you for your continued attention..