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  1. 1. EBay Inc. internet business models text and cases Anup Sharma
  2. 3. Index <ul><li>Company Overview </li></ul><ul><li>Origin and evolution </li></ul><ul><li>The industry </li></ul><ul><li>Business strategy </li></ul><ul><li>Competition </li></ul><ul><li>GBF.. </li></ul><ul><li>Conclusion </li></ul>
  3. 4. History <ul><li>1995 – founder Pierre Omidyar, graduate from Tufts University, encouraged by his wife’s hobby. </li></ul><ul><li>Skoll, Omidyar’s partner joined him as first president. </li></ul><ul><li>1996 – incorporated in San Jose, CA </li></ul><ul><li>Sept. 1998 – eBay first IPO. $18 per stock. </li></ul><ul><li>97, Meg Whitman, joins as CEO. HBS </li></ul>
  4. 5. Company Overview <ul><li>An online auction platform that facilitates transaction between buyers and sellers of goods and services. </li></ul><ul><li>Mission &Vision: </li></ul><ul><li>eBay’s Vision is to provide a global online trading platform where practically anyone can trade practically anything. </li></ul>
  5. 6. Industry information <ul><li>Total value of global e-commerce transactions - $657 b </li></ul><ul><li>Number of users online 534 m </li></ul><ul><li>B2B auction transaction growth from 98 to 2OOO was $8 b to $52 b </li></ul><ul><li>Increased awareness among users towards the potential of internet as a trading platform. </li></ul>
  6. 7. Business Model <ul><li>Seller uploads the picture and description of the item to be sold. </li></ul><ul><li>Sale ends at predetermined time. </li></ul><ul><li>High bidder and seller contact each other and make arrangements of shipment. </li></ul><ul><li>Buyer sends funds to seller {money order, check, PayPal}, seller sends goods. </li></ul><ul><li>Buyer and seller then grade each other through feedback forums. </li></ul>
  7. 8. Revenue model and profit <ul><li>Fees for the seller to post the item, any promotion activities and final sale commission. </li></ul><ul><li>Advertising revenue- 2% of TR </li></ul><ul><li>Selling profit is approx 9% of TR </li></ul><ul><li>Major money comes from listing and trading services -89% of TR </li></ul>
  8. 9. Value Proposition <ul><li>Buyer </li></ul><ul><ul><li>Massive Selection </li></ul></ul><ul><ul><li>More convenient </li></ul></ul><ul><ul><li>Saves time and money </li></ul></ul><ul><ul><li>Value added </li></ul></ul><ul><li>Seller </li></ul><ul><ul><li>- Broadens market </li></ul></ul><ul><ul><li>- Lower Distribution Cost </li></ul></ul><ul><ul><li>- maximize selling price </li></ul></ul><ul><ul><li>- repeat business and clientele </li></ul></ul>
  9. 10. The Growth <ul><li>In 97, the revenue hit $5.7m </li></ul><ul><li>98, Acquires Jump, Inc., the developer and operator of Up4Sale, an online trading service with an auction format. </li></ul><ul><li>98, Special strategic alliance with AOL. Revenue grows 724% </li></ul><ul><li>99, acquires Kruse, Inc., a company that conducts auctions and performs appraisal services and auctioneer training for classic car auctions. </li></ul>
  10. 11. Growth cont. <ul><li>99, Acquires Billpoint, Inc., a firm that develops centralized turnkey authorization, billing, and payment solutions </li></ul><ul><li>99, eBay goes online in the United Kingdom and Canada. </li></ul><ul><li>2000, acquires Half.com Inc. </li></ul><ul><li>Heavy investment in international markets including Spain, UK </li></ul><ul><li>2003: Transactions for the year near the $20 billion mark. Sales exceed $2 billion. </li></ul><ul><li>2004, International expansion in India-bazee.com and Germany. </li></ul><ul><li>2005, buys shopping.com and places a bid for skype.com </li></ul>
  11. 12. Financials <ul><li>A presence in over 20 countries internationally contributes to 40% of total revenue. </li></ul><ul><li>Main competitors, Yahoo! and Amazon have seen 65% and 61% revenue growth respectively over 6 year period from ‘98 to ‘03 </li></ul><ul><li>eBay’s ’98 revenue was 47.4 million; ’03 jumped to $2.1 billion, a 134% average increase over previous year. </li></ul>
  12. 13. Acquisition of PayPal <ul><li>PayPal uses existing electronic infrastructure of bank accounts and credit cards to allow “small” monetary exchanges online. </li></ul><ul><li>Its convenient for small businesses and individuals, because they can collect online payments without difficult set-up. </li></ul><ul><li>eBay acquired PayPal in 2002 and has integrated it throughout its website as a payment option for auctions. </li></ul>
  13. 14. Velocity of trading <ul><li>Processes a Pocket PC in UK very six minutes. </li></ul><ul><li>Mobile phone every 3O seconds in Germany. </li></ul><ul><li>A Volkswagen is sold every 25 minutes in Germany. </li></ul>
  14. 15. eBay’s Revenue 1998 2003
  15. 16. Threats or Issues <ul><li>Bargaining power of suppliers. </li></ul><ul><li>Substitutes product or services such as b2b, b2c service providers. </li></ul><ul><li>Increasing competition from Amazon and yahoo. </li></ul><ul><li>No barrier to entry in the industry. </li></ul><ul><li>Buyer-seller frauds </li></ul><ul><li>Technology failure or/and change </li></ul>
  16. 17. Issue of privacy and trust <ul><li>EBay’s view and approach. </li></ul><ul><li>Trust is facilitated by fair information and principles. </li></ul><ul><li>Users should be provided with notice and communication, choice and control, security, authentication and enforcement. </li></ul><ul><li>eBay has earned this trust in time by consistent service. </li></ul>
  17. 18. eBay’s follow up <ul><li>Target key product categories for special users. </li></ul><ul><li>Continue developing community tools. </li></ul><ul><li>Enhance the community for women and senior citizens. </li></ul><ul><li>Stress on adding services and features to make trading easier. </li></ul><ul><li>Expand value added services. </li></ul><ul><li>Major focus on trust and safety programs </li></ul><ul><li>Maximum transparency. </li></ul>
  18. 19. EBay's tackle of security <ul><li>Feedback forum- check the business practices or reputation of any buyer or seller on eBay. </li></ul><ul><li>Escrow - inspection of the product purchased before payment is being sent. </li></ul><ul><li>Fraud protection program- coverage of users up to $2OO. </li></ul><ul><li>Verified rights owner program- make sure that items do not violate intellectual property rights. </li></ul><ul><li>Neutral dispute resolution options. </li></ul>
  19. 20. Popular Subsidiaries <ul><li>Half.com- offers an organized online market place to buy and sell high quality previously owned mass market goods. </li></ul><ul><li>EBay stores- expands the market place for sellers by allowing them to customize shopping destination to merchandise their products. </li></ul><ul><li>EBay motors: Internet’s largest auction place to buy anything automotive. </li></ul>
  20. 21. Subsidiaries services <ul><li>EBay professional services- serving fast growing marketplace by providing a destination on eBay to find professionals. </li></ul><ul><li>Ebay local trading- allow users to browse items near them and browse through local interests. </li></ul><ul><li>Ebay premier- showcases fine art, antiques, fine wines and rare collectibles from leading auctions and dealers. </li></ul><ul><li>Ebay live auctions- real time bidding on items being sold on sale floor. </li></ul>
  21. 22. Competition <ul><li>Major Competitors- </li></ul><ul><ul><li>Amazon </li></ul></ul><ul><ul><li>AOL </li></ul></ul><ul><ul><li>Yahoo </li></ul></ul><ul><li>Traditional stores </li></ul><ul><ul><li>Wal-Mart </li></ul></ul><ul><ul><li>Dell </li></ul></ul><ul><ul><li>Macy’s </li></ul></ul><ul><ul><li>Home Depot </li></ul></ul>
  22. 23. Ebay Vs Yahoo Not as wide wiiide scope no yes Charge of posting none yes insurance Better than eBay Not as efficient response Less likely More likely Chances of buy/sell To buyer and seller when item is sold Up to 5% of closing price commission No charge to any buyers or sellers Based on the reserve price of the item Fee 14 days 1O days Max duration Yahoo Ebay content
  23. 24. eBay Vs Competition- facts <ul><li>eBay had great first mover advantage and brand name establishment in the U.S. </li></ul><ul><li>Google could also be a potential competitor but management does not see it as threat. </li></ul><ul><li>In the International markets though, Yahoo moved in first and EBay is suffering from that still.( Japan and other south Asian markets. </li></ul><ul><li>Amazon and yahoo stole most of the market share during three ebay crashes during 99. </li></ul><ul><li>EBay does have its supremacy in the U.S. with yahoo, Amazon and Google following leaders. </li></ul>
  24. 25. GBF <ul><li>Network effects </li></ul><ul><ul><li>Sellers want to sell their item on the auction service with the most buyers, so they put their items up for sale on eBay. </li></ul></ul><ul><ul><li>Buyers want to find the best prices with many sellers, so they go to eBay. </li></ul></ul><ul><li>Economies of scale </li></ul><ul><ul><li>Cost allocation over broader range of transaction being processed. </li></ul></ul><ul><li>Customer Retention </li></ul><ul><ul><li>Why would a customer would want to leave the biggest trading platform? </li></ul></ul><ul><ul><li>Excellent opportunity to find similar interest sellers and buyers. </li></ul></ul>
  25. 26. Reason for success <ul><li>Mature and diverse board of directors – </li></ul><ul><li>7 outsiders, 1 insider, 1 related insider </li></ul><ul><li>Strong management team lead by </li></ul><ul><li>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. </li></ul><ul><li>Brand name development – eBay has carefully developed a brand name based on ease and trust. They have created the defacto online trading platform. </li></ul>
  26. 27. Questions are welcome at this time. Thank you for your continued attention..