eBay was founded in 1995 by Pierre Omidyar with the belief that people are basically good. It created an online marketplace that allowed individuals to sell items directly to other individuals. eBay grew rapidly and now has over 90 million active users worldwide who trade over $62 billion worth of goods each year on its platform. eBay's success was due to timing its launch during the growth of e-commerce and online shopping in the 1990s. It provided a platform for individuals to sell items rather than just retailers.

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2. “Give the individual the power to be a producer as well as a consumer”
“People naturally gravitate towards eBay because it's the largest marketplace. We're the
original. We've been around the longest and so far, we've been able to hold our own.”
‐ Pierre Omidyar
eBay was founded with a simple idea‐ People are basically good. This fundamental belief
created a completely new kind of market place, forever transforming e‐commerce. Today
eBay’s values continue to guide how eBay does business and connects buyers and sellers
around the world.
eBay has built an online person‐to‐person trading community on the Internet, using the
World Wide Web. Buyers and sellers are brought together in a manner where sellers are
permitted to list items for sale, buyers to bid on items of interest and all eBay users to
browse through listed items in a fully automated way.
Founded by Pierre Omidyar on September 3, 1995 at San Jose, California, is the World’s
largest online market place with over 9 billion USD of revenue (Exhibit 1) with services
worldwide. Today, eBay community includes more than 90 million active registered users
worldwide and a global presence in 39 markets, including the U.S. eBay provides an
international platform where practically anyone can trade practically anything. eBay enables
trade on a local, national and international basis with customized sites in markets around
the world. Through an array of services, eBay is enabling global ecommerce for an ever‐
growing online community. eBay connects a diverse and passionate community of individual
buyers and sellers, as well as small businesses. Their collective impact on e‐commerce is
staggering: In 2010, the total worth of goods sold on eBay was $62 billion ‐‐ more than
$2,000 every second.
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3. Company Background
The online auction website was founded as AuctionWeb in San Jose, California, on
September 3, 1995, by French‐born Iranian‐American computer programmer Pierre Morad
Omidyar (born June 21, 1967) as part of a larger personal site that included, among other
things, Omidyar's own tongue‐in‐cheek tribute to the Ebola virus. One of the first items sold
on eBay was a broken laser pointer for $14.83. Astonished, Omidyar contacted the winning
bidder to ask if he understood that the laser pointer was broken. In his responding email,
the buyer explained: "I'm a collector of broken laser pointers."
Chris Agarpao was hired as eBay's first employee and Jeffrey Skoll was hired as the first
president of the company in early 1996. In November 1996, eBay entered into its first third‐
party licensing deal, with a company called Electronic Travel Auction to use SmartMarket
Technology to sell plane tickets and other travel products. Growth was phenomenal; in
January 1997 the site hosted 2,000,000 auctions, compared with 250,000 during the whole
of 1996. The company officially changed the name of its service from AuctionWeb to eBay in
September 1997.
Originally, the site belonged to Echo Bay Technology Group, Omidyar's consulting firm.
Omidyar had tried to register the domain name echobay.com, but found it already taken by
the Echo Bay Mines, a gold mining company, so he shortened it to his second choice,
eBay.com. In 1997, the company received $6.7 million in funding from the venture capital
firm Benchmark Capital.
Meg Whitman was hired as eBay President and CEO in March 1998. At the time, the
company had 30 employees, half a million users and revenues of $4.7 million in the United
States. eBay went public on September 21, 1998, and both Omidyar and Skoll became
instant billionaires. eBay's target share price of $18 was all but ignored as the price went to
$53.50 on the first day of trading.
As the company expanded product categories beyond collectibles into almost any saleable
item, business grew quickly. In February 2002, the company purchased IBazar; a similar
European auction web site founded in 1995 and then bought PayPal on October 14, 2002.
In early 2008, the company had expanded worldwide, counted hundreds of millions of
registered users, 15,000+ employees and revenues of almost $7.7 billion. After nearly ten
years at eBay, Whitman made the decision to enter politics. On January 23, 2008 the
company announced that Whitman would step down on March 31, 2008. Whitman
remained on the Board of Directors and continued to advise Donahoe through 2008. Now
Meg Whitman has been recruited by Hewlett Packard as its group CEO.
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4. John Donahoe has been the CEO and President of eBay since 2008. Donahoe came to eBay
in February 2005 as President of eBay Marketplaces, responsible for all elements of eBay's
global ecommerce businesses. In late 2009, eBay completed the sale of Skype for $2.75
billion to Microsoft Corporation, but will still own 30% equity in the company.
The Business Opportunity
In recent decades there had been a significant increase in the number of consumer
electronic products sold.
In 1995 the United States economy moved well into its fifth year of economic expansion
since the last recession ending March 1991 and experienced the much publicized "soft
landing." The Federal Reserve (Fed) engineered this "soft landing" with a series of interest
rate hikes from February 1994 to February 1995. The "soft landing" refers to the slowing
down of an overheating economy on the verge of driving up inflation, to an economy
growing near its full‐employment growth rate with low inflation. Therefore there was a
marginal rise in per capita in the income of people and also in the purchasing power. Online
shopping was in its initial stages. Amazon was the first company to open an online shopping
mall in in 1995 which was later followed by eBay in 1996. From banking to ordering pizzas
(Pizza Hut was pioneer in opening an online pizza shop), almost everything was available on
internet. eBay started its operations in order to pitch upon the rapid growth in this new
upcoming sector.
In the era of tech revolution, the world was witnessing evolution of various products and
revolution in quite a lot of technologies. The dependence over internet was increasing at a
very fast pace. Companies like Dell had already tasted success by going directly to the
customers (the famous Direct Model of Dell which was later imitated by other IT majors like
Hewlett Packard). Also in 1995 Jeff Bezos launched Amazon.com. It was launched initially as
an online bookstore and later expanded its portfolio to other product categories as well
witnessing the successful business model of eBay. Cisco also began to aggressively use
internet for commercial transactions. In that case the launch of eBay was very well timed.
Online shopping is a form of electronic commerce where the buyer is directly online to the
seller's computer usually via the internet (Exhibit 2). There is no intermediary service
involved. eBay further expanded this ecosystem. It was probably the first platform to bring
together various sectors of eCommerce. eBay was a trading floor for Business to Customer
(B2C), Business to Business (B2B) as well as Customer to Customer (C2C).
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5. Environment also played a very important role in the success of eBay. eBay promoted the
concept of recycling old products and also saving other resources which were used in
physical trading of goods. With eBay an individual can shop from most parts of the world
with mere one click on mouse. Through eBay people could put their old gadgets, books,
games etc. on eBay which would otherwise just consume unnecessary space at home or
offices.
In 1990s people did not have many options to sell their products. Amazon was there but it
was more oriented towards providing a platform for resellers or retailers to sell their
products. eBay was a platform not only for retailers but also for individuals willing to sell
their products to market of their choice.
eBay went public on September 21, 1998, and both Omidyar and Skoll became instant
billionaires. eBay's target share price of $18 was all but ignored as the price went to $53.50
on the first day of trading (Exhibit 3).
eBay’s Business Model and Operations
Bay has built an online person‐to‐person trading community on the Internet, using the
World Wide Web. Buyers and sellers are brought together in a manner where sellers are
permitted to list items for sale, buyers to bid on items of interest and all eBay users to
browse through listed items in a fully automated way. The items are arranged by topics,
where each type of auction has its own category (Exhibit 4).
eBay has both streamlined and globalized traditional person‐to‐person trading, which has
traditionally been conducted through such forms as garage sales, collectibles shows, flea
markets and more, with their web interface. This facilitates easy exploration for buyers and
enables the sellers to immediately list an item for sale within minutes of registering.
Browsing and bidding on auctions is free of charge, but sellers are charged two kinds of
charges:
When an item is listed on eBay a non‐refundable Insertion Fee is charged, which ranges
between 30 cents and $3.30, depending on the seller's opening bid on the item. A fee is
charged for additional listing options to promote the item, such as highlighted or bold
listing.
A Final Value (final sale price) fee is charged at the end of the seller's auction. This fee
generally ranges from 1.25% to 5% of the final sale price.
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6. eBay notifies the buyer and seller via e‐mail at the end of the auction if a bid exceeds the
seller's minimum price, and the seller and buyer finish the transaction independently of
eBay. The binding contract of the auction is between the winning bidder and the seller only.
Along with the above stated bidding process, eBay also offers buyers to buy products
through buy it now price provided the respective seller has indicated a price for buy it now
(Exhibit 5). In buy it now, the buyer can simply checkout after buying the product unlike
auctions in which the buyer generally have to wait for listing to end.
As eBay’s business is heavily relied on monetary transactions, eBay have always made sure
that it provides a fraud free and safest platform to sellers and buyers.
In 2002 eBay bought PayPal for 1.5 billion dollars. PayPal was purchased to replace eBay’s
old payment service BillPoint. PayPal would offer a safer and more convenient way of
making electronic payments. There were two reasons eBay acquired PayPal to replace
BillPoint.
The first was to prevent eBay fraud. PayPal would provide a much safer way to purchase
products online because users would not have to transfer credit card data over the internet.
Users would be more protected against hackers who try to intercept credit card information
since that was becoming more and more common.
The second was to make the payment process faster and more convenient. With PayPal all
users would have to do is enter their PayPal id and then log into their account to confirm
purchases. That method would increases sales on eBay because of how easy it was. A hassle
free method of payment would mean more sales.
Payment system is very much country specific. In India eBay uses PayPal’s sister company
PaisaPay. Paisapay does not require the customer of eBay to make a separate account for
Paisapay. As soon as the buyer checkouts after buying the product, the seller has to put in
shipping details and Paisapay would release funds only when the buyer confirms receipt of
the product on eBay. This is as safe as any transaction could be.
Recently eBay introduced eBay Buyer Protection Program in order to protect interest of
buyers and solve the issues instantly. Any buyer who is facing any kind of problem with a
seller (product not delivered, fake product, wrong description etc.) can simply open a case
through eBay’s site and eBay’s team would initiate the process of solving the respective
issue. Similarly if a seller is facing any issue with the buyer (receipt of product not
confirmed, payment not made etc.) can open a case and get the issue resolved very soon.
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7. eBay’s success is also backed by eBay’s feedback system. Under feedback system, every
registered user of eBay gets a rating which is publically visible. Better the service better will
be feedback and more will be the business for sellers and more will be the authenticity of
buyer. Apart from feedback system, eBay have also introduced DSR (Detailed Seller Rating)
system in order to provide a glimpse of any seller’s performance on eBay.
In past five years, eBay have acquired over two dozen firms ranging from millions to billions
of dollars. Also eBay have been partnering with various organizations especially for the
purpose of charity.
eBay also had some bad times. eBay was charged with forcing people to use PayPal but later
this was justified by eBay claiming PayPal to be the safest medium for transactions. eBay
also got involved into controversy which included another online market player Craigslist.
Again the judgement came in the favour of eBay and currently eBay have over 28% stake in
the company.
Google being known as the king of internet have never left any sector associated to
internet. It entered the online video industry with YouTube, social networking with Google
Plus similarly it has entered into the online shopping industry with Google Shopping (placed
against eBay) with Google Wallet (placed against PayPal) being the medium of transactions.
But lately Google have realised that something can be successful only when they are carried
out by specialised firms. Hence giving its shopping a miss, Google have signed a multi‐year
contract with eBay regarding advertising system on eBay.
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8. Future of eBay
eBay with time have widened its portfolio to all the possible sectors. Something which eBay
prohibits selling on its site like alcohol, arms and ammunition, live animals, lottery tickets
etc. can never be traded or sold openly at any shopping market place. eBay is hence
concentrating more its existing portfolio is making sure that it provides hassle free dealing
to its users. eBay is also very much active in promoting charity auctions for good causes.
eBay have always faced stiff competition from rivals all across the world. Ease of trading and
safer gateways for transactions have always made eBay a favourite choice of users. eBay’s
share is trading at the levels of 30 USD per share (Exhibit 6) which is neither too bullish nor
too undervalued. eBay is a developing firm and is constantly increasing its reach across the
globe. eBay could have easily been a major hub for piracy but eBay’s monitoring system
have always protected eBay from becoming a platform for illegal activities. eBay have to
constantly maintain its integrity in order to remain market leader.
eBay is a perfect example of a very successful business model which started with a simple
idea and is expanding ever after.
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9. Exhibit 1
Exhibit 2
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10. Exhibit 3
Exhibit 4 (A snapsh
hot of eBay’
’s auction s ystem)
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11. Exhibit 5 (A snapsh
hot of eBay’
’s buy it now
w system)
Exhibit 6 (eBay’s Stock Analys
sis)
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1 t e

12. Bibliography
‐ http://en.wikipedia.org/wiki/EBay
‐ http://pages.ebay.in/community/aboutebay/news/ebayindiacorporatebackground.html
‐ http://pages.ebay.in/help/sell/insertion‐fee.html
‐ http://en.wikipedia.org/wiki/Electronic_commerce#Timeline
‐ http://pages.cs.brandeis.edu/~magnus/ief248a/eBay/history.html
‐ http://www.myincomespot.com/history‐of‐ebay.html
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