Transcript
Page 1: Online Auction Business Model

Online Auction Business Model

NeBCC

Autumn 2008

SEMC 06 Transferable Skills

Carol Shen Jung Pai

Page 2: Online Auction Business Model

Introduction:

• Current Research Interests– Online auction platform’s feasibility in the

current and future markets– eBay’s strength and weakness– Rival: Amazon.com– Recommend some solutions to solve

eBay’s existing problems and to secure eBay’s leading position in the action market

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Online Action Environment

• Thanks to technology

• Online sales estimate: £ 19.5 billion in 2008

• Online store (Amazon) vs. Online Auction (eBay)

• Price-driven competitive market

• Buyer: Easier, faster, and more convenient

• Seller: save on operating and overhead costs, more potential customers

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eBay• The leader of the online auction markets

• Founded by Pierre Omidyar in 1995

• Auction: matches sellers and buyer’s needs

• Millions of products listed and sold everyday

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eBay Facts

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Companies Related to eBay• PayPal

– online money transfer

– Middleware between seller and buyer

• Skype– Ease the communication between seller and buyer

through chat, phone, and video conferencing

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eBay’s Revenue Diversification

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eBay’s Strength

• Current leader in the online auction market – fame and popularity

• 309 million registered users

• 39 localized websites with 28 different languages

• Cooperate with other Skype and PayPal

• Marketing features - boost up sales

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eBay’s Weakness

• Fraud ( <0.1% on total transactions)

• Identity theft (needs to strength security and privacy protection)

• Competitive rival: amazon.com

• Loop holes in the feedback system

• Limited control over buyers and sellers– mainly rely on mutual trust

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Problem 1: Fraud Accounts

• Most serious problem on eBay

• Registered with false personal information

• Fraudulent sellers: – Listed false descriptions– Do not possess the items that listed– Fake feedback history– Collect money from the buyers and then

disappear from eBay or register with another user ID

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Solutions to Problem 1

• Limit one account per person (request personal ID: SS# or drivers license

• discourage payments with cash, cheques, bank transfers, and direct debit / credit card

• Encourage paying with PayPal

• Enhance buyer protection policies

• Categorized feedback system – grouping feedbacks by transaction prices

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Problem 2: Unauthorized Access / Identity Theft

• Hackers try to break in other users’ accounts – for financial rewards or for FUN?

• Methods of break-in1. Guess password – least technical

2. Use “I forgot my password” features

3. Break into eBay’s member database system – most technical

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Solutions for Problem 2

Guess password and use “I forgot my password” features can be solved easily – changing password frequently, combination of

letters and numbers, notify the user through e-mail when password is requested

Break into eBay’s database Safer security system – block all potential

hackersFirewalls –physical and software – strict accessSecurity software – keep undated

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Problem 3: Quality Control

• To protect the buyers

• Difficult to regulate: no one will check the products physically if they match the descriptions – based on mutual trusts

• Problems: Law-suits – Ex. Louis Vuitton suits eBay for allowing the

sellers to sell fake items on eBay

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Solutions to Problem 3

• Quality control system (different for each category)– Luxury items: source and proof of purchase if

necessary– High-value listings (properties, automobiles):

work with appraisal or credit check companies– Second-hand products: grading scales to reveal

the true condition of the products

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Problem 4: Database Storage

• Needs to store massive database in a secure environment– 84.5 millions active users– 112 million listings at any given time worldwide– Localized websites in 39 countries

• Efficiency vs. costs vs. security

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Solution to Problem 4

• Currently uses Sun Microsystems’ Sun Fire T2000, X4100 servers, and Solaris 10.– Negotiate a better deal: customized software and date

storage system (feasibility & efficiency)

• US – primary marketplace (>50% transactions)– Keep stability, security, and speed– Invest heavily – perhaps supercomputer

• International marketplace– Clusters or grids depends on the country– Joint venture with local IT infrastructure companies

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Conclusion• Challenge of the rival (amazon.com)

– Declined revenue in 2007 (Amazon’s revenue ↑41%)– Amazon: warehouse, guaranteed delivery, efficient (fixed

low cost – no need to wait) • Methods to ensure eBay’s leading position

– Launch e-stores with other warehouses and brands

• Future Market trend– eBay’s online auction market (both US and international) -

slow growth rate– Revenue growth mostly from:

• Communication transaction – Skype• Payment transaction – PayPal

– Invest in the Fast growth markets instead of slow growing ones

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Bibliography• Ackerman, Elise. “eBay’s Biggest challenge: Amazon.com.” San Jose Mercury News. • 27 Aug. 2008. Pop Matters. 07 Nov. 2008 • <http://www.popmatters.com/pm/article/ebays-biggest-challenge-amazoncom>.•  • “eBay” 2008. Wikipedia. 20 Oct. 2008 <http://en.wikipedia.org/wiki/EBay>.•  • “eBay Inc.: A Short History.” ebay Media Center. 2008. eBay Inc. 18 Oct. 2008 • <http://news.ebay.com/about.cfm>. •  • “eBay Drives Explosive Growth using Sun Technology and Sun Services.” Customer • Snapshot: Technology – eBay. 2008. Sun Microsystems. 06 Nov. 2008 • <http://www.sun.com/customers/servers/ebay.xml>.•  • “eBay Inc. Reports Third Quarter 2008 Results.” Fast Facts. 2008. eBay Inc. 06 • Nov. 2008 <http://files.shareholder.com/downloads/EBAYPRESS/451409559x• 0x204060/29A0BEDF-A666-4654-B1E4-C1D6DDC294A8/eBayIncFactsheet.pdf>.•  • “eBay Marketplaces Fast Facts.” Fast Facts. 2008. eBay Inc. 06 Nov 2008 • <http://files.shareholder.com/downloads/EBAYPRESS/451409559x0x223370/C99E1580-C708-46FA-A1B5-3FB94A64ABB2/

eBayMarketplacesFastFacts.pdf>•  • “Online Action Business Model.” 2008. Wikipedia. 25 Sept. 2008 • <http://en.wikipedia.org/wiki/Online_auction>.•  •  • “Online Shopping Continues to Boom.” 16 April 2008. Which News. 28 Oct. 2008 • <http://www.which.co.uk/news/2008/04/online-shopping-continues-to-boom-136546.jsp>.•  • “PayPal.” Security and Resolution Center. 2008. eBay Inc. 02 Nov. 2008.• < http://pages.ebay.com/paypal/index.html>.•  • “Registration & Sign In.” Help. 2008. eBay Inc. 01 Nov, 2008• <http://pages.ebay.com/help/account/registration.html#>.

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Thank You

Q&A


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