eBay: The Internet’s Auction Leader

By:

Rachel Taylor

Zach Evans

Brief History of Auctions

Babylon 500 B.C. – women were auctioned on the condition that they be married

Ancient Rome – bids were not called out in the open but through ‘discrete’ actions such as a wink or wave

Reference in Oxford English Dictionary of auctions taking place in Great Britain in 1595

Sotheby’s is founded in 1744 Christie’s is founded in 1766 Auctions migrated to America and were used

to liquidate goods at the end of a season

Company Overview

Founded in September 1995 2003 Employees: 6,200 (annual growth: 55.0%) Mission: “…to provide a global trading platform where

practically anyone can trade practically anything.” International sites that serve: Australia, Austria,

Belgium, Canada, France, Germany, Ireland, Italy, Korea, the Netherlands, New Zealand, Singapore, Spain, Sweden, Switzerland, Taiwan, and the U.K.

Has investments in Latin America and China through MercadoLibre.com and EachNet

Unique Characteristics

“eBay [is] running an enterprise unique to the Internet rather than trying to improve upon a business you could successfully plant in a strip mall.”

“The reason for eBay’s success is that it has taken on the same role that the government plays in the broader economy: setting the rules for commerce and enforcing them so that transactions are cheap, fair and predictable.”

Corporate Management

Pierre Omidyar – Founder & Chairman of the Board Meg Whitman – President & CEO Maynard Webb – COO Rajiv Dutta – CFO Jeff Jordan – Senior VP, U.S. Business William Cobb – Senior VP, International Matthew Bannick – Senior VP, Global Online

Payments Mike Jacobson – Senior VP, Legal Affairs, General

Counsel & Secretary

Top Competitors

Visitor Metrics – March/April 2004

23,638,000 visitors from work #6 ranking Just behind the U.S. Government

45,369,000 visitors from home #5 ranking Just behind Google and in front of the U.S.

Government #1 electronics site #1 home and garden site #1 clothing, shoes & accessories site

Financial Performance

U.S. Dollars (in thousands)

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

Net Revenues Net Income

Revenue Sources

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2001 2002 2003

U.S. International Payments

Users (millions)

42.461.7

94.9

17.8 27.741.2

0102030405060708090

100

2001 2002 2003

Active Users

Registered Users

Merchandise Listings (millions)

423.1

638.3

971

0

100

200

300

400

500

600

700

800

900

1000

2001 2002 2003

Merchandise Sales (millions)

$9,319

$14,868

$23,779

$0

$5,000

$10,000

$15,000

$20,000

$25,000

2001 2002 2003

Fees

For the Seller $0.30 to $4.80 insertion

fee $1.00 to $100.00 for

reserve price $0.15 to $1.00 for

additional pictures Closing Value fee

$0 – $25 : up to $1.31 $25 - $1,000 : up to

$28.12 Over $1,000 : $28.12 for

first $1,000 in value plus additional 1.50% of balance > $1,000.01

Other listing fees

For the Buyer There are no fees

associated with setting up an account

Buyers only pay the price of the auctions then win

Feedback Forums

Keeps levels of trust among users highAdds to sense of communityIncreases (perceived) switching costs

Users are less likely to use another auction provider because they would have to start over again

eBay Oddities

User attempted to sell one of their kidneys Auction read “Buyer pays all transplant and medical costs.” Turned out to be a hoax

eBay pulled the underwear category after users found ‘attractive’ individuals offering dirty and sweaty (or worse) garments Sellers tried to get around regulations by offering to

‘customize’ their wares Other fraudulent offerings:

Right to witness an execution Triplets A young man’s virginity

‘Do it eBay’ Ad Campaign

Late 2002 eBay returned to TV advertising for first time in two years

Campaign cost: $15 millionCampaign purpose: to break into the

retail mainstream

Questions?

Why do you think eBay has been as successful as they have?

Do you think buying something on eBay can have a negative effect on its perceived value?

Do you think that ‘eBayers’ have always existed or do you think that eBay has created a new way of thinking online?