EBAY IN 2002: THE CHALLENGES OF SUSTAINED GROWTH. eBay is the world’s online marketplace TM. Founded in 1995, eBay created a powerful platform for the sale of goods and services by a passionate community of individuals and businesses. On any given day, there are millions of items across thousands of categories for sale on eBay. eBay enables trade on a local, national and international basis with customized sites in markets around the world. In 1995, eBay created the first online person-to-person trading community on the Internet.
Today, eBay is the world’s leading e-commerce web site with nearly 4 million items for sale in over 4, 000 categories ranging from coins and stamps to toys and antiques. Every day, users around the country and the world list approximately 500, 000 items on our site to sell. Being the world’s leading e-commerce web site poses a great many challenges for eBay. Not the least among them is the daily challenge of protecting our web site from attack, abuse and misuse by hackers, database pirates and pranksters. As you undoubtedly have heard, last week eBay, Yahoo, e Trade, CNN and other well known e-commerce sites were victims of an insidious organized attack that shut down portions of their web sites.
At eBay, the principal attack occurred at approximately 3 o’clock on February 8 th and blocked legitimate access to eBay’s site for nearly 90 minutes. That attack was followed by a second attack on our site the next day, which we were effectively able to fend off within a few minutes. Let me explain why these attacks are so serious. This attack fundamentally disrupted business on our nation’s key e-commerce sites for several days. Although we don’t yet know who was behind this attack, it was obviously well planned and aimed directly at leading commercial web sites, such as ours. As we understand the facts, nefarious computer code was serpitiously planted in the computers of unsuspecting individuals and institutions, such as the University of California at Santa Barbara.
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These computers were then used to launch a sustained attack on leading web sites. The purpose of the attack was to block access to portions of these web sites by bombarding them with a huge volume of what is known as ICMP (Internet Control Message Protocol) traffic. This attack bombarded eBay with over 1 billion bits per second of bad traffic, nearly double eBay’s normal incoming traffic. This flood of bad traffic effectively blocked legitimate traffic from reaching our home page. web eBay is the world’s largest personal online trading community. eBay created a new market: efficient one-to-one trading in an auction format on the Web.
Individuals-not big businesses-use eBay to buy and sell items in more than 1, 600 categories, including collectibles, antiques, sports memorabilia, computers, toys, Beanie Babies, dolls, figures, coins, stamps, books, magazines, music, pottery, glass, photography, electronics, jewelry, gemstones, and much more. Users can find the unique and the interesting on eBay-everything from chintz china to chairs, teddy bears to trains, and furniture to figurines. As the leading person-to-person trading site, buyers are compelled to trade on eBay due to the large amount of content available. Similarly, sellers are attracted to eBay to conduct business where there are the most buyers. We provide over two million new auctions, and 250, 000 new items every day from which users may choose. Our Mission We help people trade practically anything on earth.
... is important because it increases the value of the service for other buyers and sellers •Listening Whitman has an uncommon humility and ... ?’ They want to know how we use eBay, if there are services that eBay can help us sell, and they are willing ... via the site. She encouraged eBay to offer various specialty sites under the eBay umbrella – much the way FTD’s global Web site, under ...
eBay was founded with the belief that people are honest and trustworthy. We believe that each of our customers, whether a buyer or a seller, is an individual who deserves to be treated with respect. We will continue to enhance the online trading experiences of all our constituents-collectors, hobbyists, small dealers, unique item seekers, bargain hunters, opportunistic sellers, and browsers. The growth of the eBay community comes from meeting and exceeding the expectations of these special people. web eBay and AutoTrader. com’s Recently Launched co-branded Automobile Site To Feature Services From Saturn, escrow.
com, E-LOAN, Dependable Auto Shippers and Hagerty SAN JOSE, Calif. , June 12, 2000 – eBay (NASDAQ: EBAY; web), the world’s leading person-to-person online trading community, is teaming up with Saturn and its retailers to provide a nationwide automobile inspection service. The new inspection service, to be developed and offered by Saturn, is slated to be part of eBay and AutoTrader. com’s recently launched co-branded automobile site, which can be accessed through eBay or web eBay and Saturn plan to implement a program that offers most used vehicle sellers on the eBay and AutoTrader. com co-branded site the opportunity to purchase a comprehensive inspection that millions of potential buyers can view online. The eBay and AutoTrader.
com co-branded site already includes services designed to deliver car buyer “peace-of-mind” and ease the online transaction process through integrated escrow, finance, insurance options and shipping services – from escrow. com, E-LOAN, Dependable Auto Shippers (DAS) and Hagerty Classic Insurance. The site is expected to include the following features, some available today with others planned to be added in the near future: . A proposed new feature for the site is expert vehicle inspection services from participating Saturn retailers nationwide – so that buyers will be able to purchase a vehicle online with even more confidence. Under the program being developed, participating Saturn retailers will inspect used vehicles from most makers and deliver the award-winning customer service the company pioneered in the automobile market…
... through the MSN Sites/Services. USE OF SERVICES The MSN Sites/Services may contain e-mail services, bulletin board services, chat areas ... below: CarpointGamingZoneMSN Health MSN MoneyHomeAdvisorMSN Hotmail Encarta Online MSN Music MSN Shopping (eShop) MSNBCAuctionsMSN Photos ... rights reserved. TRADEMARKS. Microsoft, Advisor FYI, Bookshelf, Car Point, Computing Central, Encarta, Front Page, Home Advisor ...
Escrow services and transaction management from escrow. com, allowing buyers to view and inspect their purchased automobile before providing payment. With this feature, currently available on the site, buyers can deposit their payment for a vehicle in a secure trust account and, if the buyer is satisfied with the vehicle, they can authorize the release of funds to the seller… Competitive financing options from E-LOAN. Providing quotes from five leading national lenders, E-LOAN’s financing options allow buyers to quickly and easily get a loan to purchase a used car, offering some of the lowest rates in the industry and online approvals.
E-LOAN provides financing for buyers who purchase cars from individuals and car dealerships. Now up and running on the site, this is the first time auto financing has been offered as part of person-to-person transactions at eBay… Safe, secure and prompt shipping services are currently available from DAS, bringing even more cars within the reach of buyers. Since 1954, DAS has been providing affordable vehicle relocation services throughout America and abroad.
A leader in the privately owned vehicle relocation market, the company has recently invested over $22 million in a state-of-the-art, satellite tracked fleet of transports. DAS delivers affordable shipping for nearly every type of used vehicle and, through its association with specialty carrier Passport, also provides shipping for high-end, exotic and antique cars – helping eBay buyers bring the car of their dreams within easy reach… Affordable collector car insurance from Hagerty Classic Insurance. Specializing in classic car insurance for antique and vintage autos, modified and custom cars, and exotic automobiles, Hagerty provides comprehensive coverage at low rates. Available today, classic car buyers on the site can save hundreds of dollars on their insurance by working with a company that understands how classic cars are driven, housed and maintained… New automobile search features, including search by make, model, year and location – all delivered in a striking, fun, easy-to-use web page that navigates the car buyers and sellers through the online auction format.
... consumer reports study (2007) found almost half of eBay buyers encountered deceptions. Gavish and Tucci cite a VeriSign study ... commerce, platforms, online payments services and online communications. It offers products and service to individuals and businesses. Established ... acquirer, performing payment processing for online vendors, auction sites, and other commercial users, for which it charges ...
“We are constantly striving to enhance transaction safety and convenience on our co-branded site with AutoTrader. com, and are excited about adding Saturn and our other great service providers as part of this effort,” said Simon Rothman, vice president and general manager for eBay’s automobile business. “eBay is popularizing the online auction format for everything automotive, giving anyone looking for a used vehicle new levels of control over what they pay and sellers access to eBay’s vibrant community of active buyers.” eBay launched a dedicated automobile area – for collector cars, general used cars, spare parts, and automobilia – on its site in August 1999, following a groundswell of auto listings from its community members and the company’s purchase of Kruse International, the world’s largest collector car auction house. Since then, eBay’s automobile category has grown exponentially and now accounts for over 25 percent of the value of the merchandise listed on the site. In March 2000 the company announced a long-term alliance with AutoTrader. com, to create the Internet’s largest auction-style marketplace to buy and sell used cars.
About eBay eBay (web), the world’s personal trading community, pioneered person-to-person online trading. Founded in 1995, eBay has developed an efficient and entertaining trading site on the Web that is available 24 hours a day, seven days a week. eBay has more than 12 million registered users. More than 500, 000 items are added daily in more than 4, 300 categories, including: antiques; automotive; books, movies and music; coins and stamps; collectibles; computers; dolls and figures; jewelry and gemstones; photos and electronics; pottery and glass; sports memorabilia; and toys. About AutoTrader.
com AutoTrader. com (web), the world’s largest used car marketplace, fundamentally improves the way people buy and sell cars by providing a comprehensive source of credible information and a selection of more than 1. 5 million used vehicles for sale. AutoTrader. com is the exclusive online distributor of the automotive listings contained in the Auto Trader (R) and AutoMart (R) print magazines published by Trader Publishing Company. These magazines are distributed in more than 136, 000 retail outlets with an estimated weekly circulation of 2.
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5 million copies. AutoTrader. com is also the exclusive online distributor of used car listings data collected by Manheim Auctions, Inc. and the Dealer Services Group of Automatic Data Processing, Inc. (NYSE: AUD).
com’s investors include Cox Enterprises, Inc. , Manheim Auctions, Inc. , Landmark Communications, Inc. , the Dealer Services Group of Automatic Data Processing, Inc. , and Kleiner Perkins Cau field & Byers. About Saturn Corporation Saturn Corporation entered the automotive market in 1990, bringing a new level of customer service to automotive retailing.
Saturn’s first products – the compact SL sedan, SW wagon and SC coupe – featured innovations such as space-frame construction and dent resistant polymer body panels. Saturn recently introduced the world’s first and only three-door coupe, followed in 1999 by a new line of mid-size cars, the L-Series. Saturn was created through a unique partnership between General Motors and the UAW. Saturn and its retailers, represented by over 425 facilities, share a strong focus on customer service, a focus that is an integral part of Saturn’s e-commerce initiatives.
For more information on Saturn and its products, please visit web Forward Looking Statement Statements in this press release that relate to future plans, objectives, expectations, performance, events, and the like are “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 and Securities Exchange Act of 1934. Future events, risks, and uncertainties, individually and in the aggregate, could cause actual results to differ materially from those expressed or implied in these statements. The factors include but are not limited to: timing and costs associated with developing the programs referenced above; user acceptance of the new site and features; speed and success of the development and integration efforts; adoption by Saturn retailers; effects of the “Y 2 K” problem; the Internet in general and the economy; general economic conditions; and other factors discussed in the “Forward Looking Information”, “Risk Factors” or “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections included in the company’s prospectuses, registration statements on Form S-1, quarterly reports on Form 10-Q, and annual reports on Form 10-K. web The History eBay was conceived initially as a result of a conversation between Pierre Omidyar and his wife, an avid Pez TM collector (she currently covets a collection of more than 400 dispensers).
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She commented to Pierre how great it would be if she were able to collect Pez dispensers and interact with other collectors over the Internet. As an early Internet enthusiast, Pierre knew that people needed a central location to buy and sell unique items and to meet other users with similar interests.
He started eBay to fulfill this need. Pierre launched eBay on Labor Day in September 1995. Since Yahoo had been attacked the day before, eBay had already started to prepare several countermeasures. When the attack began, we quickly took a number of steps to fight back. Initially, we put in a number of our own fire walls to repel the bad traffic, but the volume of that traffic was so heavy that the fire walls were ineffective. Quickly, we turned to our Internet Service Providers (“ISPs”), whose lines were bringing this bad traffic to our site.
We worked with these providers to develop filtering mechanisms to prevent bad traffic from even reaching our site. Within 90 minutes, the filter effectively stopped the bad traffic and allowed our site to return to normal service, even though the attack itself continued for an additional 90 minutes. The next day, a similar attack was launched against eBay at about 5: 30 p. m.
With our experience from the previous day and with a number of countermeasures already in place, eBay and its ISPs were able to quickly repel this attack without any disruption of eBay’s services. Let me be clear, this attack on our site was distinguished not by its sophistication, but by it sheer scale. On an ordinary day on our web site outbound traffic exceeds inbound traffic by a 10-to-1 margin. During this attack we noted that inbound traffic was so heavy that it actually equaled outbound traffic. It’s our view that computer intrusions and attacks on commercial web sites are serious crimes that require a forceful response. Although these crimes are widely viewed within the hacking community as little more than pranks, they are much more serious, as last week’s attacks demonstrate.
Prior to last week’s attacks, eBay had established a close working relationship with the computer crimes squad within the Northern California office of the Federal Bureau of Investigation (“FBI”).
eBay has long recognized that the best way to combat cyber crime, whether it’s fraud or hacking, is by working cooperatively with law enforcement. Therefore, last year we established procedures for notifying the FBI in the event of such an attack on our web site. As result of this preparation, we were able to contact the FBI computer intrusion squad during the attack and provide them with information that we expect will assist in their investigation. In the aftermath of the attack, eBay has also been able to provide the FBI with additional leads that have come to our attention. We believe that this latest attack illustrates the challenge faced by law enforcement in the investigation and prosecution of cyber crime, and the importance of assuring that the Justice Department is adequately funded to meet this challenge.
The Internet has become the backbone and lifeblood of the new world economy. And it is imperative that consumers retain the highest degree of confidence in its reliability and security. Leading high tech companies can work cooperatively together and meet many of the challenges posed by cyber-criminals. But industry alone can’t solve the problem without establishing a partnership with law enforcement. An important element in fighting this kind of cyber crime is ensuring that law enforcement both understands the technology, and has the tools it needs to work with private industry in investigating these crimes. The need for an effective Internet law enforcement presence is particularly important in areas of the country that have a high concentration of high tech companies, such as the Eastern District of Virginia and the Northern District of California.
Northern California, for example, has undergone a radical metamorphosis in the last 20 years, and is now home to more than 6, 000 high tech companies, many of which are the leading high tech companies in the world. This growth in the high tech industry has been accompanied by a corresponding growth in high tech crimes. These crimes are no less a threat to our economic viability than conventional crimes, and can be much more difficult to investigate and prosecute. The areas of the country that have a high concentration of high tech companies need resources dedicated to this growing problem. In Northern California, for example, the FBI’s computer intrusion squad and the United States Attorney’s Office must be adequately staffed to investigate and prosecute high tech-related crime.
Such crime is a serious issue. Computer intrusions and attacks have become increasingly frequent, costing companies billions of dollars each year. Other high tech-related crimes, such as theft of trade secrets, sale of counterfeit goods on the Internet and theft of computer and high tech components, also require intervention by law enforcement. According to a 1999 Rand Corporation study, theft of high technology components alone costs the industry $5 billion annually. The Justice Department cannot hope to keep up with this volume of work unless specific resources are targeted to provide them with badly needed agents and prosecutors in key high tech regions of the country. Likewise, it is impossible to effectively combat cyber crime unless law enforcement understands this new medium at least as well as the cyber-criminals do.
This requires both a sophisticated level of training, and up-to-date computer equipment. Private industry can play an important role in the training process. For example, eBay already provides regular training to law enforcement agencies to help them understand Internet commerce and the kinds of information available to assist them in finding and gathering evidence of cyber crimes. While this partnership between industry and law enforcement can play an important role in fighting cyber crime, it cannot substitute for the basic tools that law enforcement must have to be effective ~n agents, prosecutors, and computer equipment. It is important for this Subcommittee to send a message to cyber criminals throughout the world that the U. S.
Government can and will protect e-commerce from criminal activity. But if Congress is to send a credible message that cyber crimes will be investigated and prosecuted vigorously, law enforcement must have the resources to back up that message. We urge you to take this into consideration as you determine the appropriate funding level for these important law enforcement agencies. Ebay’s competitive position in on-line auction sector “To help practically anyone trade practically anything on earth” Rough Draft I. Introduction The number of dot coms seems to be shrinking everyday after an unfathomable number were created only a few years ago. The current dot coms are having trouble attaining enough revenue to break even, so to consider turning a profit is completely out of the question.
All this is occurring despite the fact that the Internet can reach more users than any other form of business, yet it seems that almost no one is capable of any success. One company that is not struggling and is one of the top-grossing companies on the Internet is eBay. EBay is an auction website and its journey from startup company only seven years ago to internet juggernaut today is amazing. eBay has put its loyalty in the user and continually strives to find the next innovation to make its sight better and easier for its user.
This concept has paid ten fold and they continue to follow this concept today, which is why they continue to have success and have seen increasing profits since their inception seven years ago by Pierre Omidyar. The Creation of EBay EBay was founded in Pierre Omidyar’s San Jose living room back in September 1995. It was from the start meant to be a market place for the sale of goods and services for individuals. Pierre saw eBay as a way to create a person-to-person trading community based on a democratized, efficient market where everyone could have equal access through the same medium, the Internet. He launched the online auction under the name of Auction watch at the domain name of web The name eBay stood for “electronic Bay area,” in which Pierre’s initial concept was to attract neighbors and other interested San Francisco Bay area residents to the site to buy and sell items of mutual interest. The first auctions charged no fees to either buyers or sellers and contained mostly computer equipment.
Pierre’s venture generated $1, 000 in revenue the first month and an additional $2, 000 the second. EBay continued to grow and Pierre knew he couldn’t handle this exponential growth alone so he brought in Jeff Skoll. Together the two of them hired techies, customer-support staff, and finance people. They set up their headquarters in San Jose, California.
By 1997, the company public, but Pierre didn’t feel he could continue to lead his company’s sustained growth. He decided Meg Whitman as the company’s CEO. At the time Whitman never considered the thought of leaving her current position for a tiny upstart Internet company that allows consumers to determine the price of goods for themselves. On the other end Pierre Omidyar had just convinced the perfect candidate to lead his company into the future and he had no idea what the future would hold, but he knew it would be good. II. Online Auctions An action is a method of buying and selling goods to the highest bidder.
A seller offers a particular product or service for sale, and the buyer who makes the highest offer for it is considered the auction winner. As the demand for a particular good rises among the buyers, the price also rises. Competition among bidders for a desirable good drives up the price. Sometimes the highest bid will exceed the generally accepted market value of the good, a phenomenon known as the “winners curse.” Online auctions worked in the same way as the traditional auctions, the difference is that the auction process over the Internet rather than at a specific geographic location with buyers and sellers physically present. In 2000, there were three categories of online auctions: Business-to-business auctions, which involves such items as computers, used equipment, and surplus merchandise. Business-to-consumer auction, in which businesses sold goods and services to consumers via the Internet.
Many such actions involved companies interested in selling used or discontinued goods, or liquidating unwanted inventory. Person-to-person auctions, which gives interested sellers and buyers the opportunity to engage in competitive bidding. Online auction operators could generate revenue in four principal ways: Charging sellers for listing their goods or service. Charging a commission on all sales. Selling advertising on their Web sites. Selling their own new or used merchandise via the online auction format.
Most sites charge sellers either a fee or a commission and sold advertising to companies interested in promoting their goods or services to users of the auction site. III. EBay’s Business Model Ebay’s business model was based on creating and maintaining a person-to-person trading community where buyers and sellers could readily and conveniently exchange information and goods. Ebay’s role was to function as value-added facilitator online buyer-seller transactions by providing a supportive infrastructure that enabled buyers and sellers to come together in an efficient and effective manner.
Success depended not only on the quality of eBay’s infrastructure but also on the quality and quantity of buyers and sellers attract to the site; in management’s view, this entailed maintaining a compelling trading environment, a number of trust and safety programs, a cost-effective and convenient trading experience, and strong community affinity. By developing the eBay brand name and increasing customer based, eBay endeavored to attract a suffiencent number of high-quality buyers and sellers necessary to meet the organization’s goals. The online auction format meant that eBay carried zero inventory and could operate a marketplace without the need for a traditional sales force. How EBay Auction Work EBay made it very simple to buy and sell goods.
In order to sell or bid on goods, users first had to register at the site. Once they registered, users select both user name and a password. None registered users are able to view the Web site but are not permitted to bid on any goods or list any items for auction. On the Web site, search engines help customers determine what goods are currently available. When registered users found an item they like, they could choose to enter a bid. EBay’s bidding system operates as a proxy bid system.
This means that you can submit a maximum bid amount and eBay’s system will act as a proxy bidder in your absence, executing your bid for you and trying to keep the bid price as low as possible. This way you don’t have to watch the auction every minute. Users are also able to check their bids at any time and either bid again, if they have been outbid, or increase their maximum bid. EBay also offers a “Buy it Now” method, in which the seller can put a set price for the item, and in turn customer can buy the item right away. Users receive an email notification if they were outbid.
Once the auction has ended, the buyer and seller are each notified of the winning bid. The parties to auction would then privately arrange for payment and delivery of the good. Ebayers are not charged a fee for bidding on items on the site, but sellers were charged an insertion fee and a final value fee. They could also elect to pay additional fees to promote their listing, such as “Featured Item.” Final value fees range from $1. 25 to 5 percent of the final sale price. IV.
Marketing and Advertising EBay has used word of mouth advertising to reach most of its users. Towards the end of 2001 eBay reached an agreement with AOL Time Warner to place advertisements on the AOL homepage and Disney/GO. com. Other than these two forms of advertising eBay generally doesn’t do much more, which allows them to save millions in the advertising budget. They then take this saved money and invest almost all of it marketing to create new innovations that keep it a head of the pack. One might think that eBay would be hurting itself by not advertising since it was only begun in 1995, but as of Jan 1, 2002 eBay claimed it had 42.
2 million “confirmed” users as listed in its financial report. Since that report was printed eBay has added 40 to 50 new members a day. These members are making 79 million transactions per quarter with a constant posting of around 5. 5 million items. These transactions are projected to amount to between $245 million and $255 million in sales for the first quarter of 2002 alone. How EBay Keeps Users Loyal EBay is so successful because of it has a large pool of loyal members and this is due eBay’s dedication to creating a true sense of community.
When eBay was originally created, Pierre Omidyar was trying to create a marketplace where everyone had access to the same information. He wanted the individual to have the power to be the producer as well as the consumer and to this day eBay has stuck very close with this concept. The first problem to arise that challenged this concept was when users began to have complaints about poor trading by either buyers or sellers. The initial reaction by Pierre Omidyar, back in 1995, was that if eBayers really had to gripe, they should do it publicly on the site. Although, he also felt that if traders complain about people they don’t like, they should also say something nice about the people they do like. From these two thoughts he created the Feedback Forum, one of eBay’s most popular features.
The Feedback Forum allowed users to rate each other based on however they felt instead of making eBay be the mediator for all complaints. This worked great, even though Pierre initially felt it would turn into a gripe forum, and traders would get the benefit of knowing how often the trader had traded and how other users felt the transaction was. The Feedback Forum ultimately proved one of eBay and Omidyar’s guiding philosophies. EBay’s Other Appeals To go along with the fact that eBay has created such a strong community base and takes care of all of its users, there are still fundamental human characteristics why eBay has such a loyal fan base. For one, eBay appeals to people’s basic sense of fun, because its exciting to check and see if someone has outbid your previous bid, trying to overbid that person again and then waiting for that e-mail to see if you won.
EBay also plays on people’s gambling side without the risk of losing. A person will only bid on items they what they want for some purpose and that person also knows how much they ” ll pay. Every time you bid there is a risk that someone may outbid you and you ” ll continue until you ” ve reached your highest price and then you quit. Up until that point though you ” re always wondering and hoping and as humans, especially Americans, we love that. Finally eBay is affordable, occasionally someone will find their ultimate treasure way under priced or priced where they can afford the item and then its that gambling, fun appeal that takes over.
Although eBay gets addicting to its users, ultimately they ” ll never lose because they never pay more than what they feel something is worth and you can’t say that about too many things in life. V. The Innovations EBay has been consistently ahead of all its competitors with innovations and new technology to increase its member base and also create a better experience for its current members since its creation. EBay is a company that is always looking for the next competitive advantage, because everyone knows once a company has a competitive advantage and everyone copies it, it’s not an advantage anymore. The only difference with eBay is that they come up with enough advantages that its competitors don’t have time to copy them all.
Personalizing the Website to Each Unique User EBay’s first major innovation was the Feedback Forum, which was mentioned earlier in this paper. Another major innovation was called the “Personal Shopper.” The Personal Shopper allows a buyer / user to submit a request for an item and when an item of that type was listed by a seller an e-mail was sent to the buyer / user letting them know of the posting. Also through the Personal Shopper addition a person could search for items available in one’s own city, which would allow the buyer to save shipping costs or for larger more expensive items see the item first hand before making a larger bid. This option was an immediate success with the “eBay community.” VI. Strategy EBay’s strategy is to build on its leading position in online trading by broadening its trading platform across new product categories and geographies, developing global markets, enhancing features and functionality and fostering customer affinity.
Half. com EBay has won the auction wars and clearly dominates the sector, the company is turning its attention to developing a generation of Web storefronts — online outlets where new products can be offered at fixed prices that are often heavily discounted. Acquiring Half. com was one of the key moves that allowed them to vault into a fixed-priced business. The goal of eBay’s merger with Half.
com is to combine the best aspects of each site. While eBay is often applauded for its ease-of-use, customers say it is easier to sell products on Half. com. The timing of the integration was moved up in part because of the popularity of both Half. com and eBay’s “Buy It Now” feature. The eBay community benefits from a marketplace combining traditional auction-style trading and Half.
com’s fixed-price trading. Half. com offers people a fixed-price, online marketplace to buy and sell high quality, new, overstocked, remaindered and used products at discounted prices. Unlike auctions, where the selling price is based on bidding, the seller sets the price for items at Half.
com at the time an item is listed. The site’s expanding marketplace currently includes books, CDs, movies, video games, computers, consumer electronics, sporting goods and trading cards. The idea for Half. com when realized there were inefficiencies between the supply and demand for used mass-market items. Half. com overcomes these inefficiencies and significantly streamlines the entire process of connecting people to buy and sell over the Internet.
Buying at Half. com is similar to the shopping experience at other leading online retailers. Shoppers can easily search for specific items or browse for items that are categorized and surrounded with product descriptions, reviews and artwork. Sellers easily list items for sale by typing in a UPC code, ISBN, or model number, selecting the item’s condition and setting the sale price. There are no fees to list items on Half. com and like eBay, Half.
com generates revenue from transactions completed on its network of Web sites. Half. com receives a 15% fee paid by the seller when the sale item closes. EBay combines the registration information of both sites so that members will use the same user ID and password to log onto either one. EBay Stores In a move designed to enhance its revenues and streamline the sales process for users, auction leader eBay created eBay Stores, designed to be customized shopping destinations that will significantly expand the way goods and services are traded on the site. “EBay Stores is the next step in eBay’s evolution,” said Meg Whitman, eBay’s president and CEO.
“Our sellers should realize increased sales as buyers become familiar with their stores. And our buyers will enjoy the added convenience of quickly being able to browse through the inventory of their favorite sellers.” EBay Stores expands the marketplace for sellers by allowing them to create customized shopping destinations to merchandise their items on eBay. For buyers, eBay Stores represents a convenient way to access sellers’ goods and services. Buyers who shop at eBay Stores are able to make immediate and multiple-item purchases for fixed-price and auction-style items.
Sellers create their stores using customizable eBay templates, and maintain the stores using eBay’s management tools or specified store management software. The eBay Stores allow sellers to include logos, customize the categories for their items and choose color schemes. Plus, sellers can customize a company information page, called an “about” page, and a store policies page in addition to the item listing pages. Merchants get their eBay Stores listed in one of the categories on the eBay Stores homepage.
Shoppers can access them in one of these ways: by browsing the eBay Stores categories and then clicking on the stores they like, by clicking on the eBay Stores icon on a seller’s feedback page or auction listing or by going directly to a specific eBay Store Web address. Store merchants who list auctions in addition to fixed-price items have an advantage because they can drive traffic to their stores through the auction listings. When users search eBay, the results they get only include auction items. So users who don’t visit eBay stores will only see a seller’s merchandise if the seller has some auctions. EBay Professional Services EBay and eLance Inc. (web), the leading professional services marketplace and end-to-end platform for Web-based outsourcing solutions, teamed up for a new eBay specialty site for professional services.
The site, called Services for Business, will provide eBay’s users with convenient access to cost effective professional services. The introduction of Services for Business advances eBay’s evolution toward becoming the best place in the world to find the largest variety of goods and services. With eLance, the eBay community can now get a wide range of professional services and project work completed through the site ” everything from web design, creative services, programming, graphic design and more. Professional Services on eBay serves the fast growing and fragmented small business marketplace by providing a destination on eBay to find professionals and freelancers for all kinds of business needs. ELance offers buyers the ability to reach an international pool of quality service providers ” firms and professionals ” that will bid to work on projects.
Beyond access, eLance also provides online portfolio and credentials review, online collaboration tools, a global billing and payment system, and quality assurance programs to ensure high standards for work that is transacted though the marketplace. With immediate access to a global talent pool, users can find high quality work delivered efficiently and cost effectively, regardless of their location. “The business services marketplace is an important element of our growth strategy ” expanding the eBay community particularly in the business sector,” said Brian Sette, eBay’s chief operating officer. “We chose to work with eLance because they have demonstrated a strong business model for accessing high quality professional services with their technology and fast growing base of users.” The Official Online Car Dealer Label In January 2002 eBay was named the official online car dealer.
This is in conjunction with ebaymotors. com that was created through the insistence of the “eBay community.” What makes eBaymotors better than the already existing online car dealers is its newly created assurance program designed to protect buyers and sellers money and ensure that the buyer and seller get what they bargained for. EBay created the first site-unseen warranty in the online dealership community. This gives buyers one month or 1, 000 miles, whichever comes first, warranty and although this only applies to cars before 1992 it’s a start and still better than any other warranty available. EBay is also already in the process of extending this warranty plan, but is waiting to see how the initial plan works first.
EBay also provides purchase insurance up to $20, 000 for $500, but that generally won’t happen with the Mobile Vehicle Inspection Service. The Mobile Vehicle Inspection Service is performed by a professional and is listed with the car on the website to allow the buyer to have an unbiased report for a very small fee by either the buyer or seller. Finally, to ensure all payments are paid eBay has joined with Escrow. com to secure down payments and payment-in-full when necessary.
All of these things along with the fact that eBaymotors. com had a record 4. 78 million visitors in December 2001 alone shows it is the undisputed king. Developing International Markets As competition increased in the online auction industry, eBay began to seek growth opportunities in international markets in an effort to create a global trading community. While international buyers and sellers had been trading on eBay for some time, there were no facilities designed especially for the needs of these community members. In entering international markets, eBay considered three options.
It could build a new user community from the ground up, acquire a local organization, or from a partnership with a strong local company. In realizing its goals of international growth eBay employed all three strategies. Table 1 shows the list of the international markets of eBay. In late 1998, eBay’s initial effort at international expansion into Canada and the United Kingdom relied on building new user communities.
The first step in establishing these communities was creating customized home pages for users in those countries. The home pages were designed to provide content and categories locally customized to the needs of users in specific countries, while providing them with access to a global trading community. Local customization in United Kingdom was facilitated through the use of local management, grassroots and online marketing, and participation in local events. In February 1999, eBay partnered with PBL Online, a leading Internet company in Australia, to offer a customized Australian and New Zealand eBay home page.
When the site went live, transactions were denominated in Australian dollars and while buyers could bid on auctions anywhere in the world, they could also search for items located in Australia. To further expand its global reach, eBay acquired Germany’s largest online person-to-person trading site. Ebay’s management handled the transition of service in a manner calculated to be smooth and painless for the users. While the users would have to comply with eBay rules and regulations. The only significant change for the users was that they would have to go to a new URL to transact their business. To establish an Asian presence, in February 2000 eBay formed a joint venture with NEC to launch eBay Japan.
According to the new CEO of eBay Japan, Merle Okawara, an internationally renowned executive, NEC was pleased to help eBay in leveraging the tried and trusted eBay business model to provide Japanese consumers with access to a global community of active online buyers and sellers. In customizing the site to needs of Japanese users, eBay wrote content exclusively in Japanese and allowed users to bid in yen. Argentina Australia Austria Belgium Brazil Canada France Germany Ireland Italy Korea Mexico Netherlands New Zealand Singapore Spain Sweden Switzerland Taiwan United Kingdom Table 1. The global sites of eBay. Blocking Auction Search Engines (Web Crawlers) EBay has sought to block aggregators such as ” Web Crawlers” from accessing its Web site. The software searches the Internet for the lowest price of a product, among other things, and is widely used by comparison-shopping sites or search engines.
In some cases, the searches can be intrusive or even destructive. Bidders Edge and Auction Watch does not host auctions, they are “Web Crawlers.” The “Web Crawlers ‘” site contained information on more that five million items being auctioned on more than one hundred auction sites. “Web Crawlers” also provides its users with additional auction-related services and information. The information available on the web site is contained in a database of information that “Web Crawlers” compiles through access to various auction sites such as eBay. When a user enters a search for a particular item at Bidders Edge or Auction Watch, it searches its database and generates a list of every item in the database responsive to the search, organized by auction closing date and time. Rather than going to each host auction site one at a time, a user who goes to a “Web Crawlers” site may conduct a single search to obtain information about that item on every auction site EBay has reached agreements with other companies that list auctions, although it imposes some restrictions on how it is done.
Currently eBay is using a software to prevent “Web Crawlers” from connecting to eBay’s auction site. VII. Ebay’s Main Competitors In the broadest sense, eBay competed with classified advertisements in the newspaper, garage sales, flea markets, collectibles shows, and other venues such as local auction houses and liquidators. As eBay’s product mix broadened beyond collectibles to include practical household items, office equipment, toys, and so on, the company’s competitors broadened to include brick-and-mortar retailers, imports / exports companies, and catalog and mail order companies. Management saw these traditional competitors as inefficient because their fragmented local and regional nature made it expensive and time-consuming for buyers and sellers to meet, exchange information, and complete transactions. Moreover, they suffered from they suffered from three other deficiencies: They tended to offer limited variety and breadth of sections as compared to the millions of items available on eBay.
They often had high transactions costs. They were information inefficient in the sense that buyers and sellers lacked reliable and convenient means of setting prices for sales or purchases. Thus, eBay’s management saw its online auction format as competitively superior to these rivals because it provides: Facilitated buyers and sellers meeting, exchanging information, and conducting transactions. Allowed buyers and sellers bypass traditional intermediaries and trade directly, thus lowering costs.
Provided global reach, greater selection, and broader base of participants. Permitted trading at all hours and provided continuously updated information. Fostered a sense of community among individuals with mutual interests. From an e-commerce perspective, Amazon. com, Yahoo Auctions, and Ubid. com had emerged as eBay’s main competitors.
But Fair Markets, AucitonWatch, GO Network Auctions, and Auctions. com were beginning to make market inroads and contribute to erosion of eBay’s share of the online auction business. Moreover, the prospects of attractive profitability and low barriers to entry were stimulation more firms to enter competition in the online auction industry as revolving around 10 factors: the volume and selections of goods, the population of buyers and sellers, community interaction, customer service, reliability of delivery and payment by users, brand image, Web site construction, fees and prices, and quality of search tools. How eBay’s Auction Site Compared to Rivals Auction sites varied in a number of features such as; site design and ease of use, the range of items up for auction, number of simultaneous auctions, duration of the bidding process and fees. Gomez Advisors, a company designed to help Internet users select which online enterprises to do business with, had developed rankings for the leading online auction sites as a basis for recommending which sites were best for bargain hunters, hobbyist / collectors , and sellers. Table 2 shows the winter 1999 Gomez ratings of online auction competitors.
Table 3 provides selected statistics for the leading competitors in the online auction market. Rating Based on Site Characteristics (Rating scale; 0 = Lowest; 10 = Highest) Auction Site Ease of Used Customer Confidence On-Site Resources Relationship Services Overall Score Ebay 9. 07 6. 99 8.
4 8. 4 7. 97 Amazon. com 9.
05 8. 49 7. 03 6. 17 7. 67 Yahoo! Auction 8. 69 6.
91 4. 18 8. 62 7. 11 GO Network Auctions 9. 14 7. 44 6.
49 5. 89 7 Fair Market Network 7. 97 6. 89 6. 73 5. 17 6.
42 Auctions. com 8. 22 6. 78 5. 5 5.
1 6. 41 Source: Gomez Advisors, web Winter 1999. Table 2. Comparative Gomez Advisors’ ratings of leading online auction sites.
aBased on such factors as screen layout, tightly integrated content, functionality, useful demos and the extensiveness of online help. bInludes the reliability and security of the online auction site, knowledgeable and accessible customer service and quality guarantees. base on the range of products, services and information offered, information look-up tools and transactions data. based on personalization of options, programs and perks that build a sense of community and customer loyalty to the site. eBay Yahoo! Auctions Amazon. com Number of items listed for auction 3.
8 million 1. 3 million 415, 00 Percentage of listed auctions 65% 14% 11% Average numer of bids per item 3. 03 0. 59 0.
33 Average selling prices for completed auctions $65. 19 $31. 09 $25. 77 Source: Taken from “Internet: eBay: Crushing the Competition,” Individual Investor, January 21, 2000. Table 3.
Statistics for the leading competitor in the online auction market. Table 4 shows the top auction sites ranked by revenue shares in May 2001. It reveals just how much of a lead eBay has. Ebay can be seen on top of the list by having the revenue share of 64.
3%, then followed by uBid. com with 14. 7%, Onsale. com with 4%, Yahoo! Auctions with 2. 4% and Amazon Auction with 2%. Top Auction Sites Ranked by Revenue Share, May 2001 (U.
S. ) Auction Site Revenue Share Satisfaction Rate Conversion Rate eBay. com 64. 30% 8.
42 22. 50% uBid. com 14. 70% 7. 87 11.
00% Egghead. com (Onsale. com) 4. 00% 7.
75 8. 00% Yahoo! Auctions 2. 40% 7. 84 4.
40% Amazon Auctions 2. 00% 7. 64 6. 50% Source: “Silicon Valley” web Table 4. Shows the revenue share, satisfaction rate, and conversion rate of the top auction sites. EBay has done an excellent job converting a very high percentage of their shoppers into buyers and keeping customers extremely satisfied at the same time.
This has enabled them to dominate the online auction category with four times more revenue than their next closest competitor. VIII. Recent Inside eBay’s Financial Numbers Based on the company’s most recent performance, eBay now believes that net revenues for second quarter 2002 will range between $260 and $265 million, bringing its first half 2002 net revenue guidance to between $505 and $510 million, representing the high end of previous guidance. EBay also believes that second quarter 2002 pro forma earnings per diluted share will approximate $0.
17, bringing its first half 2002 guidance to approximately $0. 35. This earnings level represents an increase of $0. 03 to $0. 04 from the company’s previous guidance of $0.
31 to $0. 32 per diluted share. EBay now believes that net revenues for second quarter 2002 will range between $260 and $265 million, bringing its first half 2002 net revenue guidance to between $505 and $510 million, representing the high end of previous guidance. This net revenue outlook reflects the company’s expectation that a sequential decrease in advertising revenues will be fully offset by higher than previously anticipated transaction revenues, from both the U. S. and international markets.
The company remains committed to making important strategic investments to build its marketplace for the long term. In Q 2-02, eBay will increase marketing expenditures both domestically and internationally and continue to roll out its next-generation technology infrastructure. For the full year 2002, eBay expects that net revenues will approximate $1. 1 billion, representing the high end of its previous guidance of $1. 05 billion to $1. 1 billion.
On the bottom line, eBay now believes that pro forma earnings per diluted share could range between $0. 73 and $0. 75, reflecting a $0. 03 to $0. 04 increase from previous guidance.
Source: Ebay Annual report (web).
Table 5. Ebay’s financial results during in December 31, 2001 and March 31, 2002. IX.
The Future of EBay EBay has become an online middleman for buyers and sellers in a way which traditional brick and mortar companies cannot touch. Using the web has also brought along with it some challenges, especially regarding trust issues between buyers and sellers. EBay seems to have dealt adequately with those trust issues, since users don’t seem to mind and continue to use their service. EBay is operationally sound, especially considering it is still in its buildup period and it has a business model that scales extremely well.
The management has shown that it responds quickly and well, and has been working hard to expand the business without jeopardizing the core business. EBay has seen constant growth since its inception and to continue this trend it will need to continually find new ways to acquire more users and keep the current users making transactions. In the near future eBay will try to make its most recent innovations ebaymotors. com and allowing corporations to place items on its website more efficient, all while coming up with new and more innovative ideas.
EBay is also investing lots of time and effort by expanding to twenty different international markets. These investments have already paid off with 19 of those 20 international markets becoming the number one auction site in their respective market. X. Conclusion Pierre Omidyar had no idea what would result from his small online auction creation to help his wife with Pez trading in 1995. The result is that eBay has seen increasing revenues since its creation because of the original solid framework set up by Pierre Omidyar. Pierre Omidyar’s ability to manage as well as get help when needed, such as letting Meg Whitman take over as CEO and hiring Jeff Skoll has allowed the company to continuously grow.
This ability to manage ultimately assisted in taking eBay’s listing price of $18 to $47 in one day making him and everyone else in the company rich. Word of mouth advertising and one small joint agreement has allowed eBay to avoid the huge costs of advertising. EBay has avoided its own advertising costs while grossing some of the most advertising money among internet firms by placing small icons for other companies on their website. EBay’s idea to make its members part of a community has paid off substantially with the community currently standing at a strong 44 million users and growing every day. EBay has fought off its auction competitors by creating new and unique options for its users such as ebaymotors. com, personal shopper, and buy it now just to name a few.
EBay has nothing to hold it back from growing in the future with its ability to generate ideas and its constant expansion. It seems that only eBay has the ability to stop eBay. Recommendations EBay needs to continue to follow the solid foundation created by Pierre Omidyar to keep the users number one, because eBay has no products and without the users or “community” they will have nothing. The growth of eBay is amazing to say the least, but it needs to be careful not to grow too quickly too fast. The company has handled itself well so far, but if it grows too fast it could overwhelm its systems with users or items and cause down time. If this occurs too often the company could see a major drop in users.
EBay needs to capitalize on its new innovations especially ebaymotors. com. They know it is a winner because of its popularity and they should not take that lightly and continue to improve. EBay should also continue to improve all its other innovations, because once another auction site copies their idea its not a competitive advantage any longer. EBay needs to be continue to come up with new ways to increase its amount of users and get its current members to trade more. EBay ‘s competitors are lagging behind, but it only takes a little misstep before they step in and try to take over their territory.
The international markets eBay has expanded have succeeded instantly and eBay should make sure that it continues to invest in these international ventures. EBay should also try to link these international ventures together to create a more diverse trading atmosphere, but that also needs to be taken with precaution due to transportation of items and differences in currency. web.