Top 100 Brand in The World – Rank no.28 – Ebay – US
The former eBay homepage.
|Traded as||NASDAQ: EBAY
S&P 500 Component
|Foundation date||September 3, 1995|
|Headquarters||San Jose, California, U.S.|
|Industry||Internet, Online retailing|
|Products||eBayClassifieds, electronic commerce, Gumtree, Kijiji,online auction hosting, PayPal,iBazar|
|Revenue||US$ 14.07 billion (2012)|
|Operating income||US$ 2.88 billion (2012)|
|Net income||US$ 2.60 billion (2012)|
|Total assets||US$ 37.27 billion (2012)|
|Total equity||US$ 20.87 billion (2012)|
|Slogan(s)||“World’s Online Marketplace."
“Connecting buyers and sellers globally."
“Whatever it is, you can get it on eBay."
“Buy it, sell it, love it"
“Buy it New, Buy it Now"
“When it’s on your mind, it’s on eBay"
|Alexa rank||21 (October 2013)|
|Type of site||Online auction|
|Registration||Required to buy and sell|
eBay Inc. is an American multinational internet consumer-to-consumer corporation, headquartered in San Jose, California. It was founded in 1995, and became a notable success story of the dot-com bubble; it is now a multi-billion dollar business with operations localized in over thirty countries. The company manages eBay.com, an online auction and shopping website in which people and businesses buy and sell a broad variety of goods and services worldwide. In addition to its auction-style sellings, the website has since expanded to include “Buy It Now" standard shopping; shopping by UPC, ISBN, or other kind of SKU (via Half.com); online classified advertisements (via Kijiji or eBay Classifieds); online event ticket trading (via StubHub); online money transfers (via PayPal) and other services.
AuctionWeb was founded in San Jose, California, on September 3, 1995, by French-bornIranian-American computer programmer Pierre Omidyar (born on 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 AuctionWeb 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." The frequently repeated story that eBay was founded to help Omidyar’s fiancée trade Pez candy dispensers was fabricated by a public relations manager in 1997 to interest the media, which were not interested in the company’s previous explanation about wanting to create a “perfect market“. This was revealed in Adam Cohen’s 2002 book, The Perfect Store, and confirmed by eBay.
Reportedly, eBay was simply a side hobby for Omidyar until his internet service provider informed him he would need to upgrade to a business account due to the high volume of traffic to his website. The resulting price increase (from $30/month to $250) forced him to start charging those who used eBay, and was not met with any animosity. In fact it resulted in the hiring of Chris Agarpao as eBay’s first employee to handle the number of cheques coming in for fees.
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.
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 1998 and then bought PayPal on October 14, 2002.
By 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 decided to enter politics. On January 23, 2008 the company announced that Whitman would step down on March 31, 2008 and John Donahoe was selected to become President and CEO. Whitman remained on the Board of Directors and continued to advise Donahoe through 2008. In late 2009, eBay completed the sale of Skype for $2.75 billion, but will still own 30% equity in the company.
In July 2010, eBay was sued for $3.8 billion by XPRT Ventures that accused eBay of stealing information shared in confidence by the inventors on XPRT’s own patents, and incorporated it into features in its own payment systems, such as PayPal Pay Later and PayPal Buyer Credit.
On December 20, 2010, eBay acquired German online shopping club, brands4friends.de, for €150 million ($197 million), strengthening the company’s interests in the fashion industry in Europe. It is subject to regulatory approval and expected to close it in the Q1 2011.
Millions of collectibles, decor, appliances, computers, furnishings, equipment, domain names, vehicles, and other miscellaneous items are listed, bought, or sold daily on eBay. In 2006, eBay launched its Business & Industrial category, breaking into the industrial surplus business. Generally, anything can be auctioned on the site as long as it is not illegal and does not violate the eBay Prohibited and Restricted Items policy. Services and intangibles can be sold, too. Large international companies, such as IBM, sell their newest products and offer services on eBay using competitive auctions and fixed-priced storefronts. Separate eBay sites such as eBay US and eBay UK allow the users to trade using the local currency. Software developers can create applications that integrate with eBay through the eBay API by joining the eBay Developers Program. In June 2005, there were more than 15,000 members in the eBay Developers Program, comprising a broad range of companies creating software applications to support eBay buyers and sellers as well as eBay Affiliates.
Controversy has arisen over certain items put up for bid. For instance, in late 1999, a man offered one of his kidneys for auction on eBay, attempting to profit from the potentially lucrative (and, in the United States, illegal) market for transplantable human organs. On other occasions, people and even entire towns have been listed, often as a joke or to garner free publicity. In general, the company removes auctions that violate its terms of service agreement.
Beginning in August 2007, eBay required listings in “Video Games" and “Health & Beauty" to accept its payment system PayPal and sellers could only accept PayPal for payments in the category “Video Games: Consoles". Starting January 10, 2008, eBay said sellers can only accept PayPal as payment for the categories “Computing > Software", “Consumer Electronics > MP3 Players", “Wholesale & Job Lots > Mobile & Home Phones", and “Business, Office & Industrial > Industrial Supply / MRO". eBay announced that starting in March 2008, eBay had added to this requirement that all sellers with fewer than 100 feedbacks must offer PayPal and no merchant account may be used as an alternative. This is in addition to the requirement that all sellers from the United Kingdom have to offer PayPal.
Further, and as noted below, it was a requirement to offer PayPal on all listings in Australia and the UK. In response to concerns expressed by the Australian Competition and Consumer Commission, however, eBay has since removed the policy on the ebay.com.au website requiring sellers to offer PayPal as a payment option.
In April 2006, eBay opened its new eBay Express site, which was designed to work like a standard Internet shopping site for consumers with United States addresses. It closed in 2008. Selected eBay items were mirrored on eBay Express, where buyers shopped using a shopping cart to purchase from multiple sellers. The UK version was launched to eBay members in mid-October 2006 but on January 29, 2008 eBay announced its intention to close the site. The German version, eBay Express Germany, was also opened in 2006 and closed in 2008.
At the 2008 eBay Developer’s Conference, eBay announced the Selling Manager Applications program (SM Apps). The program allows approved developers to integrate their applications directly into the eBay.com interface. The applications created by developers are available for subscription by eBay members who also subscribe to Selling Manager.
eBay maintains a number of specialty sites including the discussion boards, groups, answer center, chat rooms, and reviews and guides. eBay has a robust mobile offering, including SMS alerts, a WAP site, Java ME clients, and mobile applications for Windows Phone, Android OS and Apple iPhone.
Many unusual items have been placed for sale on eBay, including at least two previously undiscovered species, including the Coelopleurus exquisitus sea urchin, military vehicles, and items of food.
Prohibited or restricted items
In its earliest days, eBay was essentially unregulated. However, as the site grew, it became necessary to restrict or forbid auctions for various items. Note that some of the restrictions relate to eBay.com (the U.S. site), while other restrictions apply to specific European sites (such as Nazi paraphernalia). Regional laws and regulations may apply to the seller or the buyer. Generally, if the sale or ownership of an item is regulated or prohibited by one or more states, eBay will not permit its listing. Among the hundred or so banned or restricted categories:
- Tobacco (tobacco-related items and collectibles are accepted.)
- Alcohol (alcohol-related collectibles, including sealed containers, as well as some wine sales by licensed sellers are allowed, some sites such as ebay.com.au allow licensed liquor sales) (eBay announced September 21, 2012, it will begin removing listings for beer and liquor from its site after a story was aired on ABC series 20/20.)
- Drugs and drug paraphernalia
- Nazi paraphernalia
- Bootleg recordings
- Firearms and ammunition, including any parts that could be used to assemble a firearm as well as (as of July 30, 2007) any firearm part that is required for the firing of a gun, including bullet slugs, brass casings and shells, slides, cylinders, magazines, firing pins, trigger assemblies, etc. Various types of knives are also forbidden.
- Police and emergency service vehicular warning equipment such as red or blue lights and sirens (antique or collectible items are exempt)
- Used underwear (see Panty fetishism) and dirty used clothing
- Forged, illegal, stolen, or confidential documents, which include passports, social security cards, drivers licences, voter registration cards, birth certificates, school documents, medical records, financial information, government license plates, government classified information, or CarFax documents. Any item that is used to modify documents is also restricted.
- Human parts and remains (with an exception for skeletons and skulls for scientific study, provided they are not Native American in origin)
- Live animals (with certain exceptions)
- Certain copyrighted works or trademarked items
- Lottery tickets, sweepstakes tickets, or any other gambling items.
- Military hardware such as working weapons or explosives.
- Any object of Iranian, Cuban, or North Korean origin.
- Enriched uranium, plutonium, and other fissile material.
- Sexually oriented adult material, which must be listed in the “Adult Only" category, notwithstanding certain items prohibited:
- Child pornography
- Materials deemed obscene, including bestiality, necrophilia, rape, coprophilia, and incest
- Used sex toys
- Services including any sexual activity
- Links to sites that contain prohibited items
- Adult products that are delivered digitally
- Virtual items from massively multiplayer online games, restrictions that vary by country
- Ivory products
- Knives, other than some cutlery, are prohibited in the UK following the criminal importation into the UK (by BBC Watchdog researchers) of several knives that were already illegal to own or import under existing UK legislation. The ban also includes empty leather knife scabbards if they are listed under the category of “knives" on one of the eBay sites
- Fortune-telling and witchcraft-related services
- Souls, ghosts, and other “items whose existence cannot be verified" are prohibited.
- Many other items are either wholly prohibited or restricted in some manner.
- The winning bidder pays the second-highest bid plus one bid increment amount (that is, some small predefined amount relative to the bid size), instead of simply the highest bid. However, since the bid increment amounts are relatively insignificant compared to the bid size, they are not considered from a strategic standpoint.
- The highest bidder’s bid is sealed, as in a Vickrey auction, but the current winning bid (second highest plus one increment) is displayed throughout the auction to allow price discovery.
In 2008, eBay began using detailed seller ratings with four different categories. When leaving feedback, buyers are asked to rate the seller in each of these categories with a score of one to five stars, with five being the highest rating and one the lowest. Unlike the overall feedback rating, these ratings are anonymous; neither sellers nor other users learn how individual buyers rated the seller. The listings of sellers with a rating of 4.3 or below in any into the four rating categories appear lower in search results. Power Sellers are required to have scores in each category above 4.5.
In a reversal of roles, on January 24, 2010 Auctionbytes.com held an open survey in which sellers could effectively rate eBay itself, as well as competing auction and marketplace sites. In the survey, users were asked to rank 15 sites based on five criteria:
- Customer Service
- Ease of Use
After the results were published, eBay had finished 13th overall, edged out by established sites such as Amazon and Craigslist, as well as lesser-known selling sites like Atomic Mall and Ruby Lane. In individual category rankings, eBay was rated the worst of all the 15 sites on Customer Service and Communication, and average on Ease of Use. A number of respondents said they would have given eBay a rating of ten 3 to 5 years ago. eBay was rated twelfth out of fifteen in the Recommended Selling Venue category.
Using MissionFish as an arbiter, eBay allows sellers to donate a portion of their auction proceeds to a charity of the seller’s choice. The program is called eBay Giving Works in the US, and eBay for Charity in the UK. eBay provides a partial refund of seller fees for items sold through charity auctions. As of March 4, 2010, $154 million has been raised for U.S. nonprofits by the eBay Community since eBay Giving Works began in 2003.
Some high-profile charity auctions have been advertised on the eBay home page, and have raised large amounts of money in a short time. For example, a furniture manufacturer raised over $35,000 for Ronald McDonald House by auctioning off beds that had been signed by celebrities.
To date the highest successful bid on a single item for charity was for the annual “Power Lunch" with investor Warren Buffett at the famous Smith & Wollensky Steakhouse in New York. The winning bid was $2.63 million with all of the proceeds going to the Glide Foundation. At the time of writing, the winning bidder is still not publicly known, but they will be able to bring up to seven friends to the lunch.
The previous highest successful bid on a single item for charity was for a letter sent to Mark P. Mays, CEO of Clear Channel (parent company of Premiere Radio Networks the production company that produces The Rush Limbaugh Show and Glenn Beck Program) by Senator Harry Reid and forty other Democratic senators, complaining about comments made by conservative talk show host Rush Limbaugh. The winning bid was $2,100,100, with 100 percent of the proceeds going to the Marine Corps-Law Enforcement Foundation, benefiting the education of children of men and women who have died serving in the armed forces. The winning bid was matched by Limbaugh in his largest charity donation to date.
In 2007, eBay Canada partnered with Montreal-based digital branding agency CloudRaker to develop a campaign to raise money for Sainte-Justine children’s hospital in Montreal. They aligned themselves with internet phenomenon Têtes à claques to create an eBay auction based on popular T-A-C character Uncle Tom, an infomercial host who pitches absurd products. eBay and CloudRaker reproduced Uncle Tom’s imaginary products, The Body Toner Fly Swatter, The Willi Waller Potato Peeler, and the LCD Shovel and sold them online. In 6 weeks, they raised $15,000 for Hôpital St-Justine with one fly swatter, one potato peeler, and one shovel, a world record. The Body Toner Fly Swatter sold for $8,600, the Willi Waller Potato Peeler sold for $3,550, and the LCD Shovel sold for $2,146.21.
Before an auction, eBay lets sellers choose which shipping options to offer — regular mail, express mail, or courier service. The website lets buyers choose which option to accept.
Since 2012, eBay has also allowed US sellers to opt into its Global Shipping Program. The program works as follows: Each seller decides whether or not to opt into the program. If a seller opts in, and a non-US buyer buys an item from the seller, then the buyer pays an additional fee to Pitney Bowes. The seller ships the item to a Pitney Bowes facility in the US. After receiving the item, Pitney Bowes forwards it to the buyer. The program enhances the selection available to buyers, but can considerably increase buyers’ costs on low-value items.
Profit and transactions
eBay generates revenue from various fees. The eBay fee system is quite complex; there are fees to list a product and fees when the product sells (Final Value Fee), plus several optional adornment fees, all based on various factors and scales. As of November 2012, the U.S. based eBay.com takes $0.10 to $2 (based on the opening or reserve price) as an insertion fee for a basic auction-style listing without any adornments, and 10% of the total amount of the sale (price of the item plus shipping charges) as a final value fee. Fixed-price listings have an insertion fee of $0.30, and the final value fee varies based on category and total amount of the sale (e.g. 13% for DVDs & Movies up to $50). The UK based ebay.co.uk takes from GBP £0.15 to a maximum rate of GBP £3 per £100 for an ordinary listing and from 0.75 percent to 10% (writing as of June 2009) of the final price. Reduced Final Value Fees are available to business registered customers. In addition, eBay owns the PayPal payment system that has fees of its own.
Under current U.S. law, a state cannot require sellers located outside the state to collect a sales tax, making deals more attractive to buyers. Although some state laws require purchasers to pay sales tax to their own states on out-of-state purchases, it is not a common practice. However, most sellers that operate as a full-time business do follow state tax regulations on their eBay transactions. However Value Added Tax (VAT), a form of sales tax in EU countries, is different. eBay requires sellers to include the VAT element in their listing price and not as an add-on and thus eBay profits by collecting fees based on what governments tax for VAT; i.e. it not only receives fees as a percentage of the sale (net) price but also a similar percentage of the VAT element of the overall (gross) price.
The company’s current business strategy includes increasing international trade. eBay has already expanded to over two dozen countries including China and India. The only places where expansion failed were Taiwan and Japan, where Yahoo! had a head start, and New Zealand where TradeMe, owned by the Fairfax media group is the dominant online auction website.
A more recent strategy involves the company increasingly leveraging the relationship between the eBay auction site and PayPal: The impact of driving buyers and sellers to use PayPal means not only does eBay turn buyers into clients (as a pure auction venue its clients used to be predominantly sellers) but for each new PayPal registration it achieves via the eBay auction site it also earns offsite revenue when the resulting PayPal account is used in non-eBay transactions. In its Q1 2008 results, total payment volume via PayPal increased 17 percent, but off the eBay auction site it was up 61 percent.
Escrow.com is eBay’s approved escrow site. The transactions processed through Escrow.com largely are in relation to eBay Motors; they are not restricted to this type of listing however.
eBay runs an affiliate program under the name eBay Partner Network. eBay affiliate marketers were originally paid a percentage of the eBay seller’s transaction fees, with commissions ranging from 50% to 75% of the fees paid for an item purchased. In October 2009, eBay changed to an affiliate payout system that it calls Quality Click Pricing, in which affiliates are paid an amount determined by an undisclosed algorithm. The total earnings amount is then divided by the number of clicks the affiliate sent to eBay and is reported as Earnings Per Click, or EPC.
On April 18, 2012 eBay reported a 29% Q1 revenue increase to $3.3 billion compared to their Q1 in 2011. Net income was reported to be at $570 million for the quarter.
On May 8, 2008, eBay announced the opening of its newest building on the company’s North Campus in San Jose, which is the first structure in the city to be built from the ground up to LEED Gold standards. The building, the first the company had built in its 13-year existence, uses an array of 3,248 solar panels, spanning 60,000 square feet (5,600 m2), and providing 650 kilowatts of power to eBay’s campus. The array can supply 15%–18% of the company’s total energy requirements, reducing the amount of greenhouse gases that would be produced to create that energy by other means. SolarCity, the company responsible for designing the array, estimates that the solar panels installed on eBay’s campus will prevent 37 million pounds of carbon dioxide from being released into the environment as a result of replaced power production over the next three decades.Creating an equivalent impact to remove the same amount of carbon dioxide from the atmosphere would require planting 322 acres (1.30 km2) of trees. The design of the building also incorporates other elements to reduce its impact on the environment. The building is equipped with a lighting system that detects natural ambient light sources and automatically dims artificial lighting to save 39% of the power usually required to light an office building. eBay’s newest building also reduces demand on local water supplies by incorporating an eco-friendly irrigation system, and low-flow shower heads and faucets. Even during construction, more than 75% of the waste from construction was recycled. eBay also runs buses between San Francisco and the San Jose campus to reduce the number of commuting vehicles.
eBay Inc. acquired Skype in 2005 and significantly expanded its customer base to more than 480 million registered users worldwide. To focus on its core e-commerce and payments businesses, eBay Inc. sold a majority stake in Skype in November 2009, retaining a minority investment in the company. In May 2011, Microsoft announced that it had acquired Skype for $8.5 billion.
|This article’s factual accuracy may be compromised due to out-of-date information. Please update this article to reflect recent events or newly available information. (October 2009)|
In the summer of 2004, eBay acknowledged that it had acquired 25% of classified listings website, Craigslist. Former Craigslist executive Phillip Knowlton was the seller, and he insisted that his former employer was aware of his plans to divest his holdings. Initially, eBay assured Craigslist that they would not ask the company to change the way it does business. eBay spokesman Hani Durzy stated that the “investment was really for learning purposes; it gives us access to learn how the classified market online works."
In March 2005, eBay launched the classifieds service Kijiji. In April 2008, eBay sued Craigslist to “safeguard its four-year financial investment", claiming that in January 2008, Craigslist took actions that “unfairly diluted eBay’s economic interest by more than 10%." Craigslist countersued in May 2008 “to remedy the substantial and ongoing harm to fair competition" that Craigslist claims is constituted by eBay’s actions as a Craigslist shareholder. In September 2010, Delaware Judge William Chandler ruled that the actions of Craigslist were unlawful, and that the actions taken by Craigslist founders Jim Buckmaster and Craig Newmark had “breached their fiduciary duty of loyalty", and restored eBay’s stake in the company to 28.4% from a diluted level of 24.85%. However, the judge dismissed eBay’s objection to a staggered board provision citing that Craigslist has the right to protect its own trade secrets. eBay spokesman Michael Jacobson stated “We are very pleased that the court gave eBay what it sought from the lawsuit."
Use for economics
As eBay is a huge, publicly visible market, it has created a great deal of interest from economists, who have used it to analyze many aspects of buying and selling behavior, auction formats, etc., and compare these with previous theoretical and empirical findings.
Just as economists have shown interest in eBay’s operations, computer information systems researchers have also shown interest in eBay. Recently Michael Goul, Chairman of the Computer Information Systems department of the W. P. Carey School of Business at Arizona State University, published an academic case based on eBay’s big data management and use. In the case, Goul discusses how eBay is a data-driven company which processes 50 petabytes of data a day.
eBay uses a system that allows different departments in the company to check out data from their data mart into sandboxes for analysis. According to Goul, eBay has already experienced significant business successes through its data analytics. To continue improving the business through data-driven decision making, eBay employs 5,000 data analysts.
Controversy and criticism
eBay has its share of controversy, including cases of fraud, its policy of requiring sellers to use PayPal, and concerns over forgeries and intellectual property violations in auction items. There are also issues of how negative feedback after an auction can offset the benefits of using eBay as a trading platform. eBay has also been criticised for not paying its share of UK tax: the BBC reported in October 2012 that eBay pays only £1.2m in tax on sales of over £800m.