eBay, Inc.

Introduction:

Meg Whitman – eBay president and CEO in March1999 eBay was founded in 1995 At eBay sellers
can list the items & buyers would bid on items of interest

It was fully automated system Through Feb 1999, 186 million bids for 50 million items resulting in
more than $841 million of gross merchandise sold Approximately 800,000 bids per day were
received by eBay

Recently introduced Trust and safety initiatives achieved through Enhanced feedback forums were
key features of eBay surpassing Amazon Competition between eBay & Amazon was publicized by
mediaAt that time, Jeff Bezos was Amazon CEO

Initially eBay was a pet project developed by Omidyar for personal need of auctioning According to
him what people really enjoyed was not only selling or buying but meeting other people Venture
funding of eBay by Benchmark Capital, a venture capital firm in 1997

IPO- 35 million shares at rate of 18 $ per share in Sept 1998

Stock market split as 3-for-1 increased liquidity of eBay stock in March 1999 when share price raised
to $ 282 Thus, in march 1999, stocks were sold at $282/3= $ 92 per share

Acquisitions & Alliances:

 eBay Acquired Jump Inc, operator of up4scalecom , for $23 million EBay was looking at
up4scalecom for implementation any complementary service in future It was operated
separately
 eBay has relationship with 60 other internet websites Cross-promotional deals were also
signed with some companies like First Auction, Z Auction, etc
 AOL deal was negotiated by Steven Westly, VP marketing and Business development in Feb
1998 After initial two deals (First for $750,000 & second for $12 million), a 4 year deal for
$75 million was finalised for the purpose of marketing alliance within time span of 18
months

eBay’s Business model:

 Listing of object to be done by the seller on the payment of small amount depending upon
the reserve price Minimum bid amount (initial) was to be fixed by seller
 Reserve price by seller & maximum bidding price by buyer are kept a secret
 When seller & buyers are agreed to confirmed their corresponding posting & maximum bid
respectively, then auction is ended & final value is calculated by eBay to collect commission
in form of certain percentage of sale value
 Approximately 25% of eBay users (38 billion in Q1 of 1999) made their full time living selling
on eBay
 Various promotion options are available for sellers for certain fixed amount
eBay’s Business Model:

 eBay was following a consumer to consumer model which was an unique and different
approach as compared to other websites
 As far as its alliance with AOL is considered eBay has started expanding its market & leading
the market with 89%

Decision Making & Safety Policies:

 Decisions were taken quickly & sometimes without information depending upon the ideas
 Safety programs like SafeHarbor & Legal Buddy were used to avoid protect customers from
illegal or copyrighted items
 Strict policies against Shill bidding & Deadbeat bidding
 Forums for feedback & reporting of illegal item listing
 Forums gave users an space to interact with each other to discuss about various problems
and issues which were then looked after by eBay to resolve the related issues
 Removed copyrighted material of IDSA & helped them to screening
 Removed firearms category but was some users were not convinced

Problem Statement:

 According to Whitman Amazon’s earlier than expected entrance into the online person-to-
person auction arena will create the problem for eBay
 Speciality players & other competitors may pose a threat to eBay’s growth

Customer Base:

 Collectors- this group was eBay’s basic strength (less vulnerable)

 Various groups were formed at eBay which simply indicates the basis of niche formation
 Within very short period the users were interacting each other through email dialogues &
getting involved at eBay
 Diversity in the customers helped eBay to expand their market

Analysing the Competitors:

 Onsale & Yahoo! were not able to prosper due to fact that they were just trying to set up a
service which will allow person-to-person auctions but safety & trust factor were missing
due to Yahoo!’s anonymous email domain
 Auction Universe & Classifieds2000 were mainly focussing on the Classified Advertising &
navigation facilities for classified database for person to person auction but they were not
able to attract the people
 Speciality Players like Diecast, Winebid, Biddington, Sotheby’s Holding, Christie, CNET were
mainly related with P to P auction market for only a specific type of product
Amazon:

 It was recognised by 101 million U.S. adults thus ranked one in recognised brand
 It was acquiring various websites like Livebid.com, accept.com, homeGrocer.com,
exchange.com, etc. which was ultimately increasing its resources & product categories
 Amazon has recently implemented Safety measures & insurance to gain customer trust

Recommended Strategy for eBay:

Amazon was well recognised due as it was having customers in all states during its 1997
auction of music & video. But, eBay has first mover advantage over Amazon. In 1999 AOL deal was a
breakthrough for eBay which increased the eBay customer base.

 There are two basic types of strategies that eBay can take cost leadership and differentiation
 Also being a market leader eBay should defend its market share through Position Defence
strategy. It should build the superior brand power making the brand almost impregnable
 eBay should not follow course of the Competitor-Centered companies but should focus on
the customer satisfaction
 The official eBay magazine is good move for eBay as it will differentiate from others not only
as a brand but a lifestyle. More such actions should be taken so to form a unique brand
 Safety and insurance factors should be advertised at greater extend

Also, eBay should try to take over its smaller competitors (earlier 11% share) because:

 This effort from eBay will reduce some degree of competition among its competitors
 eBay is still financially sound to afford the takeovers of its small competitors.