Introduction

IN May 1996, eBay was incorporated in California and became public

on September 24, 1998. The first eBay auction was also conducted on Labor Day.
As of 2008, eBay has a 14 percent share of global e-commerce with 86.3 million
active users.
EBay, the first virtual online business community, empowers entrepreneurial
individuals to become e-commerce business owners. EBay.com offers a sense of
community to buyers and sellers that is sustained by communication and high
transaction rates on a wide selection of goods/services (eBay.com, 2006). EBay’s
popularity is due to the value
offered to its users.

EBay provides a “faster, easier, safer online commerce experience”

EBay’s global networked community of buyers and sellers interact 24/7
in a secure and trusted global marketplace. E-commerce is supported by eBay’s
proprietary
Skype VoIP technology, which allows free telephone calls using a broadband
Internet connection to any telephone number. Skype is available in 28 languages in
over 225 countries
(eBay, 2006). EBay’s e-commerce platform also provides full support for the
buying process (registration, bidding, management of outbids, item listing, and
transaction close), community bulletins, chat, a proprietary product search engine,
purchase protection programs, customer support, value added services for auction
users, a personal home page that
includes tailored information, and fully automated merchant services. EBay’s
success is sustained through communication and trust (eBay 2006).

EBay Inc. encompasses eBay.com, the online marketplace, PayPal, which refers to
the online payments platform, and Skype, the Voice over Internet Protocol (VoIP)
offered by eBay’s subsidiary Skype Technologies S.A. Corporate revenues are
earned primarily from
three business segments: (1) Marketplaces, (2) Payments, and (3) Communications.
fees paid by merchants for payment processing services through PayPal and Bill Me
Later.
BODY
A Trusted Online Community

To facilitate trading with unknown partners on the Internet, eBay Inc. provides a
trusted and safe trading environment by offering the following services: Feedback
Forum, Safe Harbor Program, Verified Rights Owner Program, Customer Support,
Value-Added Tools and Services, and Loyalty Programs.

Feedback Forum provides feedback, comments, and ratings on other users that can
be viewed by potential users when considering a purchase. Information is recorded
up to 12 months and provides color-coded star ratings. EBay recently adopted a
policy that no longer permits sellers to leave negative feedback.

Business Segment : Payments

EBay’s Payments segment is composed of PayPal and Bill Me Later transaction
services.
PayPal was founded in December 1998 and acquired by eBay Inc. in 2002. PayPal
is a recognized global leader in online payment solutions with 70 million active
accounts. PayPal generated $60 billion in net total payment volume in 2008, an
increase of 27 percent over 2007.
PayPal has captured 15 percent of U.S. e-commerce and 9 percent of global e-
commerce trade.

International business processing accounted for 45 percent of PayPal’s total

revenues for 2008. Higher fees earned on international transactions have provided
eBay with higher revenues and gross margins in comparison to revenues from
domestic transactions.

PayPal is available to any online or offline individual or business with an e-mail

address and allows members to securely send and receive payments online securely
without sharing sensitive financial information. PayPal is accepted both online and
offline in 190 markets worldwide and processes payments in 19 currencies. PayPal
also reports a very low percentage of 0.33 percent loss from fraud.
Competition

E-Bay competitors include: online and offline retailers, distributors, liquidators,

import and export companies, online and offline auctioneers, catalog and mail-order
companies, classifieds, directories, search engines, products of search engines,
virtually all online and offline commerce participants (consumer-to-consumer,
business-to-consumer and business-to-business), and online and offline shopping
channels and networks. However, Amazon’s strong growth and satisfied customer
base pose the greatest threat to eBay.

Marketplaces Competition

Competition is expected to increase in the future because barriers to entry in this

segment are low and new online sites can be launched at a nominal cost.
Competitors include traditional department, warehouse, discount, and general
merchandise stores, emerging online retailers, online classified services, and other
offline and online home shopping networks such as Wal-Mart, Target, Sears,
Macy’s, J.C. Penney, Costco.

Economic Climate
Weak global economic conditions, in addition to the mortgage and worldwide credit
related financial crisis, are expected to limit revenue growth, particularly in the
Marketplaces segment, which is closely tied to consumer purchase patterns.
Given that eBay conducts approximately 45 percent of its business outside the
United States, profitability is also affected by currency exchange rates.

Internal Challenges

Expansion of eBay both in the United States and internationally has placed a
significant
strain on management, operations, and financial resources. Particular areas that are
strained include the following:
• Web Site Usability. Growth in the number of products and Web site features has
caused the site to become less user-friendly.
• Web Site Stability. Increased volume and greater complexity requires additional
expensive investments in hardware, software, and personnel
• Customer Account Billing. Transaction-processing and revenue collection
becomes more difficult as the number of transactions increase and consumers
default on loans.
• Customer Support. Customer support is challenged from greater trade activity and an
increased number of users.

conclusion
Approximately 57 percent of Marketplaces revenue, however, came from markets
outside of the United States. In eBay’s Communications segment, Skype
contributed $170.0 million in revenue for the quarter, representing 25 percent year-
over-year growth. Skype added 37.3 million registered users during the quarter and
ended the period with more than 480.5 million registered users.
The future for eBay is anything but certain. The company needs a clear strategic
plan.