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Ebay Analysis

explanatory Essay
1235 words
1235 words
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The History 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 marketplace for the sale of goods and services for individuals.

In 1998, Pierre and his cofounder Jeff Skoll brought in Meg Whitman to sustain the success. Meg had studied at the Harvard Business School and had learned the importance of branding at companies such as Hasbro.

Meg culled her senior staff from companies such as Pepsico and Disney, created an experienced management team with an average of 20 years of business experience and built a strong vision for the company -- that eBay is a company that's in the business of connecting people, not selling them things.

They quickly shed the image of only auctioning collectibles and moved into an array of upscale markets where the average sale price (ASP) is higher. ASP is a key metric in determining eBay's transaction fees, so increasing the ASP became an important item. By forging partnerships with namebrands such as GM, Disney and Sun, eBay has managed to do exactly that. Sun has sold

$10 million worth of equipment and it now lists between 20 and 150 items per day.

The Business Model

eBay has built an online person-to-person trading community on the Internet, using the World Wide Web. Buyers and sellers are brought together in a manner where sellers are permitted to list items for sale, buyers to bid on items of interest and all eBay users to browse through listed items in a fully automated way. The items are arranged by topics, where each type of auction has its own category.

eBay has both streamlined and globalized traditional person-to-person trading, which has traditionally been conducted through such forms as garage sales, collectibles shows, flea markets and more, with their web interface. This facilitates easy exploration for buyers and enables the sellers to immediately list an item for sale within minutes of registering.

Browsing and bidding on auctions is free of charge, but sellers are charged two kinds of charges:

• When an item is listed on eBay a nonrefundable Insertion Fee is charged, which ranges between 30 cents and $3.30, depending on the seller's opening bid on the item.

• A fee is charged for additional listing options to promote the item, such as highlighted or bold listing.

• A Final Value (final sale price) fee is charged at the end of the seller's auction.

In this essay, the author

  • Explains that when an item is listed on ebay a nonrefundable insertion fee is charged, which ranges between 30 cents and $3.30, depending on the seller's opening bid.
  • Explains that a fee is charged for additional listing options to promote the item, such as highlighted or bold listing.
  • Explains that ebay was founded in pierre omidyar's san jose living room back in 1995. meg whitman studied at harvard business school and learned the importance of branding at companies such as hasbro.
  • Explains that ebay has built an online person-to-person trading community on the internet, using the world wide web. buyers and sellers can list items for sale, bid on items of interest, and browse through listed items in a fully automated way.
  • Explains that ebay notifies the buyer and seller via e-mail at the end of the auction if a bid exceeds the seller's minimum price.
  • Explains that the network externalities effect makes it extremely difficult for a competitor to get large share of the userbase, which is exactly what amazon and yahoo have done.
  • Explains that ebay does not take possession of the item being sold or the buyer's payment, so user trust is a key issue. feedback forums reduce anonymity and uncertainty of dealing online.
  • Explains that ebay controls more than 80% of the online auction market, with yahoo and amazon lagging behind.
  • Argues that the network effect is important in this market, since the number of buyers and sellers increases the value of the service for other buyers.
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