EBay Inc.

views updated May 29 2018

EBay Inc.

2005 Hamilton Ave., Suite 204
San Jose, California 95125
U.S.A.
Telephone: (408) 558-7400
Fax: (408) 558-7401
Web site: http://www.ebay.com

Public Company
Incorporated: 1996
Employees: 138
Sales: $47.4 million (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: EBAY
NAIC: 453998 Other Miscellaneous Store Retailers

Millions of buyers and sellers have made eBay Inc. the world’s largest and most popular site on the Internet for individuals to exchange goods in person-to-person trading. Its second auction site, Great Collections, features fine art and antiques from galleries, dealers, and auction houses. As of the end of 1999, the company had more than 5.6 million registered users and listed over three million items for sale in more than 2,000 categories. The company also owns two traditional auction businesses, Butterfield & Butterfield and Kruse International, as well as online auction subsidiaries in Germany and Japan. Virtually all of its revenues come from fees and commissions from its online and traditional auction services.

Looking for Pez Dispensers: 1995–96

When Pierre Omidyar’s fiancee complained that she could not find other people interested in collecting and trading Pez dispensers, Omidyar thought he might be able to help, so he opened a small online auction service on the Web. He formed a sole proprietorship in September 1995 and operated the auction service under the name of Auction Web.

At the time, Omidyar was working at General Magic Corp. as a software developer. His background included cofounding Ink Development Corp., which became eShop, one of the pioneers of online shopping before it was bought by Microsoft; developing consumer applications for Claris, a subsidiary of Apple Computer; and writing a software program for his high school library at the age of 14.

For five months, Omidyar offered his new service for free, building a base of buyers and sellers through word of mouth. In May 1996 he incorporated eBay, becoming CEO, and quit his day job. By the end of 1996 the company had six employees, including Jerry Skoll, eBay’s original president.

The Concept

Prior to Auction Web, online auctions were either business-to-business or business-to-consumer. There was nothing comparable to Omidyar’s concept either online or offline, with the most similar institutions being local flea markets and yard sales. Unlike traditional auctions, there was no auctioneer. At AuctionWeb, sellers posted information about their items, and buyers were able to browse the site and submit bids by e-mail. The actual auction for an item was held over three to four days, with bidders receiving e-mail notices when someone made a higher bid. They could counter that bid or drop out. The winning bidder made arrangements with the seller for payment and shipping.

eBay served the role of a broker. The company did not own any of the items being sold and was not responsible for distribution. Bidding was free, but it cost between 25 cents and two dollars to list an item for sale, plus a commission of between 2.5 and five percent of the sale price. The site was profitable almost from the beginning, unlike the vast majority of e-commerce sites. Much of the site’s success appeared due to Omidyar’s sense that while people wanted a central location to buy and sell items, they also wanted to be able to meet and talk with people with similar interests. From the beginning, eBay’s auction service sought to create the sense of an old-fashioned market and encouraged communication between hobbyists and collectors.

During 1996, the site hosted more than 250,000 auctions in some 60 categories including Beanie Babies, stamps, coins, and computers. By the end of the year, it was overseeing about 15,000 simultaneous auctions daily, with 2,000 of them new each day. The site received over two million hits a week, and the amount of money exchanged for goods sold exceeded $6 million for the year.

Fighting Fraud: 1997

The site’s popularity continued to increase. The first quarter of 1997 saw over 330,000 completed auctions, with the total transaction value of the goods sold worth more than $10.25 million. Among the items was an original 1959 “Suburban Shopper” Barbie doll, which sold for $7,999. In a May 1997 press release, eBay president Jerry Skoll stated that the growth “clearly demonstrates the receptivity and the eagerness of the general public to participate in online commerce. Our goal is to provide a fun, efficient, and reliable forum for both buyers and sellers.”

Omidyar and Skoll decided the company needed venture capital and a more experienced management team. In mid-year, Benchmark Capital, a venture capital firm in Menlo Park, California, put $5 million into the company, acquiring a 22 percent stake. With their advice, the company began targeted advertising and, in September, the company renamed its auction service eBay and launched a second-generation service, with a redesigned site. By the end of 1997, the company had some 340,000 registered users and was hosting approximately 200,000 auctions at any one time. Furthermore, eBay had established a relationship with America Online Inc. (AOL), under which eBay was featured in AOL’s Hobby and Classifieds channels. A year later, in 1998, eBay became the exclusive auctioneer in the Classifieds area, paying AOL a guaranteed $12 million over three years.

The problem of fraud on the Internet was a growing concern, as buyers paid for goods that were never delivered. In November 1997, the U.S. Senate’s Permanent Subcommittee on Investigations conducted hearings. The National Consumers League found that fraud reports tripled after it created its Internet Fraud Watch project in March 1996. In addition to false promises for discounted services and charges for Internet services that were supposed to be free, more people were experiencing problems at auction sites. Between January and October 1997, Internet Fraud Watch received 141 complaints about auction sites. As Susan Grant of the National Consumers League told Internet World, “The problem basically is that auction sites really don’t take responsibility for the sales if they go bad. They merely put the buyer together with the seller.”

In that same article, eBay indicated that between May and August 1997, it had had only 27 disputes from its 1 million transactions. To keep such disputes to a minimum, eBay instituted a feedback system whereby buyers could post reviews of their transactions. eBay rated sellers based on their number of successful auctions: positive comments received one point, neutral responses a zero, and negative comments a minus one. Potential buyers were able to read the comments as well as view the rating. A rating of minus four resulted in a seller being denied use of the service.

Competition Appears: 1998

eBay continued its phenomenal growth, recording gross merchandise sales of $100 million and revenues of $6 million in the first quarter of 1998. The first quarter had become the company’s best quarter, as eBay promoted auctioning off unwanted Christmas gifts.

Some competition was beginning to develop for the company. Late 1997 saw the business-to-business auction service OnSale Inc. add person-to-person auctions and the launch of Auction Universe Inc., a Web auction firm owned by Los Angeles Times parent Times Mirror Co. During 1998, that site began providing city-oriented auction sites through a group of affiliated newspapers, with each offering a local auction site run by Auction Universe. Such web sites, which were aimed primarily at the newspaper’s local area, made it easier to auction large items, since it was expensive to ship a used car or a large piece of furniture across the country. It also offered newspapers a way to regain revenues lost when classified ads became too expensive for low-cost items.

The company bought Jump, Inc., the developer and operator of Up4Sale, an advertising-supported trading/auction site launched in 1997. Planning to use Up4Sale to introduce complementary future services, eBay operated the site as a separate service.

New CEO: 1998

In May 1998, Margaret C. (Meg) Whitman was appointed president and CEO of eBay, with Pierre Omidyar becoming chairman. Whitman came from Hasbro Inc.’s preschool division, where she had been general manager. Before that she headed up FTD Inc., overseeing the transition of that organization from a network of individual florists to a private company and launching its web site. Known for her experience in managing and marketing consumer brands, including Teletubbies and Playskool, Whitman concentrated on raising eBay’s profile through increased advertising aimed at hobbyists and groups of collectors. At the time, eBay claimed more than 950,000 registered users and hosted more than two million auctions a month in 846 categories. Furthermore, more than 70 percent of the items put up for auction were sold.

Company Perspectives:

We help people trade practically anything on earth. eBay was founded with the belief that people are honest and trustworthy. We believe that each of our customers, whether a buyer or 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.

The company had even started listing artwork for sale, although there was skepticism in the art world that this would become a significant category for eBay. As art dealer Andrew Terner told the Minneapolis Star Tribune, “It’s important to know, to touch, to see, to do due diligence on the artwork, to know exactly what you’re buying. For sophisticated collectors, buying art is in the details. I wonder whether an Internet auction can provide that information.”

Meanwhile, Sotheby’s celebrated 254 years in the auction business with its first online auction, of books and manuscripts. The auction, which included some first editions of Poe and Hawthorne, generated $65,000. “I don’t want to be replaced by a computer quite yet, but I have to say I believe in them,” Sotheby’s executive vice-president and auctioneer David Redden told Allen Breed of the Associated Press.

Going Public

In September, Whitman and Omidyar reincorporated eBay in Delaware and took the company public, watching the price of their stock triple within a few days. Among those selling shares in the $63 million initial public offering was the eBay Foundation, established by eBay several months before the IPO with a grant of 100,000 shares. According to the Community Foundation Silicon Valley, which administered the foundation, this was the first time a company had launched a charitable fund with pre-IPO stock. “It is fairly unusual, [and] it’s a fairly effective way to do it because it doesn’t cost them much,” a Community Foundation official told the Business Journal-San Jose. At the IPO, the eBay Foundation sold just over 10,000 shares, generating cash with which to make grants.

At the end of 1998, eBay was hosting nearly 1.8 million auctions and reported a profit of $2.4 million on revenues of $47.4 million, making it one of the few Internet retailers to return solid profits. At the same time, its growth and popularity were putting the spotlight on the company and user expectations were becoming more sophisticated.

Acquisitions and Crashes: 1999

The first quarter was again record-setting, with gross merchandise sales of $541 million and net revenues of $34 million. During the quarter, eBay stopped the selling of guns and ammunition on its site. The company announced a second public offering and a four-year $75 million marketing alliance with AOL. It also saw a 3-for-1 stock split. The day before the secondary offering, Amazon.com, the Web’s leading “etailer,” began hosting daily auctions.

In May, the company made three acquisitions. Both Butter-field & Butterfield, a 135-year-old San Francisco auction house, and Kruse International, an automobile auctioneer in Indiana known for collector cars, helped eBay move into a higher-priced market. The third purchase, Billpoint Inc., was a California company that made it easier to accept credit card payments over the Internet. Sellers on eBay could now use Billpoint to instantly accept credit cards and buyers would be able to receive reference reports listing all their transactions. The company issued $275 million in common stock to finance the purchases.

Moving overseas, eBay next entered a joint venture with Australia-based PBL Online. In addition, to provide its members with more news and information about their collectibles, eBay signed an agreement with the Collecting Channel to provide “content” on the site. The first offering was information about Star Wars memorabilia.

However, June was a rough month for eBay, as the company’s web site experienced numerous crashes. The company was a few days away from completing installation of a backup system when outages began occurring, including one that lasted 22 hours. eBay refunded $3–$5 million in waived listing fees, conducted free auctions, and moved to hire more computer network experts and senior technology managers. As other big Internet companies such as AOL and E*Trade had found out, site reliability was a critical factor in retaining customer loyalty. Competitors such as Amazon.com and Auction Universe reported increased traffic at their sites as a result of eBay’s problems.

Within days of the outages, however, eBay gave journalists something else to write about the company: its global expansion. It moved into Europe with the acquisition of Alando.de AG, Germany’s largest online trading site, and added a Japanese-language corner to provide customer support for its 6,500 members in Japan and to attract additional Japanese users.

Competition moved to the high end of the auction market as 1999 drew to a close. Amazon.com, which had bought a minority stake in Sotheby’s Holding Inc., paired up with its new partner to launch a joint auction site. Christie’s International indicated that it would soon be adding an interactive section to its web site, and smaller companies handling decorative and fine art or antiques were also going online. Behind all the action was the tremendous potential for sales. Experts predicted the online auction field would grow to 17.5 million registered buyers and sales of $15.5 billion by 2001, up from 1.5 millions users and $1.5 billion in sales in 1998.

eBay had already recognized the opportunity to use online auctions for high-priced items, but noted that such offerings would have to be presented differently. After acquiring Butter-field and Butterfield, the world’s fourth largest auction house, for $250 million, the company began structuring such a site. Great Collections was launched in October 1999, with partnering auction houses, galleries, and dealers having their own branded areas and offering the same authentication services they did in their brick-and-mortar locations. The branded areas, essentially storefronts, might be a forecast of things to come on the eBay site, where 20 percent of sellers accounted for 80 percent of the transactions.

Key Dates:

1995:: Pierre Omidyar launches Auction Web.
1996:: Omidyar incorporates company as eBay Inc.
1998:: eBay reincorporates in Delaware and goes public.
1999:: Company acquires world’s fourth largest auction house; launches “Great Collections” auction site for high ticket items.

The online auction business, which eBay pioneered by developing communities of collectors who wanted to buy and sell Beanie Babies, antique coins, and Elvis memorabilia, could obviously offer more than cyberspace flea markets. The issues of fraud and site reliability were still matters of concern, as they were for any e-commerce company. But eBay, with two sites for different segments of the market, 30 regional sites around the United States, German and Japanese subsidiaries, and a large and loyal community of 5.6 million users, was the company all the others had to beat.

Principal Subsidiaries

Butterfield & Butterfield; Kruse International; Alando.de AG.

Principal Competitors

Auction Universe; OnSale Inc.; First Auction; Amazon.com; Yahoo.com; Sothebys.amazon.com.

eBay Inc.

views updated May 29 2018

eBay Inc.

2005 Hamilton Ave., Suite 204
San Jose, California 95125
U.S.A.
Telephone: (408) 558-7400
Fax: (408) 558-7401
Web site: http://www.ebay.com

Public Company
Incorporated: 1996
Employees: 6,200
Sales: $2.17 billion (2003)

Stock Exchanges: NASDAQ
Ticker Symbol: EBAY
NAIC: 453998 Other Miscellaneous Store Retailers

Millions of buyers and sellers have made eBay Inc. the world's largest and most popular Internet site for individuals and businesses to exchange goods. By 1999 eBay had 5.6 million registered users and listed over 3.1 million items for sale; by 2004 there were an estimated 65 million registered users from 150 countries, 971 million items for sale, and gross merchandise sales hit $15 billion. eBay owns local sites in 19 countries, has stakes in another eight foreign nations, and provides users with its own online pay service, PayPal Inc. As eBay's revenues continue to grow, the sky seems the limit despite competition from Yahoo!, Amazon.com, and an ever increasing number of imitators.

Looking for Pez Dispensers: 1995–96

Paris-born Pierre Omidyar, who immigrated with his family to the United States when he was six, graduated from Tufts University in 1988 with a degree in computer science. While at Tufts, Omidyar met his future wife, Pam, who had an unusual hobby: she collected and traded Pez candy dispensers. When Pam complained it was hard to find people with similar interests, Omidyar decided to create a small online auction service. AuctionWeb was launched Labor Day weekend in 1995. Set up as a sole proprietorship in San Jose, California, the online bazaar was considered a "grand experiment" by its creator. Little did he know the impact his brainchild would have on the Internet, auctions, and corporate history.

At the time he launched AuctionWeb, Omidyar was working at the General Magic Corporation as a software developer. His background included cofounding Ink Development Corp., which became eShop, a pioneer of online shopping before it was bought by Microsoft. Omidyar also developed consumer applications for Claris, a subsidiary of Apple Computer, and had even written a software program for his high school library at the age of 14.

For the first five months of AuctionWeb's existence, Omidyar offered the new service for free, building a base of buyers and sellers through word of mouth. In May 1996 he incorporated eBay (which stood for "electronic Bay Area"), becoming its chief executive and quit his day job. By the end of 1996 the company had six employees, including Jerry Skoll, eBay's original president.

The Concept

Prior to AuctionWeb, online auctions were either business-to-business or business-to-consumer. There was nothing comparable to Omidyar's concept either online or offline; flea markets and yard sales were the most similar kind of person-to-person interaction offered by the precursor of eBay. Unlike traditional auctions, there was no auctioneer. At AuctionWeb sellers posted information about their items, and buyers were able to browse the site and submit bids by electronic mail (e-mail). The actual auction for an item was held over three to four days, with bidders receiving e-mail notices when someone made a higher bid. They could then counter the bid or drop out. The winning bidder made arrangements with the seller for payment and shipping.

eBay served the role of a broker; the firm did not own any of the items being sold and was not responsible for distribution. Bidding was free, but it did cost between 25 cents and $2 to list an item for sale, plus a commission of between 2.5 and 5 percent of the sale price. The site was profitable almost from the beginning, unlike the vast majority of e-commerce sites. Much of the site's success appeared due to Omidyar's sense of what people wanted: a simple, central location to buy and sell items, and the ability to talk with (and perhaps eventually meet) people with similar interests. From the beginning, eBay's auction service sought to create the sense of an old-fashioned marketplace and encouraged communication between hobbyists and collectors.

During 1996 the site hosted more than 250,000 auctions in some 60 categories including Beanie Babies, stamps, coins, and computers. By the end of the year it was overseeing about 15,000 simultaneous auctions daily, with 2,000 of them new each day. The site received over two million hits a week, and the amount of money exchanged for goods sold exceeded $6 million for the year.

Fighting Fraud: 1997

The site's popularity continued to increase and in the first quarter of 1997 AuctionWeb saw over 330,000 completed auctions, with the total transaction value of goods sold worth more than $10.25 million. Among these items was an original 1959 "Suburban Shopper" Barbie doll, which sold for $7,999. In a May 1997 press release, eBay President Jerry Skoll stated that the growth "clearly demonstrates the receptivity and the eagerness of the general public to participate in online commerce. Our goal is to provide a fun, efficient, and reliable forum for both buyers and sellers."

Omidyar and Skoll decided the company needed venture capital and a more experienced management team. In mid-1997 Benchmark Capital, a venture capital firm in Menlo Park, California, put $5 million into the company to acquire a 22 percent stake. With their advice, the company began targeted advertising, renamed itself eBay in September, and launched a second-generation service with a redesigned site. By the end of the year the company had about 340,000 registered users and was hosting approximately 200,000 auctions at any given time. eBay had also established a relationship with America Online Inc. (AOL), and eBay became featured in AOL's Hobby and Classifieds prompts. A year later, in 1998, eBay became the exclusive auctioneer in the Classifieds area, paying AOL a guaranteed $12 million over three years.

Internet fraud soon became a growing concern, with buyers paying for goods that were never delivered. In November 1997 the U.S. Senate's Permanent Subcommittee on Investigations conducted hearings into Internet commerce. The National Consumers League found fraud reports had tripled after it created its Internet Fraud Watch project in March 1996. In addition to false promises for discounted services and charges for Internet services that were supposed to be free, people were experiencing problems at auction sites such as eBay as well. Between January and October 1997, Internet Fraud Watch received 141 complaints about auction sites. As Susan Grant of the National Consumers League told Internet World, "The problem basically is that auction sites really don't take responsibility for the sales if they go bad. They merely put the buyer together with the seller."

In the same article, eBay reported it had only 27 disputes from over one million transactions between May and August 1997. To keep such disputes to a minimum, eBay instituted a feedback system for buyers to post reviews of their transactions. Sellers were then given a rating based on the number of their successful auctions: positive comments received one point, neutral responses a zero, and negative comments a minus one. Potential buyers were able to read the comments as well as view the rating. A rating of minus four (–4) resulted in a seller being denied use of the service.

Major Growth and Change: 1998

eBay grew phenomenally, recording gross merchandise sales of $100 million and revenues of $6 million in the first quarter of 1998. The first quarter had become the company's best, as eBay promoted the auctioning off of unwanted Christmas gifts.

Some competition, however, was beginning to develop. Late 1997 saw the business-to-business auction service OnSale Inc. add person-to-person auctions and the launch of Auction Universe Inc., a web auction firm owned by Los Angeles Times parent Times Mirror Company. During 1998 Auction Universe began providing city-oriented auction sites through a group of affiliated newspapers, each offering its own local auction site (but run by Auction Universe). Such web sites, aimed primarily at the newspapers' local areas, made it easier to auction large items, since it was expensive to ship a used car or a large piece of furniture across the country. It also offered newspapers a way to regain revenues lost when classified ads became too expensive for low cost items.

eBay bought Jump, Inc., the developer and operator of Up4Sale, an advertising-supported trading/auction site, launched in 1997. Planning to use Up4Sale to introduce complementary future services, eBay operated the site as a separate service. In May, Meg Whitman was appointed president and CEO of eBay, with Pierre Omidyar becoming chairman. Whitman came from Hasbro Inc.'s preschool division, where she had been general manager. She had previously headed FTD Inc., where she launched its web site and oversaw the transition of the organization from a network of individual florists to a private company. Known for her experience in managing and marketing consumer brands, including Teletubbies and Playskool, Whitman concentrated on raising eBay's profile through increased advertising aimed at hobbyists and groups of collectors.

Company Perspectives:

eBay is The World's Online Marketplace. 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. Through an array of services, such as its payment solution provider PayPal, eBay is enabling global e-commerce for an ever-growing online community.

At the time Whitman came on board, eBay claimed more than 950,000 registered users, hosted more than two million auctions a month in 846 categories, and had a success rate of more than 70 percent (offered items actually being sold). Whitman and Omidyar reincorporated eBay in Delaware in September 1998 and took the company public, watching the price of their stock triple within a few days. Among those selling shares in the $63 million initial public offering was the eBay Foundation, established by eBay several months before the initial public offering (IPO) with a grant of 100,000 shares.

According to the Community Foundation Silicon Valley, which administered the foundation, this was the first time a company had launched a charitable fund with pre-IPO stock. "It is fairly unusual, [and] it's a fairly effective way to do it because it doesn't cost them much," a Community Foundation official told the Business Journal-San Jose. The eBay Foundation sold just over 10,000 shares at the IPO, generating cash to make grants.

At the end of 1998 eBay was hosting nearly 1.8 million auctions and reported a profit of $2.4 million on revenues of $47.4 million, making it one of the few Internet retailers to return solid profits. At the same time, its growth and popularity were putting the spotlight on the company and user expectations became more sophisticated.

Ups and Downs: 1999

The first quarter of 1999 was again record-setting, with gross merchandise sales of $541 million and net revenues of $34 million. During the quarter eBay stopped selling guns and ammunition on its site, announced a second public offering, a four-year $75 million marketing alliance with AOL, and a 3-for-1 stock split. The day before the secondary offering, Amazon.com, the Web's leading "e-tailer," began hosting its own daily auctions.

In May the company made three acquisitions. Both Butterfield, a 135-year-old San Francisco auction house, and Kruse International, an automobile auctioneer in Indiana known for collector cars, helped eBay move into a higher-priced market. The third purchase, Billpoint Inc., was a California company specializing in credit card payments over the Internet. Sellers on eBay could now use Billpoint to instantly accept credit cards and buyers would be able to receive reference reports listing all their transactions. The company issued $275 million in common stock to finance the purchases.

Moving overseas, eBay next entered a joint venture with Australia-based PBL Online. In addition, to provide its members with more news and information about their collectibles, eBay signed an agreement with the Collecting Channel to provide "content" on the site. The first offering was information about Star Wars memorabilia.

In June 1999, however, eBay was shaken as its web site experienced numerous crashes. The company was a few days away from completing installation of a backup system when outages began, including one lasting 22 hours. eBay refunded from $3 to $5 million in waived listing fees, conducted free auctions, and moved to hire more computer network experts and senior technology managers. As other big Internet companies such as AOL and E*Trade had learned, site reliability was a critical factor in retaining customer loyalty. Competitors such as Amazon.com and Auction Universe reported increased traffic at their sites as a result of eBay's problems.

Within days of the outages, however, eBay gave journalists something else to write about: global expansion. It moved into Europe with the acquisition of Alando de AG, Germany's largest online trading site, and considered adding a Japanese-language corner to provide support for its 6,500 members in Japan. Yahoo, however, beat eBay to the punch and launched its own site in September 1999, a full five months before eBay officially added its Japanese site. This delay would prove a pivotal mistake in eBay's plans for global expansion.

Competition also moved to the high end of the auction market as 1999 drew to a close. Amazon.com, which had acquired a minority stake in Sotheby's Holding Inc., paired up with its new partner to launch a joint auction site. Christie's International indicated it would soon be adding an interactive section to its web site, and smaller companies handling decorative and fine art or antiques were also going online. Behind all the action was the tremendous potential for sales. Experts predicted the online auction field would grow to 17.5 million registered buyers and sales of $15.5 billion by 2001, up from 1.5 millions users and $1.5 billion in sales in 1998.

eBay had already recognized the opportunity to use online auctions for high-priced items, but noted such offerings needed to be presented in a different manner. After acquiring Butterfield and Butterfield, the world's third largest auction house for over $250 million, the company began structuring such a site. Great Collections (later renamed eBay Premier) was launched in October 1999, with partnering auction houses, galleries, and dealers having their own branded areas and offering the same authentication services they did in their brick-and-mortar locations.

Key Dates:

1995:: Pierre Omidyar launches AuctionWeb.
1996:: Omidyar incorporates the company as eBay Inc. in San Jose, California.
1998:: eBay gets a new chief executive, reincorporates in Delaware, and goes public.
1999:: The "Great Collections" auction site is launched for high ticket items.
2000:: Firm buys into AutoTrader.com and brings Japan, Canada, and Austria into the fold.
2001:: Registered users reach nearly 43 million.
2002:: eBay revenues top the $1 billion mark.
2003:: Revenues climb to a remarkable $2.17 billion.
2004:: eBay buys three international dot.coms and a stake in classified ads provider craigslist.
2005:: eBay auctions are available in 46,000 merchandise categories worldwide.

A New Century, a New Frontier: 2000–01

By the new millennium eBay had become the Internet's top auction site with ten million registered users, selling around $10 million of merchandise a day. In the week of January 9, eBay set a new record for attracting just under 1.8 million users that week, prompting CEO Whitman to tell DSN Retailing Today (May 8, 2000): "Our unique community of passionate buyers and sellers continue to take eBay to new heights."

Some of the firm's more creative users, however, had learned how to rig bids and outcomes; buyers teamed up with bidding partners, while sellers had buddies submitting fake high bids. eBay, however, was not terribly concerned since by 2000 fraud occurred only once in every 25,000 transactions according to company spokesperson Kevin Pursglove. This was due in part to measures taken two years before when the subject of fraud was addressed by CEO Whitman and eBay's board. Though founder and Chairman Omidyar feared tighter controls might alienate some of eBay's diehard users, several measures had been implemented including the ban on weapons, placing adult-themed items in a secure area, offering buyers insurance from the esteemed Lloyds of London, and allowing sellers a discounted rate at Equifax to run credit checks.

The biggest news of early 2000 was not security but the possible merger between eBay and mega-portal Yahoo. Both firms owned pay-online businesses (Yahoo bought Arthas.com and eBay had acquired Billpoint.com) and each brought clout to the bargaining table: Yahoo had a customer base of 120 million users, while eBay had already established itself as the premier online auction house. Talks, however, fell apart.

In mid-2000 eBay bought the Philadelphia-based Half.com, an auction site specializing in used goods, for $312 million. Half.com, which sold used goods for half their original retail price, already had four million registered users and earned 15 percent on every sale. While eBay finalized its acquisition of Half.com, its chairman founded the Omidyar Foundation to donate $20 million annually to worthy causes.

While eBay Chairman Omidyar spent time in Paris working on eBay's international expansion, Whitman continued to expand the company's domestic operations. At the end of 2000 a new service called BusinessExchange, a business-to-business marketplace for small companies to buy office products and equipment, was launched by eBay to maintain its lead as the world's top online auctioneer. According to Forrester Research, an Internet market research firm, eBay controlled 85 percent of the online auction action, which Forrester estimated would top $3.3 billion for the year (Fortune, June 26, 2000).

In January 2001 eBay suffered another outage, this time a crash lasting for 11 hours. While the company blamed the crash on a series of "glitches," IT analysts believed eBay's Sun Microsystems hardware and Oracle software were no longer up to the task of handling millions of transactions a day. The company denied such reports, claiming confidence in its systems. With eBay's difficulties, minor as they were, competitors were still unable to topple its reign. Yahoo, which had gained considerable ground and was the Web's third most visited firm, lost the majority of its online auction clients after starting to charge fees in the first quarter of 2001.

Not waiting for Yahoo to regain its footing, eBay inked a deal with Microsoft, the Internet's second most visited firm behind AOL, to be featured on a myriad of its web sites and to serve as its default auction provider. With online auctions growing at an exponential rate, eBay was determined to hang on to the lion's share of what Forrester Research claimed would rise to $6.4 billion in sales by 2003.

As 2001 ended, eBay earned the top slot on the Deloitte & Touche Technology Fast 500 as the fastest-growing technology company in North America, based on an average of its revenue growth over a five-year period. For the years in question, eBay had gone from $372,000 in 1996 to an astounding $431 million in revenues for 2000, with nearly 30 million registered users. Better yet were eBay's figures for the year 2001: revenues topped $748 million and registered users had climbed to more than 40 million.

Staving Off Competition: 2002 and Beyond

In early 2002 eBay signed an agreement with Priceline.com to dabble in the travel and leisure market, for which the company's 42 million registered users had already shown a keen interest. Next came a partnership with Sotheby's to market high-end collectibles. The new Sotheby's site would supersede both eBay's Premier site and Sotheby's own online auction site. Both the Priceline.com and Sotheby's deals spearheaded new frontiers, as eBay struggled with overseas competition. Rival Yahoo had gained control of Japan's lucrative online auctions, the globe's second largest online auction marketplace.

Yahoo's dominance was a stinging reminder of entering the Asian market with too little too late. Yahoo controlled 95 percent of the market by 2002 and eBay's dismal performance affected its hopes for worldwide dominion. Despite its problems in Japan, however, eBay remained the leading online auctioneer in Australia, Canada, Germany, and the United Kingdom and its year-end figures reflected its status as revenues topped the billion-dollar mark for the first time, reaching $1.1 billion on total auction sales of some $15 billion for 2002.

eBay's CEO Meg Whitman made news in early 2003 by following in the footsteps of Pierre and Pam Omidyar. Whitman donated $30 million to her alma mater, Princeton University, where she had graduated with a degree in economics in 1977. Whitman's contribution was earmarked for the New Jersey school's campus expansion and to increase student enrollment over the next ten years. On the corporate front, eBay paid a reported $1.5 billion for the Internet's premier online-pay service, PayPal, to replace its own Billpoint service. Both Billpoint and PayPal's online gambling service were phased out after the purchase.

As 2003 wound down, eBay still dominated the world's online auctions with close to 63 million registered users, revenues hitting $2.17 billion, and net income reaching $442 million. In 2004 the firm went on an acquisitions spree, buying Germany's mobile.de, India's Baazee.com, Korea's Internet Auction Company, Ltd., and a stake in online classifieds forum craigslist. Though eBay retained its status as the planet's favorite online auction host, the company had learned from its mistakes: Kruse International and Butterfields were sold; it withdrew from the Japanese market; Half.com was phased out; and Billpoint was shuttered in favor of PayPal. Despite or because of these missteps, eBay refocused on what it did best: providing a comfortable and competitive environment for online buyers and sellers in an ever increasing range of auctions.

Principal Subsidiaries

Baazee.com; Eachnet. Inc.; Internet Auction Company, Ltd.; MercadoLibre.com; mobile.de; PayPal Inc.

Principal Competitors

Amazon.com; Auction Universe; First Auction; OnSale Inc.; uBid.com; Yahoo.com.

eBay Inc.

views updated May 23 2018

eBay Inc.

ABBREVIATED CAMPAIGN
EBAY 2004 TELEVISION CAMPAIGN

2145 Hamilton Avenue
San Jose, California 95125
USA
Telephone: (408) 376-7400
Fax: (408) 369-4855
Web site: www.ebay.com

ABBREVIATED CAMPAIGN

OVERVIEW

In 1995 eBay Inc. was founded in San Jose, California. It was an online site, located at www.ebay.com, that enabled users to buy and sell items from other users. Rather than sell items itself, eBay made money by charging fees on completed transactions and by charging for advertisements on its website. In 2003 more than 900 million items were posted for sale on eBay. These items included automobiles. Because of their relatively high prices, automobile sales generated larger fees than many other kinds of sales. In the arena of used-car sales, however, the company faced competition from online search engines such as Google and Yahoo! as well as from traditional newspaper advertisements.

EBay charged the ad agency Goodby, Silverstein & Partners, based in nearby San Francisco, with developing a radio spot that would inform consumers of the benefits of using eBay to sell automobiles. The result was a humorous 60-second spot called "Abbreviated." The spot featured a narrator using an "abbreviated" language culled from newspaper classified ads. Rather than just telling listeners that classified ads did not provide enough space to adequately describe an automobile, the narrator demonstrated this through his own speech. Then he touted the benefits of selling cars on eBay.

The spot was a hit with critics. In 2005 it won a Silver Lion at the International Advertising Festival, a 2005 Bronze Clio Award, and the top prize at the annual Radio Mercury Awards. These awards, however, came after eBay's decision in March 2005 to part ways with Goodby, Silverstein & Partners. The company elected to work with BBDO on future campaigns. EBay felt that the larger New York-based agency was better equipped to handle integrated campaigns that combined online, televised, and radio elements. Both agencies were part of the larger communications company the Omnicom Group.

HISTORICAL CONTEXT

The San Jose-based eBay was created to capitalize on the increasing expansion of the Internet into everyday life in the United States and around the world. The company provided sellers and consumers a platform where they could find each other and conduct transactions. Sellers offered a wide range of goods via the eBay website, www.ebay.com, including sneakers, automobiles, furniture, clothing, and collectibles. The site was best known for the online auctions that it enabled. Sellers posted an item on www.ebay.com, and buyers could view the item and bid on it. The highest bidder purchased the item.

As the Internet became more popular, eBay was able to expand quickly, and the company set up companion sites around the world. Soon eBay began describing itself as "The World's Online Marketplace." The company's profits came via fees it collected on each transaction as well as from advertising it sold on its assorted websites. The approach was largely successful, and in 2003 alone more than 900 million items were listed on eBay. By 2004 eBay was offering the PayPal service, which enabled buyers to pay sellers through their credit cards or via secure account transfers. There were several subsections to the eBay site, including one for automobile sales, labeled "eBay Motors." Consumers could search cars by make and model or by price. Because higher-priced items generated higher fees, the company made more money from automobile sales than it did from many other items sold via www.ebay.com.

At the outset eBay relied on word of mouth to promote its business. As the company became more successful, it branched out into print and radio advertising. In 2002 eBay conducted its first television campaign, "Do It eBay," which was developed by Goodby, Silverstein & Partners. The San Francisco-based agency had been responsible for all of the company's radio advertising through 2004 as well. Goodby, Silverstein & Partners was best known for its award-winning "Got Milk" campaign on behalf of the California Milk Processor Board. The agency was founded in 1983 by Jeff Goodby and Rich Silverstein, who had previously worked together at the Ogilvy & Mather agency.

TARGET MARKET

EBay usually aimed for a very large target market. The company wanted to be the destination of choice for anyone shopping online. The website had always been especially popular with collectors, who used the site to track down rare and hard-to-find items, such as out-of-print records or idiosyncratic household goods.

The site listed many types of items for sale, however, and it was also a major attraction for bargain shoppers and consumers who were comfortable doing their shopping online. The company also allowed people to sell automobiles on the site. These were expensive items, which meant that the company collected higher fees on such transactions. The kind of shopper that bought an automobile on eBay was a typical used-car shopper: younger and on a budget. The company saw automobile sales as a prime candidate for growth.

COMPETITION

The most serious competitor for eBay, especially for big-ticket items such as automobiles, was the search engine Google. Like eBay, Google did not sell anything itself. Instead, consumers used Google's website to search for items online. For example, a used-car dealer or an individual would post on a website the vehicles they had for sale, and buyers would find the site via Google. Other search engines, such as Yahoo!, offered similar services. In fact, Yahoo! even allowed sellers to post ads that would appear in the Yahoo! Autos section of the search engine's website, www.yahoo.com. Although neither of these companies provided online auction services, they competed with eBay by providing an alternative way for consumers to buy automobiles online.

The company was even more concerned, however, about its off-line competitors. While certain products, such as music files, collectibles, or books, seemed to attract online buyers easily, most consumers were accustomed to buying automobiles through off-line means, such as classified advertisements in newspapers. To grow its automobile-selling business eBay needed to lure more of these people into buying (and selling) automobiles on ebay.com.

ONLINE AUCTIONS

The most common type of transaction on eBay's website was an auction. To list an item for auction, a seller was required to register with eBay. Then he or she chose whether or not to offer a "Buy It Now" option for the item. This was a feature that allowed a buyer to purchase the item outright, bypassing the auction. After setting a "Buy It Now" price, the seller posted a minimum bid for the item. Then the seller determined how long the auction should last and set a minimum bid increment. A minimum bid increment was the minimum amount over the current bid a buyer was allowed to offer. For example, if someone bid $5 for an item, and the minimum bid was $1, then the minimum for the next bid was $6.

Buyers bid by entering into the site the maximum amount they were willing to pay. Their bid appeared as the minimum allowed at that time, and then it moved up as more people bid. For example, in the above scenario, if the buyer chose to bid $10 instead of just $6, his or her bid first appeared as $6 and then rose as new bids were made. If someone else saw the item and bid $7, the first buyer's bid moved up to $8. Bidders were allowed to increase their maximum bids. The person with the highest bid when the auction ended won the item.

MARKETING STRATEGY

Goodby, Silverstein & Partners was the agency of record on the 2004 radio campaign, which consisted of a 60-second spot titled "Abbreviated." It was part of the $250 million in U.S. advertising that eBay purchased in 2004. Later that year eBay augmented its radio efforts with a television campaign, also engineered by Goodby, Silverstein & Partners. This campaign, which carried the tagline "The Power of All of Us," ran in the fall and winter shopping season. It did not focus on automobiles.

The "Abbreviated" radio spot was fairly straightforward. It featured a man speaking directly to the audience, without any music or sound effects. In the ad the speaker communicated in short, abbreviated words, like those used in a typical classified ad in a local newspaper. He explained to consumers—especially potential sellers—that the abbreviated language used in newspaper classifieds was too unclear to give potential buyers an idea of what the car was actually like. In contrast, eBay allowed sellers a chance to post more detailed text and pictures, so buyers knew just what they were getting.

"Abbreviated" was distinctive both for its message and for its quirky vocabulary, which entailed shortening words by leaving out most of the vowels and many of the consonants. By referring to a car as "cr," for example, the spot captured the listener's attention. It began with the announcer saying, "If YR FMLR with the CLSIFDS section of the NWSPPR, you PRBLY understand this MSSG quite well." This strange-sounding language was scattered throughout the spot, driving home its central thesis—that classified ads offered too little space for sellers to describe a vehicle properly—by demonstrating it. At one point the speaker described a car using the abbreviated language of newspaper ads, and the results sounded like gibberish.

The commercial also touted eBay's Vehicle Protection Program, which guarded consumers against being stuck paying for a car that was not in as good a condition as the advertisement had claimed. Finally it reminded listeners that eBay offered a nationwide customer base, as opposed to the local reach of most newspapers. Even when describing eBay's own services, the narrator still slipped into abbreviated words occasionally, using them sporadically enough that his meaning was not lost but often enough to keep the spot's humor going.

"Abbreviated" referred specifically to "eBay Motors" instead of just "eBay"—even though "eBay Motors" was only a category on www.ebay.com, as opposed to an actual separate entity. This distinction was made for consumers who were used to thinking about eBay as a place to buy smaller items, such as household goods or clothing. It also reinforced the idea that eBay was not only a place where automobiles were available for sale but also a natural place to go shopping for these kinds of items. This subtle gesture allowed the spot to concentrate on the benefits of selling cars on eBay without having to clear any hurdle the listener might have about shopping for an automobile that way. The commercial was recorded at the GSP Post studio in San Francisco. It was produced for Goodby, Silverstein & Partners by Brian Coate and was written by Tyler McKellar. GSP Post served as the production company.

OUTCOME

The spot was a success, although it also marked the end of eBay's account with Goodby, Silverstein & Partners. In March 2005 eBay ended its relationship with the agency, replacing it with the New York-based BBDO. The company believed that BBDO, a larger agency, was better equipped to provide integrated marketing campaigns that would combine Internet, television, print, and radio elements.

Regardless, "Abbreviated" was particularly successful with critics. It received a Silver Lion in the Radio category at the 2005 International Advertising Festival in Cannes, France. Called the "Olympics of Advertising," the Cannes festival was among the most prestigious in the world, with campaigns and agencies from all over the globe under consideration. "Abbreviated" also won a Bronze Clio that year; the Clios were one of the largest international advertising award programs. In addition Goodby, Silverstein & Partners won the $100,000 first prize at the 2005 Radio Mercury Awards for the "Abbreviated" spot. Based in New York, the Radio Mercury Awards were begun in 1992 to offer an exclusive recognition for excellence in radio advertising. All of these awards were announced after eBay had terminated its relationship with Goodby, Silverstein & Partners.

The effort contributed to a solid year for eBay. The company finished 2004 with consolidated net revenues of $3.27 billion, a 51 percent improvement from 2003. The company also reported a record 1.4 billion listings during 2004, up more than 45 percent from the previous year. More than $34 billion of transactions took place in 2004 via eBay's online auctions and listings. Therefore, the "Abbreviated" commercial appeared to succeed in helping traffic at www.ebay.com continue to grow.

EBAY 2004 TELEVISION CAMPAIGN

OVERVIEW

The San Jose, California, company eBay, Inc., was an online-based auction and selling community that in 2004 serviced 115 million shoppers, who purchased items ranging from clocks to shoes to automobiles. The company did not sell anything itself, instead making money from advertising and by charging sellers listing fees for using the company's website, ebay.com, to sell items. In 2004 eBay restructured its listing fees, charging higher fees for more expensive items, in an effort to encourage sellers to offer lower opening prices for auctions. This carried the risk that some sellers would be less inclined to use eBay, because they might want to avoid the fees. Although eBay was the most popular online-auction site, it faced pressure from other Internet companies, such as Amazon and Google, whose own services diverted consumers away from eBay.

In order to maintain strong visibility in the face of this pressure, eBay earmarked $250 million for marketing in 2004. From its inception eBay had only run one major television campaign, relying on word of mouth, Internet ads, and print campaigns to attract consumers. In 2004, however, the company commissioned Goodby, Silverstein & Partners, an agency based in San Francisco, to run a new television campaign. There were four spots in all, rolled out that October and November. The most popular spot was known as "Toy Boat." It featured a boy losing his toy boat at sea, only to find it again as an adult after a fisherman found it and posted it for sale on eBay. The commercial featured a voice-over by Hollywood actress Rosanna Arquette. Other spots appealed to the sense of community offered by eBay. The campaign was meant to differentiate eBay from impersonal sellers such as Amazon or search engines like Yahoo and Google.

The spots were a hit with critics. The Directors Guild of America singled out Noam Murro, director of "Toy Boat," for Outstanding Directorial Achievement in Commercials. The commercials helped eBay's fourth-quarter revenues jump 24 percent compared to the same period in 2003. The campaign also marked the end of eBay's relationship with Goodby, Silverstein & Partners. In 2005 eBay offered its business to BBDO, a larger advertising agency based in New York City.

HISTORICAL CONTEXT

The Internet-centered company eBay, Inc., was founded in September 1995 and was based in San Jose, California, near the state's famous "Silicon Valley," so called because it was home to a number of technology-related businesses. By 2004 eBay employed about 9,000 people and operated around the world. It was intended to provide a global trading platform where consumers could trade or auction different items. EBay allowed vendors and consumers to buy and sell a wide range of items, ranging from clothing to electronics to celebrity collectables to cars. To describe its business it adopted the slogan "The World's Online Marketplace." Throughout the 1990s the company expanded, adding local eBay sites to service countries that included Australia, China, India, and France.

EBay offered buyers the choice between either bidding in an online auction or buying an item outright for a predetermined price. All sales took place via the company's website, which in the United States was located at www.ebay.com. The company made a profit not by selling items itself but by taking a percentage of the sales price of the items sold on the site. EBay collected listing, feature, and final-value fees from all of the registered sellers that used the site. Advertising on the site itself provided another source of income. The company also expanded its business by offering PayPal, an online payment system that could be used on other websites. In 2004 eBay purchased a 25 percent stake in the online community Craigslist, which offered online "classified ads" for people to buy and sell items. It had thus been emerging as a potential competitor for eBay.

In eBay's early years the company primarily relied on word of mouth to attract buyers and sellers to ebay.com. Even in the early 2000s the company stuck to more conservative print campaigns. The company's first major television campaign was released in 2002; it was created by Goodby, Silverstein & Partners, a San Francisco-based agency that was especially known for its work with technology companies. The campaign later won a 2004 Gold EFFIE Award in the retail category. The spots helped eBay's online community expand to 115 million shoppers.

TARGET MARKET

EBay's target market was anyone interested in buying or selling things online. Because younger people were often more comfortable with technology such as the Internet, consumers under 40 were especially important to eBay. Collectors, who used the site to track down hard-to-find items such as out-of-print books and CDs, were also considered to be valuable users of the site.

After eBay raised its listing fees in January 2004, there was concern that some sellers might be more inclined to avoid listing on the site. The company had raised prices by about 9 percent across the board, but increases were as high as 45 percent on more expensive items. EBay hoped that this would convince some sellers to use a lower starting price for auctioned items, which would attract more bargain-conscious consumers, who then might be tempted to bid on more and more items. To prevent competitors from cutting into its core business, eBay decided that it needed to run another television-based marketing campaign. The company wanted to make sure that consumers still thought of eBay as the best place to buy things online.

COMPETITION

By 2004 eBay was the dominant online-auction site in the world. Because of the nature of the Internet, however, the company did not only compete with other auction-oriented sites. EBay made its money through the sales conducted on its site and via advertising on that same site. Both required the company to keep attracting a large numbers of visitors to the site. While eBay did not sell anything directly, it needed brisk sales to generate fees. Therefore, one of its biggest competitors was the online retailer Amazon. Amazon sold a variety of products, ranging from books to electronics. It conducted high-profile radio and television campaigns. Its direct sales often competed with the sellers that used eBay, so the auction site had to be sure to keep its own profile on par with Amazon.

Perhaps the most dynamic force on the Internet in 2004 was the search engine Google. Google and other search engines, including Yahoo, did not sell anything directly, but users could find individual sellers via such search engines. Users went to Google's website and searched for a particular product or seller; then they could connect with these sellers directly. Google did not have any connection with such sellers, instead making money from advertising sold on the google.com website itself. Google even added a special search called "Froogle," with which users could filter a search to show only online sellers. This cut into eBay's business, because if buyers could find sellers directly through Google, they would have no reason to shop at eBay. It also meant that sellers could sell items on their own websites and avoid paying eBay any fees.

MARKETING STRATEGY

In 2004 eBay earmarked about $250 million for U.S. advertising. Once again, Goodby, Silverstein & Partners ran the campaign. The San Francisco-based agency had made its reputation designing innovative campaigns for online-based businesses such as E*Trade. It had handled eBay's only other television campaign in 2002.

The new campaign centered on four television spots, two that launched in October and two more that followed a month later. The spots were intended to promote the idea of eBay as a community, differentiating it from the impersonal retailer Amazon or the sprawling Web that the search engine Google harnessed for its users. By underscoring the communal aspect of eBay, the company hoped to lure consumers into spending more time—and therefore making more purchases—at ebay.com. The campaign used the slogan "The Power of All of Us." One spot featured shots of people doing good deeds for each other, including opening doors for people and delivering food to shut-ins. On-screen text explained to the audience that eBay's online community "proved" that people were "good." The spot was an appeal to the sense of community that had inspired some eBay users to set up collectors' clubs built around particular products sold on eBay.com.

The most popular spot, "Toy Boat," was designed to underscore the perceived benefits of online auctions in general and eBay in particular. It began with a shot of a young boy playing with his new toy boat. The boat then was swept out to sea by the receding tide and apparently lost forever. Years later, however, it turned up in a fishnet. The fisherman who found it decided to make some money selling the toy on eBay. The now-adult boy discovered it there, posted in an online auction. The spot closed with the tagline "What if nothing was ever forgotten? What if nothing was ever lost?" Voice-over for the spot was provided by the actress Rosanna Arquette, known for her work in such films as Pulp Fiction and Desperately Seeking Susan.

Another commercial featured a man dusting off his clock collection. Soon his home was filled with other collectors offering him new clocks. He chose his favorite and added it to his current group of clocks. This spot appealed directly to collectors, people especially drawn to the site in hopes of finding a rare or unusual item. These kinds of items—a strange clock, for example—were not easy to find on sites like Amazon that focused on new, practical items, or via Google, which offered searches that showed popular (not quirky) products at the top of its listings.

OUTCOME

Critics and audiences enjoyed the new spots. One, "Toy Boat," garnered special recognition at the Directors Guild of America Awards for 2004. The spot's director, Noam Murro of the production company Biscuit Filmworks, was honored for Outstanding Directorial Achievement in Commercials for "Toy Boat" and two other spots. EBay's television commercials also helped boost the company's sales in the last quarter of 2004, which coincided with the campaign's run. U.S. revenues at the company were up 10 percent from the previous quarter and had increased a solid 24 percent compared to the previous year's fourth quarter.

DESPERATELY SEEKING EBAY

When eBay released a major television campaign for only the second time in the company's history, it knew that the spots needed to connect quickly with customers in order to distinguish the online-auction site from Internet sellers such as Amazon and search engines such as Google. To do that the company enlisted a familiar voice to star in the spots: Rosanna Arquette.

Arquette was a part of an acting family that included sister Patricia (star of the film True Romance and the television show Medium) and brother David (of the Scream trilogy). Their father, Lewis, was an actor as well, having appeared in numerous television and film projects in the 1970s and 1980s.

One of Rosanna Arquette's first high-profile roles came in 1985, when she starred in Desperately Seeking Susan. In the film Arquette's bored suburban housewife switched places with a New York bohemian (played by pop singer Madonna). She later acted in critically lauded films such as New York Stories (1989) and Pulp Fiction (1994) along with box office hits Hope Floats (1998) and The Whole Nine Yards (2000). Arquette also appeared as a guest star on many of the biggest television hits of the day, including The Practice, Malcolm in the Middle, and Grey's Anatomy. As a result, she was familiar to a vast range of people. This breadth of recognition made her ideal for work with eBay, which attracted a variety of users.

While the increase was below the 38 percent growth the company had seen in the same quarter between 2002 and 2003, it was still a healthy pace. EBay nevertheless discontinued its relationship with Goodby, Silverstein & Partners soon after the campaign finished, moving to New York City-based BBDO for future campaigns. The agency was larger and operated a more diverse portfolio than Goodby, Silverstein & Partners.

eBay Inc.

views updated May 23 2018

eBay Inc.

founded: 1995

Contact Information:

headquarters: 2145 hamilton ave.
san jose, ca 95125 phone: (408)558-7400 fax: (408)558-7401 email: investor_relations@ebay.com url: http://www.ebay.com

OVERVIEW

eBay is the world's first and largest person-to-person online auction Web site. The company boasts the largest number of traders online and is the Web's most popular shopping site, consisting of a community of 42.4 million registered users made up of individuals and businesses that form the largest online marketplace in the world. The online auction site consists of more than 8,000 categories of goods and services that range from antiques, jewelry, electronic equipment, furniture, sporting goods, tickets, and collectibles to used automobiles and boats.

eBay facilitates trade locally, nationally, and internationally, featuring a variety of international sites, specialty sites, and categories and services that provide users with the tools to trading efficiently online in auction-style and fixed-price formats. eBay's major feature and services include Billpoint, a service that facilitates credit card payments between buyers and sellers; Half.com, a fixed-price trading site of previously owned mass-market goods; eBay International, with country specific sites in Austria, Canada, France, Germany, Ireland, Italy, Korea, New Zealand, Switzerland, and the United Kingdom; eBay Motors, the Internet's largest auction-style marketplace for buying and selling all things automotive; eBay Stores, allowing sellers to create customized shopping destinations to merchandise their items on eBay and allow buyers a convenient way to access sellers' products; Buy it Now, a feature allowing buyers to buy an item at a specified price without waiting for the end of an auction; eBay Professional Services, which serves the small business community by providing a way on eBay to find professionals and freelancers in a variety of areas from web design to writing and technical support; eBay Local Trading, with 60 local markets in the United States to aid in the sale of difficult-to-ship items; eBay Premier, which presents fine art, antiques, fine wine, and rare collectibles from leading auction houses and dealers worldwide; and eBay Live Auctions, offering live, real-time auctions on items at the world's leading auction houses. All these features and services further the company's mission to "develop a global online trading platform that will help practically anyone trade practically anything on earth."

COMPANY FINANCES

In 2001 eBay transacted more than $9 billion in annualized gross merchandise sales, which is the value of all goods traded on eBay that year. More than $1 billion of that total is estimated to come from the less than two-year-old automobile category alone. Sales for 2001 totaled $748.8 million, with a one-year sales growth of 73.6 percent. Net income for 2001 was $90.4 million, up 87.2 percent over the previous year.

The company has shown consistent and impressive financial growth since its inception, with a 160 percent increase in net revenues from 1998 to 1999, a 92 percent increase in net revenues from 1999 to 2000, and a 73 percent increase in net revenues from 2000 to 2001. eBay Inc.'s stock ranged from a low of $29.25 to a high of $72.74 over a 52-week period. eBay's price-earnings ratio is a very high 143, based on 2001 estimated results, but lowers to approximately 80, based on 2002 results. Financial goals for the company are to reach $3 billion in revenues and $1 billion in operating profits by the year 2005, which would mean more than tripling the number of registered buyers and sellers to 150 million.

ANALYSTS' OPINIONS

eBay will tell any potential investor that they have established themselves as the world's largest and most popular online marketplace by pioneering online personal trading and that they have shown consistent profits since their inception in 1995 and subsequent incorporation in 1996. Several analysts agree with eBay's assessment and consider it a desirable stock. RBC Capital Markets reported in 2002 that as a result of eBay's alliance with Priceline.com and Sotheby's, along with continued expansion of eBay Motors, eBay maintained their Sector Perform-Above Average rating. CIBC World Markets Corp. reiterated its buy rating on eBay in 2002, as well. Robertson Stephens reported in January 2002 that eBay's impressive fourth quarter 2001 results suggest that business at the online trader remains strong and combines desirable growth initiatives consistent with prior expectations, therefore warranting a Buy rating on eBay stock. As one of the sole survivors of the dot-com downturn, eBay's low overhead, continued financial performance, and growth into new markets makes its stock one of the few attractive technology buys in 2001 and early 2002.

HISTORY

eBay founder Pierre Omidyar was considering an Internet venture when he realized collectors needed a central location to get together to trade and chat about their hobbies. In 1995 he launched an online person-to-person trading Web site called Auction Web, later renamed eBay. The basic, black-and-white Web site was free to use and, largely though word of mouth, the business was quickly catching on. In 1996 the business grew to the point where Omidyar quit his day job that year to devote himself fully to eBay.

The site was easy to use: seller and buyers coming together trading a wide variety of items, including antiques and collectibles. Omidyar settled on the auction format as a way of creating an efficient market—rather than setting prices for items, bidders could determine the true value of an item simply by bidding the price up. Users suggested charging small fees for selling an item to keep people from putting up things with little value. The fee system also served to make the company profitable. In February 1996 the company began charging the seller a placement fee, starting at $.25, and also a percentage of the item's closing price. The auction process is as follows: after registering, sellers put up an item for auction for a specific length of time, from 3 to 14 days, and set a minimum bid or reserve price, if applicable. Bidders put in the maximum that they are willing to pay for the item, and eBay automatically bids on their behalf until their maximum has been reached. If bidders are outbid, they are notified by eBay and can enter a new, higher maximum if desired. At the end of a successful transaction, the seller and buyer are sent each other's e-mail addresses through eBay and they contact each other to arrange for payment and shipping of the item. After a transaction is complete, appropriate feedback is left by the buyer and seller for each other remarking on the transaction. Omidyar's idea of developing a feedback system was one of the keys in building trust among buyers and sellers and weeding out any dishonest users.

The company was incorporated in May 1996. eBay's staff at the time consisted of Omidyar and Chris Agarpao, a part-time employee who is still with the company. Omidyar, who still was running the business out of his home, brought on Jeff Skoll to serve as vice president of strategic planning and analysis in 1996, and who formulated the company's first business plan. The company moved from Omidyar's home to Skoll's and a temporary office in Sunnyvale before settling into their San Jose home where the company is still headquartered. One year later, the amount of e-mail the three employees were getting was unmanageable, and Omidyar quickly brought in a customer support staff of about 12 people. In mid-1997 the company had almost 800,000 auctions a day. By late 1997, more than 3 million items had been sold with $94.0 million in transactions and $5.7 million in sales.

FAST FACTS: About eBay Inc.

Ownership: eBay Inc. is a publicly owned company traded on the NASDAQ Stock Exchange.

Ticker Symbol: EBAY

Officers: Pierre M. Omidyar, Chmn., 34; Margaret C. (Meg) Whitman, Pres. and CEO, 45, 2000 base salary $210,000; Rajiv Dutta, CFO, 40; Maynard G. Webb, Jr., Pres., eBay Technologies, 46, 2000 base salary $450,000; Jeffrey D. Jordan, SVP and Gen. Mgr., U.S. Business, 43, 2000 base salary $290,000; Matthew J. Bannick, SVP, International, 37, 2000 base salary $207,250; Michael R. Jacobson, VP, Legal Affairs, Gen. Counsel and Sec., 47, 2000 base salary $190,000

Employees: 1,927

Principal Subsidiary Companies: eBay owns and operates Half.com, which provides an alternative, fixed-price format for trading a variety of goods, including books, recorded music, movies (VHS, DVD), and video games. Through the 65 percent owned subsidiary Billpoint Inc., eBay also facilitates online trading transactions by providing buyers and sellers with the necessary tools to conduct person-to-person credit card and electronic check payments on the Internet. eBay also owns the traditional auction house Butterfields Auctioneers and leading collector car auction company Kruse International.

Chief Competitors: Though the clear leader in the field of online auction providers, eBay's top competitors are the Internet companies Amazon.com, which operates its own online auctions; uBid, another online auctioneer; Buy.com; and Yahoo! shopping. eBay potentially competes with a number of companies depending on the category of products it sells, as well as those serving broad ranges of goods. These broad-based competitors include Wal-Mart, Target, K-Mart, Sears, Macy's, Sam's Club, Costco, and JCPenney. Subsidiary Billpoint competes with PayPal and Bidpay.

Skoll and Omidyar knew the company needed more direction than they could provide, and so approached the venture capital firm Benchmark Capital, located in Menlo Park. Benchmark invested $5 million in eBay, and they immediately began searching for a CEO who could provide the needed leadership. They found Meg Whitman, who started with the company in 1998. Whitman had previously been the general manager of the preschool division at Hasbro Inc. Whitman was skeptical about leaving the toy giant to join the small upstart, but she was convinced after a meeting with Omidyar when she started realizing the company's potential. When the company went public in September 1998, the initial public offering price was $18 and climbed to $47.38 by the end of the first day of trading. Omidyar left the daily business operations to Whitman to pursue outside interests, including philanthropy.

Under Whitman, eBay saw considerable growth in 1999. The company acquired the traditional offline auction houses Butterfields Auctioneers—providing fine art, antiques, and collectibles—and Kruse International—providing collector cars—and began a fixed-price shopping site called Half.com. The company also acquired a 65 percent stake in Billpoint, which now enabled individual users and small businesses to accept credit card and electronic check payments online. In 2000 eBay launched both eBay Real Estate, for real estate and real estate-related services, and the highly successful eBay Motors, for used automobiles and automotive items.

In 2001 eBay boasted more than 8,000 categories of items with 34 million registered users. The company has country-specific sites in Austria, Australia, Canada, France, Germany, Ireland, Italy, Korea, New Zealand, Switzerland, and the United Kingdom. eBay continued its expansion into new markets in 2001 with its purchase of iBazar S.A., Europe's largest online trading platform. In 2002 the company also teamed with Priceline.com for new travel service on eBay and with Sotheby's fine art auction house to develop its high-end auction presence.

STRATEGY

eBay's corporate strategy is to leverage its position as the leading community-commerce model in the world and the Internet's most popular commerce platform. The company's vision, as stated in their annual report, is to "help practically anyone buy or sell practically anything in the world;" this vision is supported by five key elements. To broaden the eBay trading platform, eBay pursues growth within product categories; with new product categories, including eBay Motors and eBay Real Estate; through local and international geographic expansion; through acquisitions; and with new pricing formats such as Buy it Now. To foster eBay community affinity, the company will continue to instill a sense of community with tools such as About Me pages and eBay's trust and safety initiatives. To enhance features and functionality, eBay aims to provide continuous enhancements and updates to the Web site's features and functionality to ensure improvement in the trading experience. To expand value-added services, the company provides a number of services, including photo hosting and payment facilitation. To continue to develop U.S. and international markets, eBay will continue to strive to provide a truly global trading environment with the addition of regional and international sites through expansion and acquisition.

INFLUENCES

eBay is constantly improving its site with ever-expanding merchandise categories and sub-categories and new bidding policies, like the popular "Buy it Now" feature that enables bidders to buy an item for a set price without waiting for the auction to end. The addition of eBay Motors, an automobile category, was another major success for the company. Over the years they have added chat rooms and bulletin boards to help users connect with each other and talk about their hobbies, interests, or what they're looking to buy next. According to Media Metrix's September 2000 results, people spend more time on eBay than any other Web site. eBay's forte has been listening to its millions of users and using their suggestions for changes and upgrades to the site.

CHRONOLOGY: Key Dates for eBay Inc.

1995:: eBay is founded by Pierre Omidyar
1996:: eBay is incorporated in California
1997:: Approximately 3 millions items were sold on eBay with net revenues of $5.7 million
1998:: eBay Inc. goes public on the NASDAQ Exchange
1998:: Meg Whitman named president and CEO of eBay
1999:: eBay acquires Billpoint, Inc. enabling users to accept credit cards as payment for online auctions; Acquires Butterfields Auctioneers; eBay goes online in the United Kingdom and Canada
2000:: eBay Motors is launched creating the Internet's largest auction-style Web site for buying and selling used cars
2001:: eBay has 34 million registered users and 8,000 categories
2002:: eBay acquires NeoCom Technology Co. in Taiwan and a 33 percent stake in the Chinese auction site EachNet; eBay partners with Priceline.com and Sotheby's

Challenges that eBay has faced include frequent out-ages during its early years online, due to a burgeoning community of users and ever-expanding list of products and services listed for auction. This prompted the company to upgrade its technology and seek solutions for its future growth. A feature called Automatic Checkout (added in 2001) had many users complaining that it was confusing for buyers and sellers, and the auction giant listened, making it an optional feature. The site was built by listening to users and continues to evolve to meet the users' needs.

CURRENT TRENDS

The company continues to focus on growth through the introduction of new categories, through existing product categories, through worldwide expansion, and through new pricing formats including fixed price sales. The acquisition of the fixed price Web site Half.com and the Buy it Now feature on eBay indicate a trend towards an alternative to the auction format on eBay. New categories such as the highly successful eBay Motors and eBay Real Estate have spurred the company to continue growth in similar areas, partnering with Priceline.com in early 2002 with the intention of launching eBay Travel. Growing its high-end auction presence, eBay teamed with fine art auction house Sotheby's Holdings Inc. in 2002 to launch a new site in the summer of that year, Sothebys.com, with the intention of selling fine art, jewelry, and antiques. eBay also continues its expansion into foreign markets, as well as defining regional markets within the United States.

PRODUCTS

eBay's major services and features include Half.com, Billpoint, eBay International, eBay Motors, eBay Stores, Buy it Now, eBay Professional Services, eBay Local Trading, eBay Premier, and eBay Live Auctions. Proposed new services include eBay Travel and Sotheby's.com. These services and features are marketed by the company to attract both buyers and sellers to the Web site. eBay began marketing these services initially by word of mouth and by sponsorship or distribution relationships with highly frequented Web sites. The company later began more sophisticated marketing strategies, including buying online advertisements and marketing activities in other mass media, including radio; national, broadcast, and local television; trade shows and related events; and print media, including ads in category-specific publications. eBay also benefits from the publicity it has generated as a high-profile Internet company and its relationship with America Online (AOL) as the online service provider's preferred provider of online trading services.

CORPORATE CITIZENSHIP

The eBay Foundation was established in 1998 with the goal of supporting "organizations that provide hope, tools, and direction to assist people in reaching their full potential through the creative application of technology," as stated on the company's Web site. Since its inception, the foundation has made grants of more than $2.5 million to more than 75 nonprofit organizations. Additionally, eBay also began a Charity Auction program, enabling nonprofit organizations to raise money through auctions on the Web site, which have totaled $4.7 million since the program's inception. The company's Auction for America, launched after the attacks of September 11, 2001, enabled some 100,000 users raise $10 million for victims and families affected by those events. These initiatives are consistent with the principles of community and exchange of information that eBay was founded on.

PEZ SPARKS AN ONLINE AUCTION REVOLUTION

During a casual dinner conversation with his girlfriend, Pierre Omidyar learned that she was having trouble trying to find and trade with other Pez collectors and thought it would be a great idea to be able to do that online. Omidyar realized that collectors needed a central location to get together to trade and chat about their hobbies. Still a full-time employee elsewhere, Omidyar launched an online person-to-person trading Web site on Labor Day 1995. Originally called Auction Web, he later renamed it eBay for "electronic Bay" in honor of his San Francisco Bay-area home. The basic, black-and-white Web site was free to use and Omidyar didn't even draw at salary at the time, viewing the early venture as a hobby. Largely though word of mouth, the business was quickly catching on and, by 1996, his Internet service provider, Best Internet, told him that he would need to upgrade his $30 a month system due to heavy traffic. Omidyar quit his day job that year to devote himself to eBay's burgeoning business.

GLOBAL PRESENCE

eBay has country-specific sites in Austria, Australia, Canada, France, Germany, Ireland, Italy, Korea, New Zealand, Switzerland, and the United Kingdom. eBay continued its expansion into foreign markets in 2001 with its purchase of iBazar S.A., Europe's largest online trading platform.

eBay was forced to cease operations in Japan in March 2002, two years after establishing a site there, due to Yahoo Japan Corp.'s dominance in that market, low numbers traded on the site, and tactical errors by eBay. One such error was eBay's reasoning that the Japan site would mimic the growth of the U.S. site; thus, the company emphasized the used collectibles categories on the site while failing to anticipate that the Japanese users were interested in new goods. Undeterred, eBay also announced in March 2002 that it acquired the Internet auction company NeoCom Technology Co. in Taiwan. In its continuing efforts to expand into the Asian market, eBay also acquired a 33 percent stake in the Chinese auction site EachNet, the largest online trading community in China, which boasts 3.5 million registered users.

EMPLOYMENT

eBay had 1,927 full-time employees as of March 1, 2001. Due to its technical nature, the company is dependent on the performance of its key technical personnel and senior officers and seeks to find and retain such personnel. eBay does not have long-term employment agreements with any key personnel. The company's land-based auction business is especially dependent on specialists due to the relationships they have with established sellers who consign property for auction sales. The company has experienced some turnover of these personnel, whose continued losses could result in loss of future business. eBay's success also depends on attracting and retaining highly skilled technical, marketing, and customer support personnel in the San Francisco Bay Area, where competition for these individuals is intense and fluctuations in stock price could adversely affect employment.

SOURCES OF INFORMATION

Bibliography

"company overview." ebay inc., 2002. available from http://pages.ebay.com/community/aboutebay/overview.

"ebay, conceding missteps, will close its site in japan. the wall street journal, 27 february 2002.

"ebay foundation." ebay inc., 2002. available at http://pages.ebay.com/community/aboutebay/foundation.

"ebay's 'auction for america' comes to an end." ebay inc., 2002. available at http://ebay.client.shareholder.com/news.

"ebay inc." gale group, 2002. available at http://www.galenet.galegroup.com.

"ebay inc." hoover's online, 2002. available at http://www.hoovers.com.

"ebay and priceline.com to share travel sales." the new york times, 2 february 2002.

"ebay's secret ingredient." business 2.0., march 2002. available at http://www.business2.com.

"online ebay expands to china." associated press, 18 march 2002.

"sotheby's, ebay team up to sell fine art online—auction competitors hope joint venture will heal past weaknesses of both." the wall street journal, 31 january 2002.

wong, may. "online auction powerhouse ebay expands to china." associated press, 18 march 2002.

For an annual report:

on the internet at: http://www.shareholder.com/ebay/annual.cfmor write: ebay inc., 2145 hamilton ave., san jose, ca 95125

For additional industry research:

investigate companies by their standard industrial classification codes, also known as sics. ebay inc.'s primary sics are:

7375 information retrieval service

7389 business services, not elsewhere classified

also investigate companies by their north american industry classification system codes, also known as naics codes. ebay inc.'s primary naics codes are:

453998 all other miscellaneous store retailers (excepttobacco stores)

514191 on-line information services

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