304-0681 INSEAD ~ eBay Strategy (B) ox/2008 5144 This case was wtten by Soumitra Dutta, The Roland Berger Chaired Professor of Business and Technology and Subromanian Rengan, Aerocate Professor of Stratepy ene Management, both at INSEAD f= a basis for cage ciseusion rather than to ilustrsta ether efecive or Inefecive handing of an acnistative station. Copyright © 2004 INSEAD, Fontainebleau, France. Tu, Panse nore rst Ere OF ofOKERG INSEAD CREE AE FOUND OM THE AC COVE, COHEN MOF HE MAE WOU ee Ags "isaneaiencsttniatonigetaas304-0641 SED 1 su perhage what sts our business model apart from practically ll oer is sRaNPs "produce inctesing retms on the income statement ad. generale si soudsmounts ofeach In our mackeiplace model, investecs in growth oe puty dough te income satement, leaving imal eoun'scaptalized low eee set to be arrized in fue periods, The combination of out tenes x model an stone, sustainable topline outlook hs made eBay av of the srongest young companies in recent ston” Pere Oniyar, founder, and Meg Whitman, CEO, eBay, Ine! Founded in 1995, eBay has grown 10 be the welds largest online perenn-peos Fowee ae for the sale of good and services. Ts mi-2002 (let the Itermet buts Wo aren the im sl bested amare capitalization of USS1$billn 7 Betws 994 ne saa apr of eon Tpseed ebay users had ise ram agpresimaaly 2 moe 200th nue Sool ebay veers sed more than 425 milion sans and completed {2 42 milion ing US bilion.Altiough the United States remuinod cays UES ancl fm operated in rore than two dozen countries. (Bsibit | presents steed [uncial and operational dat on eBay) ow, Meg Whitman, CEO of eBay, was intending 10 ale the Sm to eniely Sse No et mane —tpling te G's reves and gross merchand sist 200 vere son ed USS3Sbn respectively. eBay's tock prco-camings aio of 130 suggested ft PSone ect much lesThe challenge, even ewe eBay bl vitully no os of inva vate, en len maean woud be costal, For ne ne O90 Sra Ocns was slowing down. "inthe quarter 10 September [200], US oft Fa ape row by jst 4%, quarter on quar, and 54% on yas compared with 7% secre previous quater The gic events of September 2001 the United States a he qaouing pobal economic slowdown had not helped mater, Macroeconomic fetes asi, the growth aa alse fundamental guestns about the Hem Thsinessstatgy going forward In pial: 1L To whit extent should eBay expand aggressively beyond alles, individuals, and To wat Ong cater wo ober Cstomer septs such a5 corporaions) Should snare merchants sr (oush as computes and cll hones) and high-k items Such & cas and un ee allowed to become an even larger percentage of its ists? +2 Would it make sense to allow fixed-price fomats to grow and possibly overshadow th sie auction forma that Bay was foended on? 1 aon ay Ar Rep. vas cocpaet with Amem’s erat ain of USS lon 2 he ag el Mn 202, = A acyl vos USI bo ascompard 9 SSIS bin Aton 3 conan Antican risers, my and Wala pare ers of USED io Disarray na. “+ put Arts od Thole, len Mant upc in le, Praca Tne sy Sear 1 20236-0681 ED 2 a 5. Should eBay we its much valued “vital rl estate” to tock advertising revenues (rather than just isting and rascton foes)? To what extent cught fhe integration of value= aad services be pursued as a source of revenue and profit growl? ‘CEO, Meg Whitman, was quietly confident “We are a global trading platform. ‘There are ‘more opportunites than we can chase"> ‘New Customers and Products Bay defined its mission as helping “pratclly anyone trade practically anything on earth” Bay's roots, however, layin efecively tapping into a segment of individuals that traded collectibles — one-of-ekind items tha usually came with a story ot Some unusual feature. ‘The success of eBay among collectors was legendary. "Stories abounded in the pest of poople who had closed ther antique shops and stopped going fo flea markos and tradeshows because they found that hey could make more money by selling exclusively through eBay, ‘Whitman estimated that 20 to 25% of caine uses were seller and of those, approximately 25% mado their fll-ime living sling on eBay. Now, eBay's user ase had grown from individual consumers 19 algo include merchants, sna to mid-sized busineses, global corporations and even goversment agencies, Largs ‘corporates, sill 2 small proportion of total trade valve on eBay, promised to bang a larger ‘age of merchandise o eBey, and wete also capable of paying higher fs for exposure to Bay members and a variety of eBay value adding series, Expanding the wer base 10 include lrg slles also created some concems for eBay. Michael van Swasj, Managing Director eBay Burope, explained “Large buyers might squeeze out other sellers by’ virtue of thir brand name and ‘he nmber of items that they can list. Lage sles might inluecehow the eBay rmarkeplace is ron. This might thealen the now-dscrimnatoy (12, nom exclusive) access that eBay provides all its members. If small sellers find tet people ae not buying their items ony more, they might G0 av4y. It raises an {porn busines dilerama: how do we balance the bone of having millions of small sellers with that of having larger comprat sellers?” Further, at eBsy eve, jit peeatone mepandd to mere eateries af ioms, and 9 broader and mare slobal wer base, In 2000, eBay lunched eBay Motors in asrocation with ‘AufoTradercom. This cated the Intemel’s largest auction-svle website for consumers end feats to buy and sell used cars. eBay users had grown the breadth and depth of the ‘markeplae, going fom 8,000 categories in te yea 2000 to more than 18,000 catogris in arly 2002 In easly 2002, thee of eBay's toplevelextegores ~ aulos, computer, and consumer electronics ~ were USS! billion businesses, a8 measured by gross merchandise 5 rau Ata an Thoolé Saar, eBay, te Fle Mahl dat para te gabe", Franca Tms, yey 11202 © ay A. Por Sten P. Brey, eBay Ins, Harvard Buses Stel Coe No, 70007, ne