eBay Inc.

Company Profile
Publication Date: 23 Aug 2010
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eBay Inc.
TABLE OF CONTENTS
Company Overview..............................................................................................4
Key Facts...............................................................................................................4
Business Description...........................................................................................5
History...................................................................................................................6
Key Employees.....................................................................................................9
Key Employee Biographies................................................................................10
Major Products and Services............................................................................16
Revenue Analysis...............................................................................................17
SWOT Analysis...................................................................................................18
Top Competitors.................................................................................................25
Company View.....................................................................................................26
Locations and Subsidiaries...............................................................................28
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TABLE OF CONTENTS
COMPANY OVERVIEW
eBay is an online provider of marketplaces for the sale of goods and services. It also provides
commerce, platforms, online payments services and online communications offerings to individuals
and businesses. The company operates in the US and other international markets. It is headquartered
in San Jose, California and employs 16,400 people which include some part time workers too.
The company recorded revenues of $8,727.4 million during the financial year ended December 2009
(FY2009), an increase of 2.2% over 2008. The operating profit of the company was $1,456.8 million
in FY2009, a decrease of 29.8% over 2008. The net profit was $2,389.1 million in FY2009, an
increase of 34.3% over 2008.
KEY FACTS
eBay Inc. Head Office
eBay Inc.
Whitman Campus
2065 Hamilton Avenue
San Jose
California 95125
USA
800 322 9266 Phone
408 516 8811 Fax
http://www.ebayinc.com/ Web Address
8,727.4 Revenue / turnover
(USD Mn)
December Financial Year End
16,400 Employees
EBAY NASDAQ Ticker
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eBay Inc.
Company Overview
BUSINESS DESCRIPTION
eBay operates a website, eBay.com which facilitates the exchange of goods and services over the
Internet. It also provides platforms, online payments services and online communications offerings
to individuals and businesses. eBay owns and leases properties in the US and 25 other countries
around the world.
The companys business is divided into three segments: marketplaces, payments and
communications.
The marketplaces segment consists of online commerce platforms that enable a global community
of buyers and sellers to interact and trade with one another. The platforms include software tools
and services, some available at no charge and others for a fee. The marketplaces platforms consist
of our core online commerce platform, eBay.com and its localized counterparts, and other adjacent
platforms like classifieds websites, StubHub, Shopping.com, Half.com, and Rent.com. The final
value, listing, feature and subscription fees, lead referral fees, transaction fees and advertising fees
are various means through which this segment generates revenue. By the end of 2009, the company
had approximately 90.1 million active users, compared to approximately 87.7 million at the end of
2008. An active user is a person who has bid on, bought or listed an item during the preceding
12-month period.
The payments segment consists of two online payment brands i.e. PayPal and Bill Me Later. PayPal
enables individuals and businesses to securely send and receive payments online in approximately
190 markets worldwide and Bill Me Later enables online US merchants to offer, and US consumers
to obtain transactional credit at the point of sale.
Communications segment consists of Skype. Skype is a global Internet communications company
that enables people to stay in touch over the Internet through free voice and video calls, instant
messages, SMS or file transfers, and by making low-cost calls to landline and mobile numbers. The
segment primarily generated revenue through fees charged to users to connect Skypes Internet
communications products to traditional fixed-line and mobile telephones. In November 2009, the
company sold 65% interest in Skype to a group of investors.
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eBay Inc.
Business Description
HISTORY
eBay was formed as a sole proprietorship in 1995, when Pierre Omidyar, a computer programmer,
wrote the code for an auction website that he ran from his home computer. The company was
incorporated in California in 1996. The company reincorporated in Delaware in 1998 and became
public in the same year. Around the same time, America Online (AOL) and eBay signed a three year
agreement under which AOL received guaranteed payments totaling $12 million from eBay. The
new alliance secured eBay a large potential customer base in the form of AOL members.
The company acquired several entities in 1999. eBay acquired Butterfield & Butterfield, an auction
houses; Alando.de, Germany's largest online auction house; and Kruse International, one of the
largest land-based auctioneers of collectible cars in the world. Kruse Internationals acquisition
provided expertise in the automobile market and led to the launch of eBay's collectibles and used
cars categories online.
eBay expanded through joint ventures in Australia and Japan in 2000. The company entered a joint
venture with Australias eCorp and also moved into the Japanese market assisted by an alliance
with NEC. In the same year, eBay took an equity stake in the online used-car dealer AutoTrader.com
and also acquired Half.com.
During 2001-02, the company further expanded with the acquisition of entities. eBay acquired the
French internet auction firm iBazar, which operated online trading sites in Belgium, Brazil, France,
Italy, the Netherlands, Portugal, Spain, and Sweden. Later eBay sold iBazar's Brazilian subsidiary
to MercadoLibre in exchange for a stake in MercadoLibre. In late 2001, eBay Singapore was launched.
The company acquired Taiwan's Neocom; EachNet, China's leading online trading community; and
PayPal, a web micro payments platform. PayPal went public in 2002 and continued to offer its
services as an independent brand following the completion of the acquisition. eBay introduced its
new business-to-business site, eBay Business in 2003.The site brought together all of eBay's business
and industry listings under one web destination. During 2003-04, the company acquired all of Fair
Markets technology and business assets; Marktplaats.nl (www.marktplaats.nl), a classifieds website
in the Netherland; Mobile.de, an online classifieds websites for vehicles in Germany; and Baazee.com
to expand its business in India. In the same year, eBay raised its stake in internet auction of South
Korea from 62% to 86%.
From 2005-06, eBay acquired several online sites to expand its business. The company acquired
Kurant's and Rent.com; Gumtree.com and LoQUo.com, an international classifieds websites;
Shopping.com, an online comparison shopping resources; Skype, a Luxembourg based company
and a provider of software that enables VoIP calls between Skype users online; and Tradera.com,
an online auction style marketplace in Sweden. In the same period, the company launched eBay
Poland (www.ebay.pl).
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History
eBay continued its expansion in 2007 with the acquisition of other entities. The company acquired
StubHub, GittiGidiyor.com, an online marketplace, in Turkey; and StumbleUpon, an early-stage
company that helps people discover and share content online. In Germany, eBay acquired ViA-Online,
an auction management software company which operated Afterbuy.com to enable professional
trading on eBay.de and other online marketplaces. In Thailand, eBay entered an agreement with
Sanook!, an online portal, to launch a regional e-commerce site. The site enabled individuals and
businesses in Thailand, to participate in local and international trade through eBay's global web
sites.
In 2008, eBay agreed to a settlement with MercExchange to dismiss all claims and appeals stemming
from the patent lawsuit filed by MercExchange in 2001. eBay and MercExchange had been engaged
in litigation over MercExchange's patents and eBay's online auctions and fixed price-related
ecommerce operations. The company also launched a new application in 2008. The new product
was a new mobile applicationeBay Mobile, available for iPhone and iPod Touch users in Europe.
The new free applications gave Apple users the freedom to bid, buy and pay for items directly from
their mobile devices. It also launched a new marketplace called WorldofGood.com for the ethically
sourced and eco-friendly product range.
eBay continued to grow inorganically in 2008. The company acquired Den Bla Avis and BilBasen,
providers of leading online classifieds sites in Denmark. The acquisitions strengthen eBays Danish
and global classifieds portfolio. The company also acquired Bill Me Later, an online-oriented payments
brand for approximately $820 million in cash and approximately $125 million in outstanding options.
The acquisition extended eBay's leadership in payments by combining Bill Me Later with eBay's
PayPal, eBays leading online-oriented payments brand. eBay Motors, eBays online automotive
marketplace, tied-up with Hollander, a provider of auto recycling and parts yard management solutions
in the US and Canada, in May 2009, to provide access to over $2.7 billion in retail value of used
parts inventory on eBay Motors.
In April 2009, eBay entered into a partnership with Gmarket to combine Gmarket, Koreas leading
e-commerce business, with its existing online marketplace in Korea.
eBay signed an agreement in September 2009, to sell Skype communications unit in a deal worth
$2.75 billion. Sales of 65% of business stake in Skype, was made to an investor group that comprised
of Silver Lake and includes Index Ventures, Andreessen Horowitz and the Canada Pension Plan
Investment Board.
In October 2009, Skype announced a new business funded click-to-call product in partnership with
European Directories that will turn online search for businesses into calls for businesses. The
partnership will offer consumers free calls to up to 700,000 businesses across Europe.
eBay launched a new digital magazine The Inside Source, in November 2009 featuring insights
and stories based on what more than 89 million active users are searching for, buying and selling
on eBay. The Inside Source offers fresh daily content with original articles, analysis and opinions
from journalists as well as eBay community contributors. In the same month the PayPal unveiled
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eBay Inc.
History
new application programming interfaces, a new developer portal and introductory services pricing
to help developers reap the financial benefits of building businesses on PayPal X.
eBay introduced eBay Fashion, a new enhanced shopping destination for clothing, shoes and
accessories on its online marketplace in April 2010. eBay Fashion aims to delivers a richer, more
visual shopping experience that surfaces and showcases selection of new, vintage, branded and
designer merchandise available on eBay.
In June 2010, the company acquired RedLaser, a popular barcode-scanning application for iPhone,
and related technology from Occipital. RedLaser provides iPhone barcode-scanning application for
comparison shopping and finding product information using a mobile device.
eBay became the first customer of Microsofts Windows Azure platform appliance, in July 2010.
eBay will incorporate the Windows Azure platform appliance into two of its data centers to further
optimize its platform and achieve greater strategic agility and datacenter efficiency.
In August 2010 eBay launched its Shopping Basket customer beta test on its eBay UK online site,
with a new features that enables users to compare the total price of items, take advantage of shipping
discounts, and pay for multiple items from various sellers in one checkout flow.
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History
KEY EMPLOYEES
Compensation Board Job Title Name
10132748 USD Executive Board President and Chief Executive
Officer
John J. Donahoe
330472 USD Non Executive Board Director Thomas J. Tierney
312972 USD Non Executive Board Director David M. Moffett
314984 USD Non Executive Board Director Fred D. Anderson
359732 USD Non Executive Board Director Edward W. Barnholt
359954 USD Non Executive Board Director Scott D. Cook
337959 USD Non Executive Board Director Marc L. Andreessen
342959 USD Non Executive Board Director William C. Ford, Jr.
304984 USD Non Executive Board Director Dawn G. Lepore
12714 USD Non Executive Board Director Pierre M. Omidyar
306484 USD Non Executive Board Director Richard T. Schlosberg, III
Senior Management Senior Vice President, Human
Resources
Elizabeth Axelrod
3463752 USD Senior Management Chief Technology Officer and Senior
Vice President, Global Products,
Marketplaces
Mark Carges
Senior Management Senior Vice President, Legal Affairs,
General Counsel and Secretary
Michael Jacobson
Senior Management Senior Vice President, Corporate
Communications
Alan L. Marks
3184136 USD Senior Management President, eBay Marketplaces Lorrie M. Norrington
5900390 USD Senior Management Senior Vice President, Finance and
Chief Financial Officer
Robert H. Swan
Senior Management President, PayPal Scott Thompson
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Key Employees
KEY EMPLOYEE BIOGRAPHIES
John J. Donahoe
Board: Executive Board
Job Title: President and Chief Executive Officer
Since: 2008
Age: 49
Mr. Donahoe has been the President and Chief Executive Officer at eBay since 2008. He has been
the President at eBay marketplaces since 2005. Prior to joining eBay, he served as the Worldwide
Managing Director at Bain and Company. Prior to that, he worked for the Rolm and Salomon Brothers.
Currently he also serves on the Board of Intel and on the Board of Trustees at Dartmouth College.
Thomas J. Tierney
Board: Non Executive Board
Job Title: Director
Since: 2003
Age: 55
Mr. Tierney has been a Director at eBay since 2003. He is the Founder of The Bridgespan Group
and has been its Chairman of the Board since 1999. Prior to founding Bridgespan, He served as
Chief Executive Officer of Bain & Company, from 1992 to 2000. He is also the Co-author of a book
called Aligning the Stars.
David M. Moffett
Board: Non Executive Board
Job Title: Director
Since: 2007
Age: 58
Mr. Moffett has been a Director at eBay since 2007. He has more than 30 years of strategic finance
and operational experience in banking and payment processing. He joined Star Banc in 1993 as the
Chief Financial Officer. He served as the Vice Chairman and Chief Financial Officer of US Bancorp.
Prior to 1993, Mr. Moffett held executive level positions at some of the nation's leading financial
services companies, including Bank of America and Security Pacific.
Fred D. Anderson
Board: Non Executive Board
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Key Employee Biographies
Job Title: Director
Since: 2003
Age: 65
Mr. Anderson has been a Director at eBay since 2003. He has been a Managing Director at Elevation
Partners, since 2004. From 1996 to 2004, he served as the Executive Vice President and the Chief
Financial Officer at Apple Computer. Prior to joining Apple, he was the Corporate Vice President
and the Chief Financial Officer of Automatic Data Processing, from 1992 to 1996. Mr. Anderson also
serves on the Board of Directors at Move and Palm.
Edward W. Barnholt
Board: Non Executive Board
Job Title: Director
Since: 2005
Age: 66
Mr. Barnholt has been a Director at eBay since 2005. He has served as the President and Chief
Executive Officer at Agilent Technologies from 1999 to 2005, and as the Chairman of the Board of
Agilent from 2002 till 2005. Before joining Agilent, he was the Executive Vice President and General
Manager at Hewlett-Packard Company's Measurement Organization from 1998 to 1999. From 1990
to 1998, he served as the General Manager at Hewlett-Packard Company's Test and Measurement
Organization. He was elected the Senior Vice President at Hewlett-Packard in 1993 and the Executive
Vice President in 1996. He also serves as the Non-Executive Chairman of the Board of KLA-Tencor.
He is also a member of the Board of Directors at Adobe Systems, and a member of the Board of
Trustees at the David and Lucile Packard Foundation.
Scott D. Cook
Board: Non Executive Board
Job Title: Director
Since: 1998
Age: 57
Mr. Cook has been a Director at eBay since 1998. He is the Founder of Intuit, a financial software
development firm. He has been a Director at Intuit since 1984 and is currently the Chairman of the
Executive Committee of the Board at Intuit. From 1993 to 1998, he was the Chairman of the Board
of Intuit. From 1984 to 1994, he served as the President and the Chief Executive Officer at Intuit.
Currently he also serves on the Board of The Procter and Gamble Company, The Asia Foundation
and The Intuit Scholarship Foundation.
Marc L. Andreessen
Board: Non Executive Board
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Key Employee Biographies
Job Title: Director
Since: 2008
Age: 38
Mr. Andreessen has been a Director at eBay since 2008. He is also a Co-founder and Chairman at
Ning. From 1999 to 2007, he was the Chairman of the Board of Directors at Opsware, (formerly
known as Loudcloud). Prior to that in 1999 he was the Chief Technology Officer at America Online.
From 1994 to 1999, he was a Co-founder at Netscape Communications, where he also served as
Chief Technology Officer and Executive Vice President of Products. He also serves on the Board
of Directors at Facebook, Stanford Hospital, Hewlett-Packard, and Room to Read.
William C. Ford, Jr.
Board: Non Executive Board
Job Title: Director
Since: 2005
Age: 52
Mr. Ford has been a Director at eBay since 2005. He has also been the Executive Chairman of the
Board of Directors at Ford Motor since 2006 and the Chairman of the Board at Ford since 1999.
From 2001 to 2006, he was Ford's Chief Executive Officer. He has held a number of management
positions at Ford since 1979. He also serves as Vice Chairman at The Detroit Lions, and Chairman
of the Board of Trustees at The Henry Ford. He is also a Vice Chairman of Detroit Renaissance.
Dawn G. Lepore
Board: Non Executive Board
Job Title: Director
Since: 1999
Age: 55
Ms. Lepore has been a Director at eBay since 1999. She has served as Chief Executive Officer and
Chairman of the Board of drugstore.com, since 2004. From 2003 to 2004, she was the Vice Chairman
of Technology, Active Trader, Operations, Business Strategy, and Administration for the Charles
Schwab and Charles Schwab & Co. She has held various positions with the Charles Schwab
Corporation including: Vice Chairman of Technology, Operations, Business Strategy, and
Administration. Currently she also serves on the Board of Directors at The New York Times.
Pierre M. Omidyar
Board: Non Executive Board
Job Title: Director
Since: 1996
Age: 42
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Key Employee Biographies
Mr. Omidyar has been a Director and Chairman of Board at eBay since 1996. He founded the
company as a sole proprietorship in 1995. He has also served as the companys Chief Executive
Officer, Chief Financial Officer, and President from inception to 1998, 1997 and 1996, respectively.
Prior to founding eBay, he was a Developer Services Engineer at General Magic, from 1994 to 1996.
He co-founded Ink Development 1991 and served there as a Software Engineer from 1991 to 1994.
Prior to this, he was a developer at Claris and other Macintosh-oriented software development
companies. He is currently Co-founder and Chairman at Omidyar Network. He also serves on the
Board of Trustees at Tufts University, Omidyar-Tufts Microfinance Fund, the Santa Fe Institute and
the Punahou School.
Richard T. Schlosberg, III
Board: Non Executive Board
Job Title: Director
Since: 2004
Age: 65
Mr. Schlosberg has been a Director at eBay since 2004. Prior to this, from 1999 to 2004, he was
the President and Chief Executive Officer at David and Lucile Packard Foundation. Prior to joining
the foundation, he was Executive Vice President at The Times Mirror and Publisher and Chief
Executive Officer of the Los Angeles Times. Prior to that, he served in the same role at the Denver
Post. Currently he serves on the Board of Directors at Edison International. He is also a member of
the USO World Board of Governors, a trustee at Pomona College and a Founding Director at the
US Air Force Academy Endowment and Chairman of the Board at the Kaiser Family Foundation.
Elizabeth Axelrod
Board: Senior Management
Job Title: Senior Vice President, Human Resources
Since: 2005
Age: 47
Ms. Axelrod has been the Senior Vice President, Human Resources at eBay since 2005. She has
served as the Chief Talent Officer at WPP Group, where she was also an Executive Director. Before
WPP, she was a Principal with McKinsey & Company where she was Co-leader of its global
organization and leadership practice.
Mark Carges
Board: Senior Management
Job Title: Chief Technology Officer and Senior Vice President, Global Products, Marketplaces
Since: 2008
Age: 48
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Key Employee Biographies
Mr. Carges has been the Chief Technology Officer and Senior Vice President, Global Products,
Marketplaces at eBay since 2008. Prior to joining the company he was the Executive Vice President,
Products and General Manager for the Business Interaction Division at BEA Systems. Prior to BEA,
he designed and developed early versions of Tuxedo at Bell Labs, Unix System Labs and Novell.
Michael Jacobson
Board: Senior Management
Job Title: Senior Vice President, Legal Affairs, General Counsel and Secretary
Since: 1998
Age: 55
Mr. Jacobson has been the Senior Vice President, Legal Affairs, General Counsel and Secretary at
eBay since 1998. He joined the company in 1998. Prior to joining eBay, he was a partner with Cooley
Godward.
Alan L. Marks
Board: Senior Management
Job Title: Senior Vice President, Corporate Communications
Since: 2008
Age: 47
Mr. Marks has been the Senior Vice President, Corporate Communications at eBay since 2008. He
has more than 20 years of experience in managing communications for top global consumer brands.
Prior to joining eBay in April 2008, he was at Nike, where he served as a member of its global
communications leadership team from 2005 to 2008. Prior to Nike, he headed corporate
communications for Gap from 1999 to 2005. He also led corporate media relations for global product
launches, communications of the company's growth strategy, and Nike's industry-leading corporate
responsibility strategies.
Lorrie M. Norrington
Board: Senior Management
Job Title: President, eBay Marketplaces
Since: 2008
Age: 50
Ms. Norrington has been President, eBay Marketplaces Operations at eBay since 2008. Previously,
she was President at eBay International. She joined eBay in 2006. Prior to joining the company she
was President and Chief Operation Officer (CEO) of Shopping.com. She joined Shopping.com in
2005 after spending four years as Chief Operating Officer at Intuit. Before joining Intuit, for 20 years
she served GE in various roles in the information services, medical systems, industrial systems and
financial services businesses. Currently she is also on the Advisory Board of the Catalyst Group.
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Key Employee Biographies
Robert H. Swan
Board: Senior Management
Job Title: Senior Vice President, Finance and Chief Financial Officer
Since: 2006
Age: 49
Mr. Swan has been the Senior Vice President, Finance and Chief Financial Officer at eBay since
2006. Prior to joining the company, he was the Chief Financial Officer and Executive Vice President
at Electronic Data Systems (EDS). Prior to EDS, he served as the Chief Financial Officer and the
Executive Vice President at TRW. He also held Executive-level positions at Webvan Group. He
began his career with General Electric (GE) in 1985 and spent 15 years in a various positions,
including Corporate Audit Staff and Chief Financial Officer at GE Transportation Systems and GE
Medical Systems-Europe. He left GE in 1999 as the Vice President of Finance and the Chief Financial
Officer of GE Lighting.
Scott Thompson
Board: Senior Management
Job Title: President, PayPal
Since: 2008
Age: 52
Mr. Scott has been the President of PayPal at eBay since 2008. Prior to this, he was PayPal's Senior
Vice President and Chief Technology Officer. Before joining PayPal in 2005, he was the Executive
Vice President of Technology Solutions at Inovant. He has also been the Chief Information Officer
of Barclays Global Investors. Prior to that, he worked with Coopers and Lybrand. Currently he serves
on the Board of Directors at F5 Networks and Zuora.
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Key Employee Biographies
MAJOR PRODUCTS AND SERVICES
eBay is an online company that provides online marketplaces for the sale of goods and services.
The company's key products and services include the following:
Services:
Online services for the sale of goods and services
Online communication services
Online payment and transactional credit services
Online classifieds
Advertising
Brands:
eBay
Half.com
PayPal
Skype
Bill Me Later
Shopping.com
StubHub
Rent.com
WorldofGood.com
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Major Products and Services
REVENUE ANALYSIS
eBay
The company recorded revenues of $8,727.4 million during the financial year ended December 2009
(FY2009), an increase of 2.2% over 2008. For FY2009, US, the company's largest geographic
market, accounted for 45.7% of the total revenues.
eBay generates revenues through three business divisions: marketplaces (60.9% of the total revenues
during fiscal year 2009), payments (32%) and communications (7.1%).
Revenues by Division*
In FY2009, the marketplaces division recorded revenues of $5,311 million, a decrease of 4.9% over
2008.
The payments division recorded revenues of $2,795.9 million in FY2009, an increase of 16.3% over
2008.
The communications division recorded revenues of $620.4 million in FY2009, an increase of 12.6%
over 2008.
* Revenues rounded off
Revenues by Geography**
The US, eBay's largest geographical market, accounted for 45.7% of the total revenues in FY2009.
Revenues from US reached $3,985.1 million in 2009, an increase of 0.4% over 2008.
Germany accounted for 13.1% of the total revenues in FY2009. Revenues from Germany reached
$1,140.2 million in 2009, a decrease of 6.6% over 2008.
UK accounted for 12.1% of the total revenues in FY2009. Revenues from UK reached $1,054.7
million in 2009, a decrease of 1.7% over 2008.
Rest of world accounted for 29.2% of the total revenues in FY2009. Revenues from Rest of world
reached $2547.4 million in 2009, an increase of 11.8% over 2008.
** Percentages rounded off
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Revenue Analysis
SWOT ANALYSIS
eBay is an online provider of marketplaces for the sale of goods and services. It also provides
commercial platforms, online payments services and online communications offerings to individuals
and businesses. The company has grown to establish a strong brand value and market position.
However, eBay faces high risk of internet fraud due to which it is involved in various litigations and
the companys transition from an auction price sales format to a fixed price format could erode its
competitive differentiation.
Weaknesses Strengths
Companys inability to counter the sale of
counterfeit products
Efficient business model that is helping
eBay to expand its customer base as well
as revenue Failed synergies between eBay and its
acquired entities Augmenting revenue with the growth of
internet display advertising and classifieds
Strong market position and brand value that
has ensures customers loyalty even in the
downturn
Threats Opportunities
Main Street Fairness Act and the resulting
high rate of internet sales tax
Expanding Chinese e-retail market and
subsequently the need for safe payment
systems Increasing internet fraud and the
subsequent problem of litigation The growing secondary market that include
liquidation, out of season, excess and
off-price inventory
Moving away from auction based sale to
fixed price sales could erode eBays
competitive differentiation Rising demand for alternative payment
systems to ensure security and keep credit
card balances low
Strengths
Efficient business model that is helping eBay to expand its customer base as well as revenue
eBay operates on a unique business model which unites buyers and sellers in an online marketplace.
This business model overcomes the inefficiencies of traditional marketplaces, which tend to be
fragmented and offer a relatively limited variety of goods. This business model also saves on the
transaction costs per sale, due to absence of intermediaries. Further eBay maintains zero inventory
unlike amazon.com and its other competitors and therefore costs related to inventory management
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SWOT Analysis
is negligible. In particular, this model has been successful in addressing markets of new and scarce
goods, end-of-life products, and used and vintage items, which would otherwise be difficult to locate
and purchase.
The size of eBays marketplaces is one of the largest in the world, with its gross merchandise volume
(total value of goods sold in all of eBays marketplaces) at nearly $50,000 million in 2009. More than
3 million items are bought daily across 50,000 categories on ebay.com, with listings of more than
150 million by over 25 million sellers in multiple formats. Presently, ebay.com accounts for
approximately 13% share of the global eCommerce.
eBays efficient business model has given it flexibility and cost efficiency that helps it to continuously
increase the number of members without adding significantly to its cost structure and hence increase
the companys revenue base.
Augmenting revenue with the growth of internet display advertising and classifieds
Internet advertising revenues in the US reached $5.9 billion for the first quarter of 2010, an increase
of 7.5% over the same period in 2009. It is the highest first-quarter revenue level ever for the industry.
The Internet combined with technological innovation in devices and platforms has transformed
consumers lives, expanding their access to entertainment and information. In 2009, the display
advertising accounted for 35% of online advertisement revenue, an increase of 33% over 2008.
Digital video, a component of display advertising, increased by 38% in 2009 over 2008. Display
related advertising revenues were $8 billion or 35% of the full year 2009 online advertising revenues,
an increase of 4% from the $7.6 billion (33% of total revenue) in 2008. Whereas revenues from
classifieds accounted for 10% of 2009 full year revenues or $2.3 billion, a decrease of 29% over
2008 figures.
eBay generates considerable revenues from advertising and classifieds. Marketing services and
other revenue increased 6.6% y-o-y to $1.05 billion in FY09, representing 12% of total net revenue,
the increase was primarily driven by the growth in text and graphical advertising revenue and
classifieds revenue. eBays classifieds websites are available in over 1,000 cities around the world
and are primarily designed to help people trade on a local level. Its classifieds websites include Den
Bla Avis, BilBasen, eBay Classifieds (eBay Anuncios, eBay Kleinanzeigen and eBay Annunci),
Gumtree, Kijiji, LoQUo, Marktplaats.nl and mobile.de. The company also has non-controlling equity
investment in craigslist, which operates the craigslist classifieds websites around the world.
Den Bla Avis (dba.dk) and BilBasen (bilbasen.dk) are two leading online classifieds sites in Denmark,
which were acquired by the company in 2008. In 2008, eBay launched its own advertising service
so that third parties can buy advertising text directly from eBay. Increasing online advertising has
helped the company to generate additional revenues directly from selling advertising space. With
the companys efforts to expand this service and the growth in online advertising expenditure, the
company stands to boost its revenue significantly.
Strong market position and brand value that has ensures customers loyalty even in the downturn
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SWOT Analysis
eBay has a strong market position. Over the years, the company has built a strong brand value. In
2009, Interbrand Design Forum ranked eBay 11th in the category of the most valuable US retail
brands. Besides eBay the other retailers with only online presence on the list were Dell Company
(6th position), Amazon.com (14th position) and Netflix (32nd position).eBay currently accounts for
approximately 13% of all e-commerce globally. The company has focused on a swift increase in the
number of users and number of product listings. By the end of 2009, the company had approximately
90.1 million active users, compared to approximately 87.7 million at the end of 2008. In the first
quarter of 2010, customers bought goods worth over $13,000 million across 50,000 categories; more
than 25 million sellers have over 15 million listings in multiple formats on the companys site.
Increasing number of customers has been contributing to the growth of the company and it has
emerged as one of the largest global online auction website with presence in 25 countries. In a
recession, brand can act as a very powerful too, as retailers with a well-positioned brand have the
opportunity to thrive and seize a bigger chunk of the market, in terms of customers. Strong customer
base and market position provides competitive advantage and gives eBay considerable bargaining
power.
Weaknesses
Companys inability to counter the sale of counterfeit products
On one hand online retail has proved a boon for many retailers by increasing their revenue and
lowering their cost but on the other hand it has also resulted in the growth of online sales on counterfeit
products. Sales of counterfeit products through online commerce platforms like eBay, Amazon and
others has become easy because its very difficult to trace the identity of the seller of these goods.
According per the US Chamber of Commerce, counterfeiting activities cost the US economy more
than $250,000 million a year.
Over the years, eBay too has been fighting against litigations against it with respect to sale of
counterfeit products over its website. In 2008, eBay had to pay 40 million euros to Louis Vuitton
Malletier for the alleged sales of counterfeit purse of the brand over its website. The company has
ended up in paying huge fines to many other cosmetics and apparel brands over the issue. eBay
lacks an effective tools to monitor and weed out such sales. In most cases, the company is able to
identify counterfeit products only after they are listed. This has negatively affected the companys
image in media. It could also affect eBays reliability as the customers and public would form a
negative perception. It can have a serious bearing on the companys brand image and also affect
its sales.
Failed synergies between eBay and its acquired entities
In 2009, eBay sold Skype to a group of investors for a sum of $2.75 billion. Skype was acquired by
the company only in 2005 for $2.6 billion with the expectation that its online phone service and
innovative peer to peer (P2P) technology would complement the other segments of the company.
Acquisition of Skype did add a high-growth business to eBay, generating $526 million in revenues
and adding 129 million users in 2008. Skype has over 480 million registered users and an 8% market
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SWOT Analysis
share of global international call minutes However the company realized that as a standalone
company Skype would do well but as a part of eBay it would be difficult to integrate its offerings with
the companys online auction and payments businesses.
Something of the same nature happened with StumbleUpon, a social web site discovery tool, which
the company acquired in 2007 for $75 million. eBay sold StumbleUpon in 2009 to its original founders
because of lacking synergies. This move can reduce the overall growth of eBay and potentially lead
investors to lower the amount they would be willing to pay for eBay shares and also put a question
mark on the leadership capabilities of the top level managers.
Opportunities
Expanding Chinese e-retail market and subsequently the need for safe payment systems
In 2009, China's e-commerce market stood 263 billion RMB (approximately $38.5 billion). It
represented a year-on-year growth rate of about 105%. China's e-commerce transaction volume
went up to 1.02 trillion RMB in the first quarter of 2010. At present, the consumer-to-consumer (C2C)
represents the largest segment of China's e-commerce market. As per a report by the China
e-Business Research Center, China's B2B market will continue to grow rapidly in the next few years
with the nation's economic growth and rising e-commerce penetration. The business-to-consumer
(B2C) has also been increasingly because traditional retailers are developing e-commerce platforms
as additional channels to get consumers to buy their products. The B2C transactions are also on a
rise because more and more individual entrepreneurs are finding success on the existing C2C sites
like Taobao.com. As per the report, the number of e-commerce websites is expected to reach 23,000
by the end of 2010.
Seeing the current trend, eBay has been quick in increasing it presence in the market. The company
plans to double its workforce from 1,000 to 2,000 in the Asia Pacific region in 2010. In March 2010,
PayPal partnered with China UnionPay Co, an electronic-payment service provider, to allow Chinese
consumers to shop from and make payments to overseas merchants. This partnership will help eBay
to expand its business to Chinas massive consumer market. From 3rd quarter of 2010, China
UnionPay cardholders within China will be able to link their bankcard accounts with PayPal and
access a network of almost eight million online merchants world-wide, including US retailers like
Wal-Mart and Zappos.com. and others.
PayPal also entered into an agreement in March 2010, with DBS Bank based in Singapore to offer
4 million DBS customers with an alternate payment choice for their online purchases via PayPal.
DBS customers make up 90% of the bank account holders in Singapore. These strategic alliances
will help the company to expand its market and increase its revenue too.
The growing secondary market that include liquidation, out of season, excess and off-price inventory
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SWOT Analysis
After the economic crisis in the US consumer spending has gone down. Home budgets are tight and
people are looking at all the opportunities to save on every possible purchase. In the US, household
savings in 2009 increased by 51.6% and the private final consumption decreased by 4.7%. According
to Datamonitor's consumer survey, most respondents across the 15 countries questioned agreed
that they had been "making an effort to save more money" during the recession. Business budgets
too have taken a battering and every expense is being scrutinized to maximize profit margins. The
situation for many distributors and suppliers has not turned out too well. Many of them are stuck with
surplus goods that are either gathering dust in retail stores or using up expensive space at
warehouses. eBay estimates the global secondary market to be worth $500,000 million.
eBay can provide these retailers and distributors with the ideal platform for the sale of their products.
The company has the required infrastructure in place that can help these parties. Since eBay is an
online retail platform, the parties will not be required to invest huge sum of money in real estate,
personnel, electricity, and other utilities necessary to a physical establishment. By targeting these
customers, the company can expand its revenue base.
Rising demand for alternative payment systems to ensure security and keep credit card balances
low
More and more customers are moving towards making payment through means other than cards
and cash. This shift has been due to increased risk of identity and information thefts. Retailers are
now providing other forms of payment through their platform such as debit card processing, PayPal,
virtual cash in the form of Ukash and Paysafecard, inbound bank transfers and payout solutions
such as cheques and bank transfer issuing services and prepaid cards.
According to a study released in February 2010, prepaid cards, gift cards and alternative payments
are projected to have the highest rates of compound annual growth for e-commerce purchases
through 2014. The growth will be fuelled by the need to keep credit card balances down or defer
payments. Security will also be a main driver for consumers using alternative payment methods.
The company through its offering of PayPal and Bill Me Later can hugely benefit from this trend.
Both these payment alternatives enjoy high degree of market penetration due to the already well
established reach of the companys e-commerce platform. In fact it has the potential to grow even
bigger than eBay marketplaces because they targets all of e-commerce and not just the ones that
take place on the companys marketplace.
Threats
Main Street Fairness Act and the resulting high rate of internet sales tax
In July 2010, a bill Main Street Fairness Act was introduced by Congress in US. The bill if passed
would allow states to collect sales tax for online purchases. The implementation of the bill will enable
the Congress to provide fiscal relief worth $23 billion, to the states without any financial help from
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SWOT Analysis
the federal government. Earlier the state governments were not able to collect sales tax on most
internet purchases due to a 1992 Supreme Court Decision that said that retailers can only charge
tax in states where they have a physical presence.
On the flip side, if the internet sales taxes recommend legislation is passed it would mean new costs
on hundreds of thousands of online small businesses and ecommerce entrepreneurs. The complex
internet sales taxes could discourage buyers at it will raise products prices, and create an enormous
administrative burden on sellers, forcing them to keep track of thousands of different taxing
jurisdictions. The small online retailers will be required to comply with varying and regularly changing
sales tax rules and rates for thousands of tax jurisdictions and to collect and remit sales taxes from
each customer. It can result in lower number of transactions on the companys online commerce
platforms thereby adversely affecting its revenue.
Increasing internet fraud and the subsequent problem of litigation
Exposure to internet fraud will increase costs and affect customer confidence adversely Online
marketplaces have a high exposure to different types of fraud. There are various types of internet
frauds including sale of fake or counterfeit products, credit card fraud or non delivery of goods, etc.
According to Internet Crime Complaint Centers (IC3) statistics, internet fraud has been on a rise.
During 2009, IC3 registered 336,655 complaints which indicate an increase in complaints by 22.3%
over 2008. The total dollar loss due to these frauds has been $ 559.7 million which works out to be
an average loss of $16612 per complaint. Auction fraud, which is misrepresentation of the products
sold in auction sites like eBay, comprised 5.7% of the internet fraud. eBay has constantly been
involved in long trials related to various internet frauds. Internet frauds are difficult to curb as they
are often obscure and place the company in a vulnerable position. Effectively eliminating frauds is
costly as the company has to incur large recurring expenses to monitor and prevent such frauds. In
case the company gets involved in any litigation then it would have incur legal expenses and there
is a possibility that heavy penalty or compensation has to be paid. Internet frauds may also affect
the brand image of eBay adversely and might dissuade online shoppers. These factors may prove
to be unfavorable for eBays business and will affect both revenues and bottom line negatively.
Moving away from auction based sale to fixed price sales could erode eBays competitive
differentiation
As soon as Mr. Donahoe became eBays President and Chief executive Officer in 2008, he announced
his plans that the company would be focusing on increasing sales through the fixed price format
rather than the auction based sales. This was followed with a revision of fee structure for sellers
pushing it to a higher level. As a result, sellers boycotted the companys site in February 2008 thereby
affecting its daily product listing by almost 13%. In 2008, eBay partnered with Buy.com that offered
fixed price listings on the companys website. The partnership with Buy.com indicated eBay's slow
transition away from its core auction format toward a more Amazon-like marketplace. The move
however was not favorable to sellers in the categories in which Buy.com sells, as their sales were
hurt by Buy.com listings.
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In 2009, the fixed-price listing format accounted for approximately 53% of eBays gross merchandise
volume (GMV), and the auction-style format accounted for the remaining 47% of GMV. In 2nd quarter
of 2009 eBays marketplace revenues decreased by 14% over 2008 to $1.3 billion. While transaction
revenues decreased by 14% over and marketing services revenues fell 10%. The fixed-price GMV
excluding vehicles grew 19% on a fixed currency basis. However the auctions GMV excluding
vehicles remained under pressure, and decreased by 17% in the quarter. This show that eBays
shift away from its core auction platform toward a more traditional fixed-priced platform has helped
it to stabilize revenue declines. However, an increasing emphasis on the fixed price format could
transform eBay into a more traditional commerce site, thus eroding its competitive differentiation.
The more eBay tweaks its business model the more it competes directly against Amazon and other
e-commerce players offering fixed-price sales.
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TOP COMPETITORS
The following companies are the major competitors of eBay Inc.
Yahoo! Inc.
Amazon.com, Inc.
Buy.com, Inc.
Costco Wholesale Corporation
Home Shopping Network Inc
JC Penney Company Inc
Macys, Inc.
OfficeMax, Inc.
Office Depot, Inc.
QVC Inc.
Sears Holdings Corporation
Staples, Inc.
Target Corporation
Wal-Mart Stores, Inc.
Google Inc.
Nochex Ltd.
Liquidity Services, Inc.
Overstock.com, Inc.
U.S. Auto Parts Network, Inc.
BIDZ.com, Inc.
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Top Competitors
COMPANY VIEW
A statement by John J. Donahoe, President and Chief Executive Officer of eBay is given below. The
statement has been taken from the companys 2009 annual report.
For most of fiscal 2009, we operated three primary business segments: Marketplaces, Payments
and Communications. Our Marketplaces segment provides the infrastructure to enable global online
commerce on a variety of platforms, including the traditional eBay.com platform and our other online
platforms, such as our online classifieds businesses, our secondary tickets marketplace (StubHub),
our online shopping comparison website (Shopping.com) and our apartment listing service platform
(Rent.com), as well as our fixed price media marketplace (Half.com).
Our Payments segment is comprised of our online payment solutions PayPal (which enables
individuals and businesses to securely, easily and quickly send and receive payments online in
approximately 190 markets worldwide) and Bill Me Later. Our Communications segment, which
consisted of Skype, enabled Internet communications calls between Skype users and provided
low-cost connectivity to traditional fixed-line and mobile telephones.
On November 19, 2009, we completed the sale of Skype to an investor group. Skype was consolidated
with our results of operations through November 19, 2009, but was not consolidated with our results
of operations after November 19, 2009. Following the completion of the sale of Skype, we operated
and continue to operate two primary business segments: Marketplaces and Payments.
Overall, revenue increased 2% to $8.7 billion in 2009 compared to 2008. The increase was driven
primarily by PayPal offset by a decline in revenues generated from our Marketplaces business. We
achieved an operating margin of 17% in 2009 compared to 24% in 2008 driven by the impact of a
legal settlement charge, acquisitions and foreign currency movements against the U.S. dollar. Diluted
earnings per share increased to $1.83 in 2009 compared to $1.36 in 2008 driven primarily by the
gain on the sale of Skype. Operating cash flow increased to $2.91 billion in 2009 from $2.88 billion
in 2008.
Some key operating metrics that members of our senior management regularly review to evaluate
our financial results include net promoter score (NPS), market share, gross merchandise volume
(GMV), GMV excluding vehicles, number of sold items, net total payment volume (TPV), net number
of payments, free cash flow, and revenue, excluding acquisitions and foreign currency impact.
We are cautiously optimistic about the current economic environment for fiscal 2010. We will continue
to focus on driving operational efficiencies designed to enable us to reallocate resources into strategies
and initiatives that we believe will directly benefit our customers and increase activity on our platforms.
In 2010, we plan to continue our emphasis on becoming a more customer-focused and technology
driven company with clear priorities for our Marketplaces and Payments businesses. The 2010
strategy for our Marketplaces business is to make more progress in trust, value and selection by:
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Company View
Offering buyers great experiences they can trust; providing innovative shopping experiences that
deliver great value and selection; and providing tools and pricing to make eBay more attractive to
entrepreneurial sellers, casual consumer sellers and large sellers.
The 2010 strategy for our Payments business is to strengthen and expand its position as a leader
in on-line payments by: growing our Merchant Services business through merchant acquisition and
increased consumer preference as we expand our global footprint; continuing to penetrate the eBay
Marketplace, especially internationally; and launching new products and accelerating innovation off
our platform.
Net Revenues
We generate two types of net revenues: net transaction revenues and marketing services and other
revenues. Our net transaction revenues are derived principally from listing fees and final value fees
(which are fees payable on transactions completed on our Marketplaces trading platforms), fees
paid by merchants for payment processing services and, until the sale of Skype on November 19,
2009, fees charged to users to connect Skypes Internet communications products to traditional
fixed-line and mobile telephones. Our marketing services revenues are derived principally from the
sale of advertisements, revenue sharing arrangements, classifieds fees and lead referral fees. Other
revenues are derived principally from interest earned on certain PayPal customer account balances,
interest and fees earned on the Bill Me Later portfolio of receivables from loans and from contractual
arrangements with third parties that provide services to our users.
We generate the majority of our revenue internationally and, accordingly, fluctuations in foreign
currency exchange rates impact our results of operations. We have a foreign exchange risk
management program that is designed to reduce our exposure to fluctuations in foreign currencies;
however, the effectiveness of this program in mitigating the impact of foreign currency fluctuations
on our results of operations varies from period to period, and in any given period our operating results
are usually affected, sometimes significantly, by changes in currency exchange rates. For the year
ended December 31, 2009, foreign currency movements against the U.S. dollar negatively impacted
net revenues by approximately $354.2 million compared to the prior year.
On a business segment basis for the year ended December 31, 2009, foreign currency movements
against the U.S. dollar negatively impacted Marketplaces, Payments and Communications net
revenues by approximately $247.7 million, $62.1 million and $44.4 million, respectively, compared
to the prior year. For the year ended December 31, 2008, foreign currency movements against the
U.S. dollar positively impacted net revenues by approximately $70.7 million compared to the prior
year. On a business segment basis for the year ended December 31, 2008, foreign currency
movements against the U.S. dollar positively impacted Marketplaces, Payments and Communications
net revenues by approximately $37.5 million, $1.5 million and $31.7 million, respectively, compared
to the prior year. Revenues are attributed to U.S. and international geographies primarily based
upon the country in which the seller, payment recipient, customer, Skype users Internet protocol
address, website that displays advertising, or other service provider, as the case may be, is located.
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Company View
LOCATIONS AND SUBSIDIARIES
Head Office
eBay Inc.
eBay Inc.
Whitman Campus
2065 Hamilton Avenue
San Jose
California 95125
USA
P:800 322 9266
F:408 516 8811
http://www.ebayinc.com/
Other Locations and Subsidiaries
PayPal PayPal, Inc.
12312 Port Grace Boulevard eBay Park North
La Vista 2211 North First Street
Nebraska 68128 San Jose
USA California 95131
USA
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Locations and Subsidiaries