Get Big Fast

1

EBay Inc.
2
Index

• Company Overview
• Origin and evolution
• The industry
• Business strategy
• Competition
• GBF..
• Conclusion

3
History

• 1995 founder Pierre Omidyar, graduate from
  Tufts University, encouraged by his wifes
  hobby.
• Skoll, Omidyars partner joined him as first
  president.
• 1996 incorporated in San Jose, CA
• Sept. 1998 eBay first IPO. 18 per stock.
• 97, Meg Whitman, joins as CEO. HBS

4
Company Overview

• An online auction platform that facilitates
  transaction between buyers and sellers of goods
  and services.
• Mission Vision
• eBays Vision is to provide a global online
  trading platform where practically anyone can
  trade practically anything.

5
Industry information

• Total value of global e-commerce transactions -
  657 b
• Number of users online 534 m
• B2B auction transaction growth from 98 to 2OOO
  was 8 b to 52 b
• Increased awareness among users towards the
  potential of internet as a trading platform.

6
Business Model

• Seller uploads the picture and description of the
  item to be sold.
• Sale ends at predetermined time.
• High bidder and seller contact each other and
  make arrangements of shipment.
• Buyer sends funds to seller money order, check,
  PayPal, seller sends goods.
• Buyer and seller then grade each other through
  feedback forums.

7
Revenue model and profit

• Fees for the seller to post the item, any
  promotion activities and final sale commission.
• Advertising revenue- 2 of TR
• Selling profit is approx 9 of TR
• Major money comes from listing and trading
  services -89 of TR

8
Value Proposition

• Buyer
• Massive Selection
• More convenient
• Saves time and money
• Value added
• Seller
• - Broadens market
• - Lower Distribution Cost
• - maximize selling price
• - repeat business and clientele

9
The Growth

• In 97, the revenue hit 5.7m
• 98, Acquires Jump, Inc., the developer and
  operator of Up4Sale, an online trading service
  with an auction format.
• 98, Special strategic alliance with AOL. Revenue
  grows 724
• 99, acquires Kruse, Inc., a company that conducts
  auctions and performs appraisal services and
  auctioneer training for classic car auctions.

10
Growth cont.

• 99, Acquires Billpoint, Inc., a firm that
  develops centralized turnkey authorization,
  billing, and payment solutions
• 99, eBay goes online in the United Kingdom and
  Canada.
• 2000, acquires Half.com Inc.
• Heavy investment in international markets
  including Spain, UK
• 2003 Transactions for the year near the 20
  billion mark. Sales exceed 2 billion.
• 2004, International expansion in India-bazee.com
  and Germany.
• 2005, buys shopping.com and places a bid for
  skype.com

11
Financials

• A presence in over 20 countries internationally
  contributes to 40 of total revenue.
• Main competitors, Yahoo! and Amazon have seen 65
  and 61 revenue growth respectively over 6 year
  period from 98 to 03
• eBays 98 revenue was 47.4 million 03 jumped
  to 2.1 billion, a 134 average increase over
  previous year.

12
Acquisition of PayPal

• PayPal uses existing electronic infrastructure of
  bank accounts and credit cards to allow small
  monetary exchanges online.
• Its convenient for small businesses and
  individuals, because they can collect online
  payments without difficult set-up.
• eBay acquired PayPal in 2002 and has integrated
  it throughout its website as a payment option for
  auctions.

13
Velocity of trading

• Processes a Pocket PC in UK very six minutes.
• Mobile phone every 3O seconds in Germany.
• A Volkswagen is sold every 25 minutes in Germany.

14
eBays Revenue
1998
2003
15
Threats or Issues

• Bargaining power of suppliers.
• Substitutes product or services such as b2b, b2c
  service providers.
• Increasing competition from Amazon and yahoo.
• No barrier to entry in the industry.
• Buyer-seller frauds
• Technology failure or/and change

16
Issue of privacy and trust

• EBays view and approach.
• Trust is facilitated by fair information and
  principles.
• Users should be provided with notice and
  communication, choice and control, security,
  authentication and enforcement.
• eBay has earned this trust in time by consistent
  service.

17
eBays follow up

• Target key product categories for special users.
• Continue developing community tools.
• Enhance the community for women and senior
  citizens.
• Stress on adding services and features to make
  trading easier.
• Expand value added services.
• Major focus on trust and safety programs
• Maximum transparency.

18
EBay's tackle of security

• Feedback forum- check the business practices or
  reputation of any buyer or seller on eBay.
• Escrow- inspection of the product purchased
  before payment is being sent.
• Fraud protection program- coverage of users up to
  2OO.
• Verified rights owner program- make sure that
  items do not violate intellectual property
  rights.
• Neutral dispute resolution options.

19
Popular Subsidiaries

• Half.com- offers an organized online market place
  to buy and sell high quality previously owned
  mass market goods.
• EBay stores- expands the market place for sellers
  by allowing them to customize shopping
  destination to merchandise their products.
• EBay motors Internets largest auction place to
  buy anything automotive.

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Subsidiaries services

• EBay professional services- serving fast growing
  marketplace by providing a destination on eBay to
  find professionals.
• Ebay local trading- allow users to browse items
  near them and browse through local interests.
• Ebay premier- showcases fine art, antiques, fine
  wines and rare collectibles from leading auctions
  and dealers.
• Ebay live auctions- real time bidding on items
  being sold on sale floor.

21
Competition

• Major Competitors-
• Amazon
• AOL
• Yahoo
• Traditional stores
• Wal-Mart
• Dell
• Macys
• Home Depot

22
Ebay Vs Yahoo
content Ebay Yahoo
Max duration 1O days 14 days
Fee Based on the reserve price of the item No charge to any buyers or sellers
commission Up to 5 of closing price To buyer and seller when item is sold
Chances of buy/sell More likely Less likely
response Not as efficient Better than eBay
insurance yes none
Charge of posting yes no
scope wiiide Not as wide
23
eBay Vs Competition- facts

• eBay had great first mover advantage and brand
  name establishment in the U.S.
• Google could also be a potential competitor but
  management does not see it as threat.
• In the International markets though, Yahoo moved
  in first and EBay is suffering from that still.(
  Japan and other south Asian markets.
• Amazon and yahoo stole most of the market share
  during three ebay crashes during 99.
• EBay does have its supremacy in the U.S. with
  yahoo, Amazon and Google following leaders.

24
GBF

• Network effects
• Sellers want to sell their item on the auction
  service with the most buyers, so they put their
  items up for sale on eBay.
• Buyers want to find the best prices with many
  sellers, so they go to eBay.
• Economies of scale
• Cost allocation over broader range of transaction
  being processed.
• Customer Retention
• Why would a customer would want to leave the
  biggest trading platform?
• Excellent opportunity to find similar interest
  sellers and buyers.

25
Reason for success

• Mature and diverse board of directors
• 7 outsiders, 1 insider, 1 related insider
• Strong management team lead by
• Meg Whitman. Senior staff consists of
  experienced managers from companies such as
  PepsiCo and Disney with an average of 20 yrs. of
  business experience and a strong vision for the
  company.
• Brand name development eBay has carefully
  developed a brand name based on ease and trust.
  They have created the defacto online trading
  platform.

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Questions are welcome at this time.Thank you for
your continued attention..