eBay Inc. is an American Internet company that manages eBay.com, an online auction and shopping website in which people and businesses buy and sell a broad variety of goods and services worldwide. Founded in 1995, eBay is one of the notable success stories of the dot-com bubble; it is now a multi-billion dollar business with operations localized in over thirty countries (Dell XPS M1210 Battery) .
eBay expanded from its original "set-time" auction format to include "Buy It Now" standard shopping; shopping by UPC, ISBN, or other kind of SKU (via Half.com); online classified advertisements (via Kijiji or eBay Classifieds); online event ticket trading (via StubHub); online money transfers (via PayPal ) and other services (Dell Studio XPS 1340 Battery) .
Origins and history
The online auction website was founded as AuctionWeb in San Jose, California, on September 3, 1995, by French-born Iranian computer programmer Pierre Omidyar as part of a larger personal site that included, among other things, Omidyar's own tongue-in-cheek tribute to the Ebola virus. One of the first items sold on eBay was a broken laser pointer for $14.83. Astonished, Omidyar contacted the winning bidder to ask if he understood that the laser pointer was broken (Dell Studio XPS 1640 Battery) .
In his responding email, the buyer explained: "I'm a collector of broken laser pointers." The frequently repeated story that eBay was founded to help Omidyar's fiancée trade Pez candy dispensers was fabricated by a public relations manager in 1997 to interest the media. This was revealed in Adam Cohen's 2002 book, The Perfect Store, and confirmed by eBay (Dell Vostro 1710 Battery) .
Chris Agarpao was hired as eBay's first employee and Jeffrey Skoll was hired as the first president of the company in early 1996. In November 1996, eBay entered into its first third-party licensing deal, with a company called Electronic Travel Auction to use SmartMarket Technology to sell plane tickets and other travel products. Growth was phenomenal; in January 1997 the site hosted 2,000,000 auctions, compared with 250,000 during the whole of 1996 (SONY VAIO VGN-FZ11S Battery) .
The company officially changed the name of its service from AuctionWeb to eBay in September 1997. Originally, the site belonged to Echo Bay Technology Group, Omidyar's consulting firm. Omidyar had tried to register the domain name echobay.com, but found it already taken by the Echo Bay Mines, a gold mining company, so he shortened it to his second choice, eBay.com. (Echobay.com is now owned by Echobay Partners, Ltd., a private equity firm based in Nevis (ASUS EEE PC900 battery)
In 1997, the company received $6.7 million in funding from the venture capital firm Benchmark Capital.
Meg Whitman was hired as eBay President and CEO in March 1998. At the time, the company had 30 employees half a million users and revenues of $4.7 million in the United States. eBay went public on September 21, 1998, and both Omidyar and Skoll became instant billionaires. eBay's target share price of $18 was all but ignored as the price went to $53.50 on the first day of trading (Dell RM791 battery) .
As the company expanded product categories beyond collectibles into almost any saleable item, business grew quickly. In February 2002, the company purchased IBazar, a similar European auction web site founded in 1995 and then bought PayPal on October 14, 2002 (Sony VGP-BPS13 battery) .
In early 2008, the company had expanded worldwide, counted hundreds of millions of registered users, 15,000+ employees and revenues of almost $7.7 billion. After nearly ten years at eBay, Whitman made the decision to enter politics. On January 23, 2008 the company announced that Whitman would step down on March 31, 2008 and John Donahoe was selected to become President and CEO (sony vgp-bpl9 battery) .
Whitman remained on the Board of Directors and continued to advise Donahoe through 2008. In late 2009, eBay completed the sale of Skype for $2.75 Billion, but will still own 30% equity in the company.
In July 2010, eBay was sued for $3.8 billion by XPRT Ventures which accused eBay of stealing information shared in confidence by the inventors on XPRT's own patents, and incorporated it into features in its own payment systems, such as PayPal Pay Later and PayPal Buyer Credit (Sony VGP-BPL11 battery) .
Millions of collectibles, decor, appliances, computers, furnishings, equipment, vehicles, and other miscellaneous items are listed, bought, or sold daily. In 2005,eBay launched its Business & Industrial category, breaking into the industrial surplus business. Generally, anything can be auctioned on the site as long as it is not illegal and does not violate the eBay Prohibited and Restricted Items policy (Sony VGP-BPL15 battery) .
Services and intangibles can be sold, too. Large international companies, such as IBM, sell their newest products and offer services on eBay using competitive auctions and fixed-priced storefronts. Separate eBay sites such as eBay US and eBay UK allow the users to trade using the local currency. Software developers can create applications that integrate with eBay through the eBay API by joining the eBay Developers Program (Dell Inspiron E1505 battery ) .
In June 2005, there were more than 15,000 members in the eBay Developers Program, comprising a broad range of companies creating software applications to support eBay buyers and sellers as well as eBay Affiliates.
Controversy has arisen over certain items put up for bid. For instance, in late 1999, a man offered one of his kidneys for auction on eBay, attempting to profit from the potentially lucrative (and, in the United States, illegal) market for transplantable human organs
On other occasions, people and even entire towns have been listed, often as a joke or to garner free publicity. In general, the company removes auctions that violate its terms of service agreement.
Beginning in August 2007, eBay required listings in "Video Games" and "Health & Beauty" to accept its payment system PayPal and sellers could only accept PayPal for payments in the category "Video Games: Consoles" (HP Pavilion dv6000 Battery) .
Starting January 10, 2008, eBay said sellers can only accept PayPal as payment for the categories "Computing > Software", "Consumer Electronics > MP3 Players", "Wholesale & Job Lots > Mobile & Home Phones", and "Business, Office & Industrial > Industrial Supply / MRO". eBay announced that starting in March 2008, eBay had added to this requirement that all sellers with fewer than 100 feedbacks must offer PayPal and no merchant account may be used as an alternative. This is in addition to the requirement that all sellers from the United Kingdom have to offer PayPal (Hp Pavilion dv3-1000 battery) .
Further, and as noted below, it is a requirement to offer Paypal on all listings in Australia and the UK. In response to concerns expressed by the Australian Competition and Consumer Commission, ebay has now removed the policy on the ebay.com.au website requiring sellers to offer paypal as a payment option (Dell Precision M70 Battery) .
In April 2006, eBay opened its new eBay Express site, which is designed to work like a standard Internet shopping site for consumers with United States addresses. It closed in 2008. Selected eBay items were mirrored on eBay Express, where buyers shop using a shopping cart to purchase from multiple sellers. The UK version was launched to eBay members in mid-October 2006 but on January 29, 2008 eBay announced its intention to close the site. The German version, eBay Express Germany, was also opened in 2006 and closed in 2008 (Acer Aspire One battery) .
Selling Manager Applications
At the 2008 eBay Developer's Conference, eBay announced the Selling Manager Applications program (SM Apps). The program allows approved developers to integrate their applications directly into the eBay.com interface. The applications created by developers are available for subscription by eBay members who also subscribe to Selling Manager (Hp 520 battery) .
eBay specialty sites
eBay maintains a number of specialty sites. eBay Pulse, for example, provides information about popular search terms, trends, and most-watched items. Other ebay Community Content includes the Discussion Boards, Groups, Answer Center, Chat Rooms, and Reviews & Guides. eBay has a robust mobile offering, including SMS alerts, a WAP site, Java ME clients, and an Apple iPhone application available in certain markets (Toshiba Satellite L305 Battery) .
Best of eBay is a specialty site for finding the most-unusual items on the eBay site. Users can vote on and nominate listings that they find.
eBay.com offers several types of auctions.
Auction-style listings allow the seller to offer one or more items for sale for a specified number of days. The seller can establish a reserve price (Toshiba Satellite Pro M15 Battery) .
Fixed price format allows the seller to offer one or more items for sale at a Buy It Now price. Buyers who agree to pay that price win the auction immediately without submitting a bid.
Fixed price format with best offer allows the seller to accept best offers. If a buyer submits a best offer, the seller either rejects or accepts the best offer. If the best offer is not satisfactory, a seller may submit a counter offer to the buyer. Best offer is not available for auction style listings. In addition, best offer is not available in every category. Sellers also meet specific requirements in order to sell with best offer (SONY VAIO VGN-FZ11l Battery) .
Bidding on eBay's auction-style listings is called proxy bidding and is essentially equivalent to a Vickrey auction, with the following exceptions.
The winning bidder pays the second-highest bid plus one bid increment amount (i.e., some small predefined amount relative to the bid size), instead of simply the second-highest bid. However, since the bid increment amounts are relatively insignificant compared to the bid size, they are not considered from a strategic standpoint (SONY VAIO VGN-FZ11z Battery) .
The current winning bid is not sealed, but instead is always displayed. However, at any given moment, the highest bidder's bid is not necessarily displayed, since this amount may be higher than the amount required to win the auction.
Example of bidding on an auction-style listing
Suppose bidding for an item placed by Anne starts at $1.00 and that the bid increment amount in this price range is $.25. Eric bids $3.00 for the item, and since no one else has bid yet, eBay displays that the current winner is Eric, with a bid of $1.00, and that the minimum allowable bid is $1.25, which is equal to one bidding increment above the winning bid (SONY VAIO VGN-FZ11m Battery) .
Suppose then that Bob bids $2.00 for the item. Since Eric has already bid more than Bob, eBay will display that the current winner is Eric, with a bid of $2.25, which equals the second-highest bid ($2.00) plus the bid increment amount ($.25). Again, eBay will also display that the minimum allowable bid is $2.50, one bid increment above the winning bid. Suppose that Bob bids again, this time at $2.75 (SONY VAIO VGN-FZ18m Battery) .
Again, since Eric's bid is higher than Bob's, eBay will display that the current winning bidder is Eric, with a bid of $3.00, which is equal to the second-highest bid ($2.75) plus the bid increment ($.25). eBay will also display that the minimum allowable bid is $3.25, one bidding increment above the current winning bid. Suppose Bob bids one more time, at $10.00 (SONY VAIO VGN-FZ21m Battery) .
Since Bob's bid is now higher than Eric's, eBay will display that the current winning bidder is Bob, with a bid of $3.25, which is equal to the second-highest bid ($3.00) plus the bid increment ($.25). If Bob were to win the auction, he would have to pay the amount equal to the winning bid ($3.25), even though his previous bid was much larger than that (SONY VAIO VGN-FZ38M Battery) .
In 2007, eBay began using detailed seller ratings with four different categories. When leaving feedback, buyers are asked to rate the seller in each of these categories with a score of one to five stars, with five being the highest rating and one the lowest. Unlike the overall feedback rating, these ratings are anonymous; neither sellers nor other users learn how individual buyers rated the seller. The listings of sellers with a rating of 4.3 or below in any of the four rating categories appear lower in search results. Power Sellers are required to have scores in each category above 4.5 (SONY VAIO VGN-FZ410 Battery) .
In a reversal of roles, on January 24, 2010 Auctionbytes.com held an open survey in which sellers could effectively rate eBay itself, as well as competing auction and marketplace sites. In the survey, users were asked to rank 15 sites based on five criteria (SONY VAIO VGN-FZ280E Battery) :
Ease of Use
After the results were published, eBay had finished 13th overall, edged out by established sites such as Amazon and Craigslist, as well as lesser-known upstarts like Atomic Mall and Ruby Lane (Dell INSPIRON 1525 battery) .
In individual category rankings, eBay was rated the worst of all the 15 sites on Customer Service and Communication, and average on Ease of Use. A number of respondents said they would have given eBay a rating of ten 3 to 5 years ago. eBay was rated twelfth out of fifteen in the Recommended Selling Venue category (Toshiba Satellite M300 Battery) .
Profit and transactions
eBay generates revenue from various fees. The eBay fee system is quite complex; there are fees to list a product (Insertion Fee) and fees when the product sells (Final Value Fee), plus several optional adornment fees, all based on various factors and scales. The U.S.-based eBay.com takes $0.10 to $4 (based on the opening price) for a basic listing without any adornments and 8.75% or less of the final price (as of May 2009) (Toshiba NB100 Battery) .
The UK based ebay.co.uk (ebay.co.uk offices) takes from GBP £0.15 to a maximum rate of GBP £3 per £100 for an ordinary listing and from 0.75 percent to 10% (writing as of June 2009) percent of the final price. Reduced FVF's are available to business registered customers. In addition, eBay owns the PayPal payment system which has fees of its own (Toshiba Satellite 1200 Battery) .
Under current U.S. law, a state cannot require sellers located outside the state to collect a sales tax, making deals more attractive to buyers. Although some state laws require purchasers to pay sales tax to their own states on out-of-state purchases, it is not a common practice. However, most sellers that operate as a full time business do follow state tax regulations on their eBay transactions (Toshiba Satellite A200 Battery) .
However for the tax called Value added tax (VAT), eBay requires sellers to include the VAT fees in their listing price and not as an add-on and thus eBay profits by collecting fees based on what governments tax for VAT.
The company's current business strategy includes increasing international trade. eBay has already expanded to over two dozen countries including China and India. The only places where expansion failed were Taiwan and Japan, where Yahoo! had a head start, and New Zealand where TradeMe, owned by the Fairfax media group is the dominant online auction website (Toshiba PA3399U-2BRS battery) .
A more recent strategy involves the company increasingly leveraging the relationship between the eBay auction site and PayPal: The impact of driving buyers and sellers to use PayPal means not only does eBay turn buyers into clients (as a pure auction venue its clients used to be predominantly sellers) but for each new PayPal registration it achieves via the eBay auction site it also earns offsite revenue when the resulting PayPal account is used in non-eBay transactions. In its Q1 2008 results, total payment volume via PayPal increased 17 percent, but off the eBay auction site it was up 61 percent (Toshiba Satellite T4900 Battery) .
For most listing categories, eBay sellers are permitted to offer a variety of payment systems such as Paypal, Paymate, ProPay, and Moneybookers.
eBay runs an affiliate program under the name eBay Partner Network. eBay affiliate marketers were originally paid a percentage of the eBay seller's transaction fees, with commissions ranging from 50% to 75% of the fees paid for an item purchased. In October 2009, eBay changed to an affiliate payout system that it calls Quality Click Pricing, in which affiliates are paid an amount determined by an undisclosed algorithm. The total earnings amount is then divided by the number of clicks the affiliate sent to eBay and is reported as Earnings Per Click, or EPC (Toshiba Satellite M65 battery) .