eBay

eBay Inc. (stylized as ebay) is an American multinational internet consumer-to-consumer corporation, headquartered in San Jose, California. It was founded in 1995, and became a notable success story of the dot-com bubble; it is now a multi-billion dollar business with operations localized in over thirty [4][5] countries. The company 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. In addition to its auctionstyle sellings, the website has since expanded 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 [6] Classifieds); online event ticket trading (via StubHub); online money transfers (via PayPal) and other services.

History
AuctionWeb was founded in San Jose, California, on September 5, 1995, by French-born IranianAmerican computer programmer Pierre Omidyar(born on June 21, 1967) as part of a larger personal site [7] 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. In his responding email, the [8] buyer explained: "I'm a collector of broken laser pointers." The frequently repeated story that eBay was founded to help Omidyar's fiance trade Pez candy dispensers was fabricated by a public relationsmanager in 1997 to interest the media, which were not interested in the company's previous [9] explanation about wanting to create a "perfect market". This was revealed in Adam Cohen's 2002 [7] [9] book, The Perfect Store, and confirmed by eBay. 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 [10] 1996. 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 [11] [12] gold mining company, so he shortened it to his second choice, eBay.com. In 1997, the company received $6.7 million in funding from the venture capital firm Benchmark Capital.
[13]

Meg Whitman was hired as eBay President and CEO in March 1998. At the time, the company had 30 [14] [15] employees, half a million users and revenues of $4.7 million in the United States. eBay went public [16] on September 21, 1998, and both Omidyar and Skoll became instant billionaires. eBay's target share [17] price of $18 was all but ignored as the price went to $53.50 on the first day of trading. As the company expanded product categories beyond collectibles into almost any saleable item, business [8] grew quickly. In February 2002, the company purchased IBazar, a similar European auction web site founded in 1993 and then bought PayPal on October 14, 2002. By early 2008, the company had expanded worldwide, counted hundreds of millions of registered users, [15] 15,000+ employees and revenues of almost $7.7 billion. After nearly ten years at eBay, Whitman decided to enter politics. On January 23, 2008 the company announced that Whitman would step down [18] on March 31, 2008 and John Donahoe was selected to become President and CEO. Whitman

remained on the Board of Directors and continued to advise Donahoe through 2008. In late 2009, eBay [19] 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 that accused eBay of stealing information shared in confidence by the inventors on XPRT's own patents, and incorporated it into features in its own [20] payment systems, such as PayPal Pay Later and PayPal Buyer Credit. On December 20, 2010, eBay announced its acquisition of a German online shopping club, brands4friends.de, for 150 million ($197 million) to strengthen the company's interests in the fashion [21] industry in Europe. It is subject to regulatory approval and expected to close it in the Q1 2011.

Bidding
[edit]Auction-style

listings

Bidding on eBay's auction-style listing 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 (that is, 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 [59] considered from a strategic standpoint. The highest bidder's bid is sealed, as in a Vickrey auction, but the current winning bid (second [60] highest plus one increment) is displayed throughout the auction to allow price discovery.

[edit]Seller

ratings

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. [61][62][63][64][65] Power Sellers are required to have scores in each category above 4.5. In a reversal of roles, on January 24, 2010 Auctionbytes.com held an open survey in which sellers could [66] 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: Profitability Customer Service Communication Ease of Use Recommendation
[67]

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 selling sites like Atomic Mall and Ruby Lane. 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. [edit]Charity

auctions

Using MissionFish as an arbiter, eBay allows sellers to donate a portion of their auction proceeds to a charity of the seller's choice. The program is called eBay Giving Works in the US, and eBay for [68] Charity in the UK. eBay provides a partial refund of seller fees for items sold through charity [69] auctions. As of March 4, 2010, $154 million has been raised for U.S. nonprofits by the eBay [70] Community since eBay Giving Works began in 2003. Some high-profile charity auctions have been advertised on the eBay home page, and have raised large amounts of money in a short time. For example, a furniture manufacturer raised over $35,000 for Ronald [citation needed] McDonald House by auctioning off beds that had been signed by celebrities. To date the highest successful bid on a single item for charity was for the annual "Power Lunch" with investor Warren Buffett at the famous Smith & Wollensky Steakhouse in New York. The winning bid was $2.63 million with all of the proceeds going to the Glide Foundation. At the time of writing, the winning bidder is still not publicly known, but they will be able to bring up to seven friends to the lunch. The previous highest successful bid on a single item for charity was for a letter sent to Mark P. Mays, CEO of Clear Channel (parent company of Premiere Radio Networks the production company that produces The Rush Limbaugh Show and Glenn Beck Program) by Senator Harry Reid and forty other Democratic senators, complaining about comments made by conservative talk show host Rush Limbaugh. The winning bid was $2,100,100, with 100 percent of the proceeds going to the Marine CorpsLaw Enforcement Foundation, benefiting the education of children of men and women who have died serving in the armed forces. The winning bid was matched by Limbaugh in his largest charity donation to [73] date. In 2007, eBay Canada partnered with Montreal-based digital branding agency CloudRaker to develop a campaign to raise money for Sainte-Justine children's hospital in Montreal. They aligned themselves with internet phenomenon Ttes claques to create an eBay auction based on popular T-A-C character Uncle Tom, an infomercial host who pitches absurd products. eBay and CloudRaker reproduced Uncle Tom's imaginary products, The Body Toner Fly Swatter, The Willi Waller Potato Peeler, and the LCD Shovel and sold them online. In 6 weeks, they raised $15,000 for Hpital St-Justine with one fly swatter, one potato peeler, and one shovel, a world record. The Body Toner Fly Swatter sold for $8,600, the Willi Waller Potato Peeler sold for $3,550, and the LCD Shovel sold for $2,146.21.
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Profit and transactions

eBay generates revenue from various fees. The eBay fee system is quite complex; there are fees to list a product and fees when the product sells (Final Value Fee), plus several optional adornment fees, all based on various factors and scales. As of November 2012, the U.S.-based eBay.com takes $0.10 to $2 (based on the opening or reserve price) as an insertion fee for a basic auction-style listing without any adornments, and 9% of the total amount of the sale (price of the item plus shipping charges) as a final [75] value fee. Fixed-price listings have an insertion fee of $0.50, and the final value fee varies based on [76] category and total amount of the sale (e.g. 13% for DVDs & Movies up to $50). The UK based [77] ebay.co.uk 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) of the final price. Reduced Final Value Fees are

available to business registered customers. In addition, eBay owns the PayPal payment system that has fees of its own. 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 [78][79] transactions. However Value Added Tax (VAT), a form of sales tax in EU countries, is different. eBay requires sellers to include the VAT element in their listing price and not as an add-on and thus eBay profits by collecting fees based on what governments tax for VAT; i.e. it not only receives fees as a percentage of the sale (net) price but also a similar percentage of the VAT element of the overall (gross) [80] price. 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. 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 [83] via PayPal increased 17 percent, but off the eBay auction site it was up 61 percent. For most listing categories, eBay sellers are permitted to offer a variety of payment systems such [84] 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. On April 18, 2012 eBay reported a 29% Q1 revenue increase to $3.3 billion compared to their Q1 in 2011. Net income was reported to be at $570 million for the quarter.
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Use for economics

As eBay is a huge, publicly visible market, it has created a great deal of interest from economists, who have used it to analyze many aspects of buying and selling behavior, auction formats, etc., and compare these with previous theoretical and empirical findings. Just as economists have shown interest in eBay's operations, computer information systems researchers have also shown interest in eBay. Recently Michael Goul, Chairman of the Computer Information Systems department of the W. P. Carey School of Business at Arizona State University, published an academic case based on eBays big data management and use. In the case, Goul discusses how eBay is [96] a data-driven company which processes 50 petabytes of data a day.

eBay uses a system that allows different departments in the company to check out data from their data mart into sandboxes for analysis. According to Goul, eBay has already experienced significant business successes through its data analytics. To continue improving the business through data-driven decision making, eBay employs 5,000 data analysts.