Ebay History and Business Model

With more than 100 million active users globally (as of Q4 2011), eBay is the world's largest online marketplace, "where practically anyone can buy and sell practically anything" (eBay.com, 2012a). Founded in September 1995 by Pierre Omidyar in his San Jose living room (Bjornsson 2001) , eBay connects a diverse and passionate community of individual buyers and sellers, as well as small businesses. Their collective impact on ecommerce is enormous: In 2011, the total value of goods sold on eBay was $68.6 billion — more than $2,100 every second (eBay.com 2012).


eBay is one of the notable success stories of the dot-com bubble, it is now a multi-billion dollar business with operations in over thirty countries. There is a strong company vision with a singular focus – that eBay is a company that’s in the business of connecting people, not selling things (Bjornsson, 2001). eBay has purchased PayPal, which enables individuals and businesses to securely, easily and quickly send and receive online payments. They also reach millions through specialized marketplaces such as StubHub, the world's largest ticket marketplace, and eBay classifieds sites, which together have a presence in more than 1,000 cities around the world (Shipman 2011).

“A good business model begins with an insight into human motivations and ends in a rich stream of profits” (Magretta 2002)

E-business modelling has similar goals to enterprise modelling in general. Modelling helps firms develop business visions and strategies, redesign and align business operations, share knowledge about the business and its vision and ensure the acceptance of business decisions through committing stakeholders to the decisions made (Persson & Stirna , 2001). Business modelling is simply the setup of a business and its network of partners for creating, marketing and supplying value and relationship capital to one or more customers to generate a profitable and sustainable revenue stream.

The Business Model of eBay is an online person-to-person trading community on the Internet, using the World Wide Web. Buyers and sellers are brought together in a manner where sellers are permitted to list items for sale and buyers to bid on items of interest, also both sellers and buyers are able to browse through all listed items. The items are arranged by topics, where each type of auction has its own category.
eBay has both streamlined and globalized traditional person-to-person trading, which has traditionally been conducted through such forms as garage sales, collectibles shows, flea markets and more, with their web interface. This enables easy searching for buyers and enables the sellers to immediately list an item for sale within minutes of registering.

Browsing and bidding on auctions does not incur any charges, but sellers are charged two kinds of fees. eBay Australia has introduced 30 free auction-style listings per month and there after you are charged the ‘Insertion Fee’ (conditions apply).
• When an item is listed on eBay a nonrefundable Insertion Fee is charged, which ranges between 50 cents and $3.00, depending on the listing start price of the item. A fee is charged for additional listing options to promote the item, such as highlighted or bold listing.
• A Final Value (final sale price) fee is charged at the end of the seller's auction. This fee is 7.9% of the final sale price, there are other circumstances and exceptions but this is the general figure. (eBay Australia, 2012a)

eBay automatically notifies the buyer and seller via e-mail at the end of the auction if a bid exceeds the seller's minimum price, and the seller and buyer finish the transaction independently of eBay. The binding contract of the auction is between the winning bidder and the seller only.

At no point during the auctioning process does eBay take physical possession of either the item being sold or the buyer's payment for the item, user trust is a key issue. In the traditional Buy/Sell model the buyer and the seller usually exchange the item for the payment at the same time and place. For eBay to be able to convince users to participate they must deal with the inevitable delay between the buyer buying the item and receiving it, which is not an issue in the traditional model. To reduce this anonymity and uncertainty of dealing online, eBay introduced Feedback Forums. At the completion of a transaction, users are encouraged to submit compliments or criticism to the trading profile of the trading partner to the Feedback Forum, both the Seller and the Purchaser have the ability to comment on each other. By looking at the trading partners’ history of trades, and the comments made, the user will be able to estimate more accurately the trustworthiness of the trading partner (eBay Australia 2012b). This is by no means a fool proof way to combat misuse, since users may be tempted to wait until their reputation is good enough that they can start to trade in expensive items before running away with the buyer's money, and of course there will be no feedback on a new user.

eBay Process


Caban, J. (2007). Business Environment of EBay, Wal-Mart, & Best Buy, 2012, from http://voices.yahoo.com/business-environment-ebay-wal-mart-best-buy-367735.html?cat=35
ebay.com (2012a). Who We Are, 2012, from http://www.ebayinc.com/who
Bjornsson, M. (2001). Retrieved from http://pages.cs.brandeis.edu/~magnus/ief248a/eBay/history.html
eBay Australia (2012a). Basic Sellers Fees, 2012, from http://pages.ebay.com.au/help/sell/fees.html
eBay Australia (2012b). Account Safety retrieved from http://pages.ebay.com.au/help/account/safety.html
Margretta, J. (2002). Harvard Business Review May 2002, Why Business Models Matter. Retrieved from http://info.psu.edu.sa/psu/fnm/asalleh/MargarettaWhyBusinessModelsMatter.pdf
Persson, A. & Stirna, J. (2001) Why Enterprise Modelling?, Conference on Advanced Information Systems Engineering 2001, Proceedings (CAISE 01)
Shipman, S.R. (2011). Comments of eBay Inc. in reply to the Matter of Information and Innovation In the Internet Economy before the Department of Commerce National Telecommunications and Information Administration. Retrieved from http://www.ntia.doc.gov/files/ntia/comments/101214614-0614-01/attachments/eBay%20Inc%20comments%20to%20DOC%20privacy%20green%20paper.pdf
eBay logo used with permission of eBay Australia - http://pages.ebay.com.au/help/policies/overview.html


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