an additional commission fee is charged. Margin on each
transaction is phenomenal since once the infrastructure is
built, incremental costs on each transaction are tiny – all
eBay is doing is transmitting bits and bytes between
buyers and sellers.
Advertising and other non-transaction net revenues
represent a relatively small proportion of total net rev-
enues and the strategy is that this should remain the case.
Advertising and other net revenues totalled $94.3 million
in 2004 (just 3% of net revenue).
The eBay marketplace is well known for its core service
which enables sellers to list items for sale on an auction or
fixed-price basis giving buyers the opportunity to bid for
and purchase items of interest.
Software tools are provided, particularly for frequent
traders including Turbo Lister, Seller’s Assistant, Selling
Manager and Selling Manager Pro, which help automate
the selling process; the Shipping Calculator, Reporting
tools, etc. Today over sixty per cent of listings are facili-
tated by software, showing the value of automating
posting for frequent trading.
Fraud is a significant risk factor for eBay. BBC (2005)
reported that around 1 in 10,000 transactions within the
UK were fraudulent. 0.0001% is a small percentage, but
scaling this up across the number of transactions, this is a
eBay has developed ‘Trust and Safety Programs’ which
are particularly important to reassure customers since
online services are prone to fraud. For example, the eBay
feedback forum can help establish credentials of sellers
and buyers. There is also a Safe Harbor data protection
method and a standard purchase protection system.
According to the SEC filing, eBay summarises the core
messages to define its proposition as follows:
Access to broad markets
Efficient marketing and distribution costs
Ability to maximise prices
Opportunity to increase sales
Although there are now few direct competitors of online
auction services in many countries, there are many indirect
competitors. SEC (2005) describes competing channels as
including online and offline retailers, distributors, liquida-
tors, import and export companies, auctioneers, catalog
and mail-order companies, classifieds, directories, search
engines, products of search engines, virtually all online and
offline commerce participants (consumer-to-consumer,
business-to-consumer and business-to-business) and
online and offline shopping channels and networks.
BBC (2005) reports that eBay are not complacent
about competition. It has already pulled out of Japan due
to competition from Yahoo! and within Asia and China is
also facing tough competition by Yahoo! which has a
portal with a broader range of services more likely to
Before the advent of online auctions, competitors in the
collectibles space included antique shops, car boot sales
and charity shops. Anecdotal evidence suggests that all of
these are now suffering at the hands of eBay. Some have
taken the attitude of ‘if you can’t beat ’em, join ’em’. Many
smaller traders who have previously run antique or car
boot sales are now eBayers. Even charities such as Oxfam
now have an eBay service where they sell high-value items
contributed by donors. Other retailers such as Vodafone
have used eBay as a means to distribute certain products
within their range.
Objectives and strategy
The overall eBay aims are to increase the gross merchan-
dise volume and net revenues from the eBay Marketplace.
More detailed objectives are defined to achieve these
aims, with strategies focusing on:
1 Acquisition – increasing the number of newly registered
users on the eBay Marketplace.
2 Activation – increasing the number of registered users
that become active bidders, buyers or sellers on the
3 Activity – increasing the volume and value of transac-
tions that are conducted by each active user on the
The focus on each of these 3 areas will vary according to
strategic priorities in particular local markets.
eBay Marketplace growth is also driven by defining
approaches to improve performance in these areas. First,
category growth is achieved by increasing the number and
size of categories within the marketplace, for example:
Antiques, Art, Books and Business & Industrial. Second, for-
mats for interaction. The traditional format is auction listings,
but it has been refined now to include the ‘Buy-It-Now’ fixed
price format. Another format is the ‘Dutch Auction’ format,
where a seller can sell multiple identical items to the highest
bidders. eBay Stores was developed to enable sellers with a
wider range of products to showcase their products in a
more traditional retail format. eBay say they are constantly
CHAPTER 1 · AN INTRODUCTION TO INTERNET M ARKETING