How Ebay Works: Business & Revenue Model

B2C and C2C multinational e-commerce online marketplace Ebay based in California started their operations in 1995 and went public in 1998. With over $9.6 billion annual revenue and 170 million active users as of quarter 4th of 2017, Ebay is well accepted e-commerce online marketplace. Ebay sell their products either via a silent auction where users can submit the maximum price they are willing to pay for the product or via buy it now where user buy products at the listed price. As of 4th quarter of 2017, 39% of buyers were female and likewise 44% of sellers are female. Over 65% of Ebay’s revenue generates from Ebay online marketplace transactions and only 10% revenue comes from StubHub which is online ticket marketplace acquired by Ebay in 2007.

Ebay is an online marketplace for buying and selling of new and used products. Online marketplace deals in both B2C and C2C marketplace. Ebay is available in 180 countries for buying and selling of wide variety of goods. Ebay revenue comes from seller for listing of products and commission on sale of product. Buyers need to pay the product price only to buy products on online marketplace. Sellers can list first 50 items on the Ebay online marketplace free of cost every month. After that company charges the listing fee depending upon the product category. Company also charges commission fee on sale of products. Over 90% gross merchandise volume generates from Ebay’s marketplace.

Ebay Founders, Funding received and Timeline:

Founders: Pierre Omidyar

Founded Date: September 1, 1995

Headquarter: San Jose, California, United States

Number of Funding Rounds: 1

Total Funding Amount: $6.7M

Number of Acquisitions: 62

IPO Date: September 24, 1998

IPO Share Price: $18.00

Timeline of Ebay:

Timeline of online marketplace Ebay

Ebay Revenue generation Model:

First online marketplace Ebay is known for huge variety of products. Websites similar to Ebay are doing well but Ebay business model is way different to its competitors. Ebay offers buyer and seller an online marketplace platform to buy and sell products. Ebay don’t store the inventory of products rather directs the order directly to the seller.

With over 1.93 million (as on 2017) active sellers on Ebay, Ebay allows sellers to list first 50 products on the online marketplace platform free of cost. After that Ebay charges listing fee on each item. Additionally, Ebay charges upto 10% commission on sale value pre-tax including shipping charges. Online marketplace Ebay offer two ways to sellers to sell and buyers to buy wide variety of products. Buy it Now and bidding option are made available to users. In bidding option, buyer has an option to bid the price they are willing to pay to buy the product. Buyer with highest bidding price gets the product and in Buy it Now option seller update the price of product.

Other revenue generation model on websites like Ebay is Advertisement. Online marketplace websites like Ebay sells advertising on their websites that go on external websites. Ebay also own some classified ads that generate some revenue for the online marketplace platform. Other revenue souce is giving license of their in-house technologies to other companies. Online marketplace like Ebay generate revenue from various sources but the major chunk of revenue comes from online marketplace.

Features of Online Marketplace Ebay:

  • Return policy of product with 100% money back gaurantee.

  • Ebay accepts all the online payment options with EMI payment method with allow buyer to pay in monthly installments.

  • Ebay authentication policy for all the products and product verification by experts.

  • Bidding option to buy products. At least 30% price difference in lowest bid price and buy it now price.

  • Product wishlist and product feedback & review via catalog on online marketplace website.

  • Report link to buyers for fake and unauthenticate product.

Value Proposition of Ebay:

Customer

  • Large product catalogue
  • Quality assured products
  • Free shipping
  • Fast Delivery
  • Review and Feedback of products
  • Order tracking
  • Product return policy with 100% money back guarantee

Seller

  • Global online audience
  • Good customer satisfaction
  • Bidding and buy it now feature for selling of product
  • Effecient marketing and distribution channel
  • opportunity to enhance sale

Why Ebay is successful

Online marketplace website like Ebay has a large list of competitors. Even with first player to enter in online marketplace domain around the world, Ebay is facing a huge competition. Ebay is the only place to offer auction of products that attract large set of audience around the world. No other online marketplace is able to offer auction feature to buyer and seller both. Rare collectable items and huge toy collection along with auction listing appeal to buyers.

Ebay online marketplace is successful with its unique interface. Ebay offers search algorithm unlike of search engine which search information, but Ebay search for physical products around the world. Online marketplace Ebay retains their market share of audience and safeguard Ebay from large set of online marketplace competitors. Number of products &services offered, price and quality are most important aspects for Ebay that makes Ebay different and successful in online marketplace world.

Ebay is an online marketplace for buying and selling of products around the world. Online marketplace Ebay is quite different from other players. Ebay core offering is better services to buyers and sellers. Other online marketplace competitors focus more on products. Auction feature of Ebay along with buy product at fixed price is a unique offering to engage buyer and sellers.

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