Case Study
Case
17
Teaching Note
Ebay: Facing the Challenge of Global Growth
Overview
This version of the eBay case has been substantially revised and extensively updated from the version that appeared in the 14th edition. While some of the fundamental material remains the same, the case includes new data and strategic issues that eBay’s managers must address as the company moves beyond the traditional auction niche that it now dominates largely unchallenged and as the company drives to continue its phenomenal growth by expanding into international markets. In 2005 when people thought about online auctions the first name that popped into their heads was eBay. In fact, eBay was the largely unchallenged leader in the online auction industry. Benefiting from the network effect, eBay had created the world’s largest Web-based community of consumer-to-consumer auctions using an entertaining format that allowed people to buy and sell collectibles, automobiles, jewelry, high-end and premium art items, antiques, coins and stamps, dolls and figures, pottery and glass, sports memorabilia, toys, consumer electronics products, and a host of other practical and miscellaneous items. The company had also become a business-to-business and business-to-consumer clearinghouse for Fortune 500 companies and large governmental agencies seeking to liquidate inventories and/or other assets as eBay’s core buyers changed from collectors to bargain hunters. Ebay’s business model had further evolved to include more fixed price transactions with the increasing popularity of the buy-it-now option, the acquisition of Half.com and the promotion of eBay. Ebay’s product mix also broadened to include more bigticket auctions including automobile, real estate, and boat sales. In 2003, eBay engaged in forward vertical integration through the purchase of the online payment service PayPal. At year-end 2005, eBay held more than 4 million auctions per day and had over 168 million registered users. The
17
Teaching Note
Ebay: Facing the Challenge of Global Growth
Overview
This version of the eBay case has been substantially revised and extensively updated from the version that appeared in the 14th edition. While some of the fundamental material remains the same, the case includes new data and strategic issues that eBay’s managers must address as the company moves beyond the traditional auction niche that it now dominates largely unchallenged and as the company drives to continue its phenomenal growth by expanding into international markets. In 2005 when people thought about online auctions the first name that popped into their heads was eBay. In fact, eBay was the largely unchallenged leader in the online auction industry. Benefiting from the network effect, eBay had created the world’s largest Web-based community of consumer-to-consumer auctions using an entertaining format that allowed people to buy and sell collectibles, automobiles, jewelry, high-end and premium art items, antiques, coins and stamps, dolls and figures, pottery and glass, sports memorabilia, toys, consumer electronics products, and a host of other practical and miscellaneous items. The company had also become a business-to-business and business-to-consumer clearinghouse for Fortune 500 companies and large governmental agencies seeking to liquidate inventories and/or other assets as eBay’s core buyers changed from collectors to bargain hunters. Ebay’s business model had further evolved to include more fixed price transactions with the increasing popularity of the buy-it-now option, the acquisition of Half.com and the promotion of eBay. Ebay’s product mix also broadened to include more bigticket auctions including automobile, real estate, and boat sales. In 2003, eBay engaged in forward vertical integration through the purchase of the online payment service PayPal. At year-end 2005, eBay held more than 4 million auctions per day and had over 168 million registered users. The