eBay Inc. Managing Success in a Dynamic Online Marketplace

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In September of 1995 Silicon Valley software engineer Pierre Omidyar spent a long holiday weekend writing the computer code for an Internet-based trading system "in which buyers and sellers could establish a genuine market price" (eBay, 2005). Omidyar's website, initially called Auction Web and later renamed eBay, soon attracted a group of people who used the site to trade collectibles like PEZ candy dispensers, Beanie Babies, and antique figurines. At year-end 2005, eBay boasted 135 million registered users, including an estimated 430,000 users in the U.S. who were making all or part of their income by selling on eBay (eBay, 2005 pg. 257). In mid-2005, eBay reported that it had about 150 million registered users including some 60 million 'active' users who have bid for or listed items within the past year worldwide buying and selling goods worth more than $40 billion this year (Meg Whitman CEO eBay, 2005).

No longer just a haven for trading collectibles, today eBay.com is a place where you can find just about anything as long as it is legal. While it is still possible to find PEZ dispensers on eBay, it is also possible to find automobiles, industrial equipment, computers, books, videos, furniture, houses, haunted wedding dresses, teddy bears, and more. The power of eBay is such that in the United States, eBay is now estimated to account for about 75% of all e-commerce sales, excluding online travel and grocery sales (Meg Whitman CEO eBay, 2005). With a market capitalization of $54 billion at the end of 2004, and recent annual growth rates in excess of 80%, eBay.com is unquestionably a successful, fast-growing global giant by any measure (Hoover's, 2005). Moreover, eBay is one of the Internet's few unqualified ecommerce successes. Notwithstanding eBay's historical success, a number of analysts have expressed concern about the company's future.

This paper provides a strategic analysis eBay's organizational and marketing strategy. The paper includes an overview and analysis of eBay's history, mission, current operations, strategies, and operating environment as well as an analysis of eBay's position relative to its major competitors. The paper concludes with a summary S.W.O.T. analysis and recommendations on future adjustments to eBay's strategy.

History & Strategic Overview

Ebay was formed as a sole proprietorship by Silicon Valley software engineer Pierre Omidyar on Labor Day Weekend in 1995. Omidyar's purpose was to establish a self-regulating online marketplace. A central premise of Omidyar's online marketplace was the belief that people are essentially honest (ebay, 2005). Reporting on a recent 10-year anniversary "fireside chat" with Omidyar and eBay's first president Jeff Skoll, an eBay staffer explained that, "the site was based on a relatively simple idea: given the opportunity, people would do the right thing such as sending money to strangers to buy items online" (http://pages.ebay.com/community/chatter/2005september/insideebay.html).

Named "AuctionWeb", the sites initially function like an online flea market, with buyers and sellers trading collectibles, garage sale items, and assorted junk. Omidyar encouraged organic growth of the company which continues to this day allowing sellers to decide what items to list and shaping the direction of the company through buyer and seller demand and feedback. The business which offered a free service to both buyers and sellers was initially operated out of Omidyar's living room. The site began to make a name for itself through word of mouth and the number of registered users at the site grew rapidly in late 1995/early 1996. AuctionWeb was incorporated in California in May of 1996, with Omidyar serving as CEO and his friend Jeff Skoll as President. To cover the costs of operating the business, AuctionWeb also began to charge a fee to auction items online. That same year (1996), as part of an effort to address quality complaints and maintain the...
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