1. What source of competitive advantage does eBay have, and is that position supported by its resources and assets? 250 and over words in total

CASE 13 players such as Yahoo and Amazon posed a major threat to eBay's top management felt that the company would end up little threat from these major competitors. The company had no plans for further big acquisitions but intended to expand CASES EBAY Expanding into China* Like many U.S. Internet companies, eBay has repeatedly and sellers interact with one another. Alipay, an online tried to broaden its reach by entering new appealing sec payment system, was started a year later. By 2010 Tan tors, such as mobile commerce, and expanding into other bao assisted over 80 percent of the e-commerce Market geographical sectors, especially in Asia, where local rivals in China, with roughly 170 million registered users. Al had strong ties to users. With Asia's population exceeding the same time, eBay decided to concentrate its focus on 4 billion, more than half the world's population, and Inter- cross-border e-commerce, where Chinese consumers sell net usage in the region skyrocketing at 620 percent,' eBay to consumers overseas. It currently operates as the leader needed to develop a strategy that would successfully adapt in that segment. to Asian local markets and compete with local competitors such as Taobao, China's top auction site. eBay In 2012 Xiu.com and eBay partnered up to launch an Since its inception in 1995, eBay has enjoyed strong reve- online shopping platform, named eBay Style, that aimed nue growth and been a dominant player in the online auction to "bring the very best of eBay to Chinese consumers, industry. The company posted net income of $3.2 billion particularly in fashion." Xiu.com focuses on the sale of and revenue of $11.65 billion for 2011 (see Exhibit 1). products from overseas to Chinese customers in a way eBay's founder, Pierre Omidyar, envisioned a commu- that they are comfortable with. The company is based in nity built on commerce, sustained by trust, and inspired by Shenzhen and has roughly 800 employees. With the new opportunity. The company's mission was to enable indi- partnership in place, Chinese consumers are able to access vidual self-empowerment on a global scale" and employ the global collection of products on eBay's platform, while "business as a tool for social good. Omidyar cited "trust Xiu.com took control of managing all sales, logistics, and between strangers" as the social impact tied to eBay's customer service. Xiu.com also took responsibility for ability to remain profitable. curating and translating the inventory and implementing The company's unique business model, which united a product search function suitable for Chinese customers. buyers and sellers in an online marketplace, attracted over The new eBay Style included only new items from a 221 million registered users. eBay has enabled e-commerce collection of 5,000 brands across all categories, including at multiple levels (local, national, and international) through apparel, handbags, shoes, accessories, health and beauty an array of websites, including eBay Marketplaces, Pay- products, and other lifestyle categories. At the time of the Pal, Rent.com, Shopping.com, and its newest addition, deal's fruition, Xiu said it employed almost 1,500 people eBay Style. The company's range of products and services in China and mentioned new smartphone and tablet apps evolved from collectibles to household products, customer that were in the making. Even with this new deal, eBay services, automobiles, and the mobile industry. The variety Style faced unyielding competition, especially Alibaba's of products attracted a range of users that included students, Taobao.com, the largest Chinese online retailer. Also, Ali- small businesses, independent sellers, major corporations, pay, a payment processing company and another unit of and government agencies. the Alibaba Group, had 300 million users, three times as Despite eBay's outstanding growth performance, the many as PayPal in China. company still faced a number of challenges in both domestic Taobao, eBay Style's largest threat, consciously por and international markets. The low entry barriers in the trays itself as a Chinese company. For example, online online marketplace attracted a number of large dot-com moderators use screen names imitative of popular charac- competitors, including Amazon, Yahoo, uBid, and Over ters from Chinese kung-fu novels. Taobao also strived to implement a more interactive and user-friendly customer competitors, such as Stubhub (tickets), but established stock. Historically, the company had acquired other online service initiative. In 2003 Taobao began using an communication tool called Aliwangwang to help buyers eBay's market share and ability to sustain profitability. Still *This case was prepared by Professor Alan B. Eisner and graduate students David J. Morates and Shruti Shrestha of Pace University. This case was solely as a specialty business, an idea suggesting that it would face based on library research and was developed for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright 2013 Alan B. Eisner. and identify synergies within existing business lines. C74 CASE 13: EBAY Nol EVENNOIN Cont of not revenues eBay needed to develop an effective strategy to compete in EXHIBIT 1 Income Statements (In millons, except per-share amounts; year-end December 31) 2009 2010 2011 2012 $8,727 $9,156 $11,652 $14,072 2,480 2,565 3,460 4,216 Gross profil 6,248 6,592 8,191 9,856 Opornting expondos: Sales and marketing 1,886 1,947 2,435 2.913 Product dovelopment 803 908 1,235 1,573 Goneral and administrative 1,418 1,079 1,364 1,567 Provision for transaction and loan lossos 383 392 517 580 Amortization of acquired intangible assets 263 190 267 335 Rostructuring 38,187 21,437 (489) Total operating expenses 4,791 4,538 5,817 6,968 Income from operations 1,457 2,054 2,373 2,888 Interest and other income, not 1,422 45 1,537 196 Income before income taxes 2,879 2,098 3,910 3,084 Provision for Income taxes (490) (297 (681) (475) Net Income $2,389 $1,801 $3,229 $2.609 Net Income per share: Basic $1.85 $1.38 $2.50 $2.02 Diluted $1.83 $1.36 2.46 1.99 Weighted average shares: Basic 1,289 1,305 1.292 1,292 Diluted 1,304 1,327 1,312 1,313 eBay did however acknowledge its inability to grow Evolution of Auctions and compete in certain international markets. The com- pany created localized sites in 24 countries and established Traditional Auctions presence in Latin America through its investment in According to Greek scribes, the first known auctions Mercadolibre.com. However, eBay's numerous attempts occurred in Babylon in 500 BC. At that time, women were to penetrate the Asia Pacific market, specifically China sold on the condition of marriage, and it was considered and Japan, ended in failure, with the company pulling out illegal for daughters to be sold outside auctions. Auctions of Japan and buying out Chinese start-up Eachnet, essen- evolved during the French Revolution and throughout the tially canceling years of invested work. According to many American Civil War, where colonels auctioned goods that analysts, the company's recent interest in its South Korean were seized by armies. Although there were various types Tiwal Gmarket Inc. and joint venture with Beijing-based of auctions, they all provided a forum where sellers could Tom Online were further indications that eBay couldn't find buyers. Auctions were considered one of the purest compete in these countries. To remain successful and markets, because buyers paid what they were willing to muy the same financial performance as it had in the past, spend for an item, thereby determining the true market value of the item. Over time, auction formats evolved, and major Asian markets and mitigate the risk of existing local through technological advances and improved communi- cation they found a new home the Internet. competitors. CASE 17MIY MT Online Auctions E-Commerce The primary difference between traditional and online Although Vannevar Bush originally conceived the idea auctions is that the online auction process occurs over the of the Internet in 1945, it wasn't until the 1990s that Internet as opposed to at a specific location where both the Internet became overwhelmingly popular. Accord- buyers and sellers were present. Online auctions offer ing to Internet World Stats, in June 2012 there were over strategic advantages to both parties that are not typically 2.4 billion Internet users in over 150 countries. Exhibit 2 available in traditional auctions. Buyers can select from shows world Internet usage and population as of June 30. millions of products and engage in multiple auctions 2012, and Internet usage growth between 2000 and 2012. simultaneously. Given the massive inventory of an online As of 2012, North America was the region most pen- auction market, items are usually available in multiple auc etrated by the Internet, with approximately 78.6 percent tions, allowing buyers to compare starting bid prices and of the population already online. However, Internet usage search for better prices. Sellers are exposed to millions of growth between 2000 and 2012 was considerably less in buyers, since more buyers have access to the Internet and North America than in other regions. Internet usage growth feel comfortable making purchases online. Thus, the Inter was highest in developing regions, such as Africa, the Middle net gave buyers and sellers access to a marketplace that East, Latin America, and Asia, where penetration was low, spanned the world. Considering that close to 80 percent of the world's popula- Online auctions also offer the following strategic tion resides in these areas, it is inevitable that Internet usage advantages: growth will continue to increase dramatically in these regions. Although Asia constituted approximately 56 percent 1. No time constraints. A bid can be placed at of the world's population, its penetration rate was only any time. 27.5 percent. Compared to other regions with high usage 2. No geographic constraints. Sellers and buyers can growth rates, such as Africa and the Middle East, Asia participate from any location with Internet access. invested more in its technology infrastructure and con- 3. Network economies. The large number of bidders tained by far the most current Internet users, making it a attracts more sellers, which attracts more bidders, more attractive market. and so on. This creates a large system that has As the usage growth of the Internet increased, so did more value for both parties. Online auctions also the popularity of e-commerce. E-commerce, or electronic allow businesses to easily sell off excess inventory commerce, is the concept of conducting business transac- or discontinued items. This is done through either tions over the Internet. Like online auctions, e-commerce business-to-business (B2B) or business-to-consumer eliminates boundaries such as time and geography, (B2C) auctions. Offering products and services allowing businesses and customers to interact with one in an online auction helps small businesses build another constantly. As more users were exposed to the their brand and reputation by establishing a devoted Internet, they became comfortable with the idea of con- customer base. Finally, some businesses use the ducting transactions online. In correlation with Internet online marketplace as an inexpensive yet effective way to test-market for upcoming products. growth usage, revenue generated through e-commerce has increased dramatically since the 1990s. Usage as Percentage of World Total Usage Growth 2000-2012(%) 3,606.7 7.0 EXHIBIT 2 World Internet Usage and population Statistics, as of June 30, 2012 Percentage Population Internet Usage of Population World Regions (millions) (millions) Penetrated Africa 1,073,380,925 167.3 15.6 Asia 3,922,066,987 1076.7 27.5 Europe 820,918,446 518.5 63.2 Middle East 223,608,203 90.0 40.2 North America 348,280,154 78.6 Latin America 593,688,638 254.9 42.9 Australia 35,903,569 24.3 67.6 7,017,846,922 2405.5 34.3 44.8 841.9 21.5 393.4 3.7 273.8 11.4 2,639.9 153.3 1,310.8 10.6 Total 1.0 218.7 100.0 566.4 Source: Internet World Stats. 2012. Usage and Population Statistics, www.internetworldstats.com C76 CASE 13 : EBAY impediments. Company Background manage the In Asia, e-commerce has grown rapidly since China's Echo Bay was unavailable, so he decided to use the abbre- admission into the World Trade Organization (WTO) on December 11, 2001. Induction into the WTO allowed China to conduct business with other nations more freely San Francisco residents to the site and prompt them to buy by reducing tariffs and eliminating market and government Computer programmer Pierre Omidyar founded the online auction website in San Jose, California, on September 3, 1995. Omidyar was born in Paris, France, and moved to Maryland with his family when his father took graduated from Tufts University with a degree in computer viated version eBay, which also stood for electronic bay area." The company's name was also selected to attract and sell items. Initially, the company did not charge fees to either buy. ers or sellers, but as traffic grew rapidly, Omidyar was forced to charge buyers a listing fee to cover Internet ser- vice provider costs. When Omidyar noticed that the fees had no effect on the level of bids, he realized the potential for profitability of his business. To handle and company's day-to-day operations, Omidyar hired Jeffrey on a residency at Johns Hopkins University Medical Cen- Skoll (B.A.Sc. University of Toronto, MBA Stanford Uni- and he wrote the business plan that eBay later followed science. While living and working in the San Francisco from its emergence as a start-up to its maturity as a finan- Bay area, he met his current wife, Pamela Wesley, a man cial success. The two worked out of Skoll's living room agement consultant, who later became a driving force in and various Silicon Valley facilities until they eventually launching the auction website. The couple's vision was to settled in the company's current location in San Jose, establish an online marketplace where people could share California. the same passion and interest as Pamela had for her hobby By the middle of 1997, after less than a year under of collecting and trading Pez candy dispensers. Omidyar the name eBay, the company was hosting nearly 800,000 also envisioned an online auction format that would create auctions a day. Although the rapid expansion of eBay's a fair and open marketplace, where the market truly deter traffic caused the company to suffer a number of service mined an item's value. To ensure trust in the open forum, interruptions, the site remained successful and continued Omidyar based the site on five main values: to gain the confidence of its strong customer base. Skoll remained president until early 1998, when the company 1. People are basically good. hired Meg Whitman as president and CEO. At the time, the 2. Everyone has something to contribute. company had only 30 employees and was solely located 3. An honest, open environment can bring out the best in the United States; in a decade the number of employees in people. went up to over 15,000. In September 1998 eBay launched 4. Everyone deserves recognition and respect as a a successful public offering, making both Omidyar and Skoll instant billionaires. By the time eBay went public, unique individual. less than three years after Omidyar had created the com- 5. You should treat others the way you want to be pany, the site had more than a million registered users. The treated. company grew exponentially in the late 1990s and, based On Labor Day weekend in 1995, Omidyar launched on its 2011 performance, indicated no sign of stopping. Exhibit 3 highlights the company's recent growth perfor- Auction Web, an online trading platform. After the busi- mance by segments. ness exploded, Omidyar decided to dedicate more atten- Whitman stepped down as the president and CEO of the tion to his new enterprise and work as a consultant under the name Echo Bay Technology Group. When he tried to company on March 31, 2008, but remained on the board register a website for his company, Omidyar discovered of directors. Omidyar, the chairman of the board, said this EXHIBIT 3 eBay Growth (in millions year-end December 31) Supplemental Operating Data MS 2010 2011 gener 2012 Marketplace Segment: Gross merchandise volume* $61,819 $60,332 $67,763 Payments Segment: Net total payment volumet $91,956 $118,758 $144,937 *Total value of all successfully closed items between users on eBay Marketplaces trading platforms during the period, regardless of whether the buyer and seller actually consummated the transaction. Total dollar volume of payments, net of payment reversals, successfully completed through eBay payments network or on Bill Me Later accounts during the period, excluding the payment gateway business. Source: eBay Inc., www.ebayinc.com/ CASE 13 :: EBAY C77 . . market space. Before fixed pricing, selling prices were solely determined by the highest auction bid, and this took days or weeks, depending on the length of the auction the new CEO, John Donahoe, was a good choice to lead eBay's different trading platforms also offered disting services and target-specific market niches, which allowed auction site and helped it become an integral part of our lives." ' Both Omidyar and Whitman were confident that eBay. Donahoe joined the company in 2005 as president of eBay's largest division, Marketplaces, and within three eBay to broaden its customer base. The platforms included years managed to double the revenues and profits for this PayPal: Founded in 1998 and acquired by eBay in business unit. Before joining eBay, Donahoe served as the 2002, PayPal enabled individuals to securely send CEO of Bain & Company, an international consulting firm payments quickly and easily online. PayPal was based in Boston. 10 "I'm extremely confident in John's considered the global leader in online payments with skills and the abilities of John's veteran management team," tens of millions of registered users. In 2011 Paypal's Meg Whitman commented on the transition. Whitman's confidence appears to have been well- president, Scott Thompson, expected revenue to double to $6 billion to $7 billion by 2013. He also founded. In 2012, after 4 years on the job as CEO, Donahoe predicted that 75 percent to 80 percent of eBay had helped eBay make impressive progress. Although eBay's transactions will be done through PayPal by 2013, up financial outlook was not dreadful when Donahoe took from 69 percent in 2010.14 over in March 2008, there was a growing perception that Rent.com: Acquired by eBay in February 2005, Rent.com its growth was beginning to decline and that its run as the was the most visited online apartment listing service leader of the e-commerce industry was behind it, as Ama- zon began to make strides toward becoming the next best in the United States, with more than 20,000 thing. During the global financial crisis, eBay's stock had properties listed. fallen to almost $10 per share in February 2009, far below Online classifieds: By 2009, eBay had the world- the optimistic price of $58 that it reached in 2004. Since leading portfolio of online classifieds sites, including 2009, however, the stock has been on a stable uptrend, Kijiji, Intoko, Gumtree, LOQUo.com, Marktplaats.nl more than doubling during a 12-month period from 2011 and mobile.de. CEO John Donahoe said, We are to 2012 and closing at almost $49 in November 2012. the global leader in classifieds, with top positions in "What John Donahoe has accomplished over the past few Canada, Australia, Germany, Japan and the United years is one of the most remarkable feats in the valley's Kingdom, and sites in more than 1,000 cities across history," said Gil Luria, an analyst at Wedbush Securities. So what has the new CEO done to spurt this turnaround? Shopping.com: With thousands of merchants and Luria noted that eBay began investing more in technology millions of products and reviews, Shopping.com and was willing to take risks regarding altering the look and feel of the platform's shopping experience. T2 empowered consumers to make informed choices, which drove value for merchants. eBay Now was also implemented to offer same-day Stubhub.com: StubHub was an online marketplace delivery of products from online and offline merchants in San Francisco. ThinkEquity analyst Ron Josey wrote, We for selling and purchasing tickets for sports events, concerts, and other live entertainment events. view eBay Now as one of the most innovative products eBay has launched in some time." The new service func- eBay Express: eBay Express behaved like a standard tions as a mobile app, one representation of Donahoe's Internet shopping site but gave sellers access to over vision for eBay to begin embracing the increasing trend of 200 million buyers worldwide. Sellers could design mobile and offline shopping. "We've gone from competing product categories within minutes, and buyers could in a $500 billion e-commerce market to now a $10 trillion purchase from multiple sellers by using a single retail market, Donahoe recently told analysts. 13 shopping cart. eBay Motors: This specialty site was considered eBay Platforms the largest marketplace for automobile buyers eBay's overall strategy comprised three primary components: and sellers. Buyers could purchase anything from products, sense of community, and aggressive expansion. All automobile parts to new or antique vehicles. three components evolved around the various geographic Skype: Acquire Bay October 2005, and specialty platforms the company introduced. Skype was the world's fastest-growing online communication solution, allowing free video and Product Categories audio communication between users of Skype eBay had an array of product categories and trading plat- software. By November 2009, Skype connected more forms that offered a range of pricing formats, such as fixed than 480 million registered users. Sale of Skype: eBay's acquisition of Skype was 20 countries."15 . fixed-price format allowed eBay to compete directly with expected to enhance the customer experience by improving . communication between buyers and sellers. When it acquired international markets that utilized the Internet. With Skype, eBay said it hoped the service would support its auctions and its PayPal payment service by letting buyers aimed to increase market share and revenue through acqui- and sellers discuss transactions. But eBay users were not so chatty. In November 2009 eBay sold Skype to a group led by Silver Lake Partners, a private equity firm in Silicon Valley. The deal was made at $2.75 billion, with eBay retain- ing a 30 percent stake. Mr. Donahoe said eBay did not regret that an open forum where users could post opinions and feed- community the site required. Buyers and sellers were encour- vidual feedback was recorded and amended to a user pro- model.21 The company's success relied primarily on tion before engaging in a transaction. The company believed each buyer and seller. eBay users could view this informa- large number of buyers and sellers. As eBay's reputation that the feedback forum was critical for creating initial user acceptance for purchasing and selling over the Internet and that it contributed more than anything else to eBay's success. To compete effectively and create a global trading plat- form, the company continued to develop in U.S. and intense competition in the online auction industry, eBay sitions and partnerships in related and unrelated busi- nesses. For example: In June 2000 eBay acquired Half.com for $318 million. having bought Skype when company executives believed In August 2001 eBay acquired Mercado Libre, Lokau, eBay was in a mortal struggle with Google, which was also and iBazar, Latin American auction sites. pursuing the service. He said the spinoff would allow eBay On August 13, 2004, eBay took a 25 percent stake in to focus on its core e-commerce and online payment busi Craigslist, an online network of urban communities. nesses and avoid extra distractions. We don't regret having In September 2005 eBay invested $ 2 million in the done this at all. We compete in a dynamic market, and you have to move quickly and take risks, Mr. Donahoe said. Meetup social networking site. "When we bought Skype we thought it had synergies with In August 2006 eBay announced international our other two businesses, and it turns out it did not. But it cooperation with Google. also turned out that it's a great stand-alone business. 17 In January 2007 eBay acquired online ticket In May 2011, Microsoft agreed to buy Skype for marketplace Stubhub for $310 million. $8.5 billion from Silver Lake. eBay said it will earn more In June 2010 eBay acquired RedLaser, a mobile than a 50 percent return from the firm's initial investment application that would let customers scan bar codes of $2.6 billion in Skype six years earlier. With this sale, we to list items faster on its online auction site and to have realized a total return of $1.4 billion on our original compare prices. 18 investment in Skype," said John Pluhowski, a spokesman In December 2010 eBay acquired Milo, a leading for eBay. Considering that eBay had bought Skype in a local shopping engine that provides consumers heavily criticized deal in 2005 and that it was considered access to accurate, real-time, local store inventory a failed acquisition, the latest Microsoft agreement turned and pricing, giving them even more choices and out to be good news for eBay, making eBay one of the big flexibility when shopping online.' winners in the Microsoft and Skype deal. In December 2010 eBay acquired Critical Path Software Inc., a developer of smartphone applications, to accelerate its lead in mobile The underlying key to all eBay sites and trading platforms commerce. 26 was creating trust between sellers and buyers. The company created community values, and this was why eBay users Company Business Model were willing to send money to strangers across the country. eBay's business model was based on a person-to-person The Feedback Forum was created in February 1996 and marketplace on the Internet, where sellers conveniently encouraged users to post comments about trading partners. listed items for sale and interested buyers bid on these Originally, Omidyar handled disputes between buyers and items. The objective was to create a forum that allowed sellers via email by putting the disputing parties in touch with buyers and sellers to come together in an efficient and each other to resolve the issue themselves. He soon realized effective manner. The business model overcame the inefficiencies of traditional fragmented marketplaces, back about one another would create the trust and sense of which tended to offer a limited variety of goods. According to former CEO Meg Whitman, the company ed to post comments (positive, negative, or neutral) about started with commerce and what grew out of that was a each other at the completion of each transaction. The indi- community, essentially creating a community-commerce grew, so did the number of buyers and sellers, keeping the company in line with Omidyar's original vision. However, as new competitors entered the online auction business and the popularity of the Internet increased, eBay tweaked its business model to accommodate changes in the fast-paced environment. The company was aggressively expanding globally and looking for new products and services to offer to Sense of Community Aggressive Expansion through electronic payments made through the company website, primarily via PayPal. The newest source of rev. enue, until November 2009, was communications (Skype). customers. It was also looking closely at the kind of mer- chants who sold on eBay. In the beginning, eBay focused on a consumer-to-consumer business model, but since which produced $620 million of the company's revenue for some of the individuals became small dealers, the model changed to a mix of consumer-to-consumer and business- that year. Although free, Skype generated revenue through its premium offerings, such as making and receiving calls to-consumer. The sellers wanted to maintain their business to and from landline and mobile phones, as well as voice on eBay, since it was their most profitable distribution channel. eBay wanted new ways to generate revenue as a mail, ring tones, and call forwarding. Exhibit 4 shows the result of more small dealers and businesses selling their company's recent revenue performance by type. In addition to the primary revenue sources, there were products through the company's website. eBay generated revenue through three main channels: specific elements of eBay's business model that made marketplaces, payments, and, until 2009, communications. the company a success. eBay's dominance of the online Marketplaces, which generated revenue by charging sell- auction market and the large number of buyers, sell ers a fee for every item they sold, accounted for over 65 ers, and listed items were primary reasons for eBay's percent of the company's revenue. As of December 2011 tremendous growth. The trust and safety programs. marketplace revenue was approximately $6.6 billion of such as the Feedback Forum, continued to attract and the company's $11.65 billion total revenue. Another $4.4 retain new and current eBay users. The cost-effective billion of the company's revenue came from fees charged and convenient trading, coupled with the strong sense of Year Ended December 31, 2011 Year Ended December 31, 2012 EXHIBIT 4 Net Revenues by Type (in millions, except percentage changes) Year Ended December 31, 2010 Net Revenues by Type: Net transaction revenues Marketplaces 4,800 Payments 3,261 GSI 5,431 6,078 4,123 5,146 460 850 Total net transaction revenues 8,061 10,014 12,074 Marketing services and other revenues Marketplaces Payments 921 1,211 1,320 174 289 428 GSI 130 233 Total marketing services and other revenues 1,095 1,638 2,020 Total net revenues $9,156 $11,652 $14,072 Net Revenues by Segment: Marketplaces Payments 6,642 7,398 $5,721 3,436 4,412 5,574 GSI 598 Total net revenues $9,157 1,730 $14,072 $11,652 Net Revenues by Geography: U.S. $4,214 5,484 6,778 International 4,942 6,168 7,294 Total net revenues $9,156 $11,652 $14,072 urce: eBay Inc., www.ebayinc.com/. D CASE 13: EBAY . community, added further value to the company's busi- ness model. However, as the company continued to grow and new trends evolved, eBay had to continue to adjust its As competition intensified in the online auction industry, eBay expanded its international presence in an effort to create an online global marketplace. Gradually, eBay company that later became eBay Germany. Alando trading company. Germany became eBay's second- largest market, accounting for 21 percent of the Acquired Dutch competitor Marktplaats.nl, which had 80 percent of the Netherlands market share. Acquired Sweden's leading online auction company, model to remain competitive. Tradera.com, for $48 million. International Expansion Acquired Denmark's leading online classifieds businesses, Den Bla Avis and BilBasen, for $390 million 23 For the most part, eBay was successful in expanding in Jocalized sites in the following countries: Europe and Latin America, where it was able to quickly Asia Pacific: Australia, China, Hong Kong, India, adapt to local needs through its partners. The company Malaysia, New Zealand, Philippines, Singapore, was also successful in countries it expanded to from the South Korea, and Taiwan. ground up, such as Canada and the United Kingdom. In Europe: Austria, Belgium, Denmark, France, 2007 the United Kingdom accounted for 15.5 percent of Germany, Ireland, Italy, Netherlands, Poland, Spain, eBay's total listings. By engaging the local community in Sweden, Switzerland, and the United Kingdom. these countries, eBay customized its sites to meet specific local needs while providing access to the online global North America: Canada and the United States. community. In many of the international websites, eBay provided eBay was considered the leader in each of its markets local language and currency options to gain popularity gled repeatedly to gain market share. In 2002 eBay was with the exception of Japan and China, in which it strug- and ensure the sense-of-community feeling. In most cases, eBay expanded its business by either acquiring or form- forced to pull out of Japan due to rising costs and intense ing a partnership with a local company, as it recently has competition by rival Yahoo Japan. eBay also faced fierce done with Xiu.com in its re-entry into the Chinese market. competition in Korea, where Gmarket, another investment of Yahoo, dominated the market. This strategy helped eBay better understand local cultures and ensure that the company was meeting specific local Despite its lack of success in local Asian markets, eBay needs. This approach proved successful with the compa- continued its attempts to expand into the region, recogniz- ny's equity investment in Mercado Libre.com, which tar- ing the tremendous growth potential that was available. In June 2006 eBay formed a joint venture with PChome geted Argentina, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, Mexico, Panama, Peru, Uru- Online in Taiwan. PChome Online was an Internet service provider in Taiwan, with more than 10 million members.24 guay, and Venezuela. At the end of 2006, Mercado Libre. The company offered services such as Internet portal, com reported 18 million registered users who performed 15.8 million transactions worth $1.1 billion.22 Other notable e-commerce platform, and telecommunications. The move was expected to provide eBay with the local e-commerce international growth acquisitions are listed below. expertise it needed to launch a new trading website that Asia Pacific catered to the needs of Taiwan's Internet users. In 2006 eBay emphasized its commitment to the Chi- Acquired China-based Eachnet for approximately nese e-commerce market by announcing a new joint ven- $150 million. eBay's failure to manage the ture with Beijing-based Tom Online Inc. Tom Online, company resulted in its recent partnership with which primarily sold cell phone add-on services, such as communications company Tom Online. ring tones and avatars, put in $20 million for a 51 percent Acquired all outstanding shares of India's Baazee share and management control of eBay's online China site, Eachnet 25 In 2002 eBay had purchased a 30 percent stake .com, which later became eBay India. in Eachnet and within a year bought out local investors. Acquired Korean rival Internet Auction Co. by Central management control of Eachnet was maintained in purchasing nearly 3 million shares. Acquisition has eBay's San Jose, California, location. Many believed the not proved successful due to intense competition move to partner with Tom Online was a result of eBay's from top Korean auction site market. failure to adapt to local needs and successfully compete with China's online auction market leader, Taobao, which controlled approximately 70 percent of the market. Jack Acquired Alando auction house for $43 million, a Ma, the chief executive of Alibaba.com, Taobao's parent company, believed eBay's failure in China was due to an inability to build a community effect in the country, which, was previously considered Germany's leading online according to Ma, begins with customer satisfaction. Ma also felt that since eBay had to adhere to a global platform, meeting specific local needs was difficult because changes Europe . company's total listings. the export hub for the world, now China is open for with China UnionPay removes an important friction pour that exists across borders, and we are thrilled to eliminar the payments barrier so merchants can welcome milline ket offered fixed prices and provided an option to negotiate Despite not having a huge presence in the online 2 tion industry, Amazon was still considered a fierce online ers to conduct deals instantly instead of waiting until bids global competitor. Amazon started as Earth's biggest and store and rapidly evolved to selling everything, including Gmarket to dominate the Korean online auction industry. beauty aids, groceries, and so on. Still, books, CDs, and toys, electronics, home furnishings, apparel, health sal Gmarket frequently introduced new marketing initiatives at a global level had to be approved in the United States, to provide sellers with various options to attract new cas which further limited the company's ability to produce a tomers. Gmarket grew financially powerful in 2006 when website tailored to the Chinese market.26 it launched its IPO, and Yahoo purchased a 9 percent stake In April 2009 eBay secured agreements to buy a 67 per- cent stake of South Korea's Gmarket in a deal estimated in the company. In 2009 eBay decided to secure an interest in its rival and to be worth $1.2 billon. The move was part of Donahoe's effort to increase revenue in coming years. It was expected was granted approval to purchase a combined 67 percem that Gmarket would help eBay's push into Asia. stake in Gmarket from Interpark Corp. and its chairman In May 2010 eBay announced that it intended to work with Competitors Gmarket's founder to expand Gmarket's presence in Japan and Singapore. Lorie Norrington, president of eBay Me As eBay's product offerings and pricing formats evolved, ketplaces commented, "This joint venture is a sign of our so did its range of competitors. Originally, the company continued commitment to help grow and lead ecommerce faced competition from alternative auctions or other venues across Asia by offering more opportunities for sellers and for collectors, such as flea markets and garage sales. How- ever, as the company grew and introduced fixed pricing, extraordinary buying experiences for consumers.* the range of competitors included large companies like Walmart and Kmart that also had retail websites. eBay's Taobao product platforms, like eBay Motors, put the company in In 2005 Yahoo entered a strategic partnership with Ali- direct competition with auto dealers and other online auto baba.com, Taobao's parent company, which created sites, such as Autobytes. Still, eBay faced the harshest instant threat in the Chinese market. The move created competition from major online companies, including one of the largest Internet companies in China, one with a Yahoo and Amazon, which also had online auctions that leading position in business-to-business e-commerce.com rivaled eBay's. sumer e-commerce, and online payments. Like Gmarket. Taobao offered buyers and sellers quick and convenient Yahoo! ways to conduct business. Its instant messaging and fixed eBay's larger online competitor was Yahoo, which also had price arrangements allowed transactions to be conducted a strong global presence, particularly in Asian markets. quickly. In 2006 the company partnered with Intel to offer Yahoo originally started as a search engine and quickly customers a wireless platform. This further improved com- evolved to include additional products and services, such munication and convenience when customers were con as Yahoo! Mail, Yahoo! Maps, and Yahoo! Messenger. The ducting transactions. In 2011 Taobao was eBay's largest company also offered e-commerce services through Yahoo! competitor in China, controlling over 80 percent of the Shopping, Yahoo! Autos, Yahoo! Auctions, and Yahoo! Chinese online auction market. Travel. Like eBay, Yahoo's e-commerce sites allowed In early 2010 eBay announced the partnership of users to obtain relevant information and make transactions Paypal with China UnionPay, a local intrabank card sys and purchases online. However, Yahoo's business model tem operator, which would make it accessible for custom- primarily focused on generating revenue through search ers to make online purchases from overseas. This move advertising. In the United States, in response to potential was made to challenge Alipay, a unit of Alibaba Group, threats from web giant Google, Yahoo and eBay formed an which controlled about 50 percent of the market. Thus alliance in which Yahoo utilized eBay's payment system, partnership would allow international retailers to selline PayPal, and eBay gained additional advertising through a large base of Chinese customers, who, combined, belki Yahoo searches. Still, Yahoo posed a major competitive 2.1 billon China UnionPay cards. 324After years of berice threat in foreign markets, particularly the Asia Pacific area, through its partnerships with Gmarket and Taobao. business as an import e-commerce market," said Scene Thompson, president of PayPal. "PayPal's partnership Gmarket Yahoo's stake in Korean auction site Gmarket proved successful, with more than 17.2 million unique visitors. Founded in 2000, Gmarket was a Korean online auction of new Chinese customers to their sites."33 and shopping-mall website that generated its revenue by charging a fee based on selling price.28 Like Taobao, Gmar- Amazon prices with sellers on an exclusive basis. This allowed buy- were completed. Gmarket also offered cheaper listings. These options, along with constant new features, allowed C82 CASE 13 :: EBAY Bay's strategy of forming a partnership with former rival The Future of eBay DVDs accounted for more than 65 percent of the firm's Alibaba Group as the best way to generate sales from sales. Although Amazon had a large international pres- ence, the company's linkage to brick-and-mortar shops in partners who were looking to expand international sales. It the United States made it a greater threat locally than in foreign markets. Amazon's international local sites were in Canada, the United Kingdom, Germany, Japan, France, and market in order to proceed in the local market China. Despite its large online presence, Amazon scaled back its online auction business, cutting staff and shutting down Livebid, as part of an overall corporate restructuring. he Asia Pacific region had more than 50 percent of the World's population and was experiencing some of the largest Alibaba Group and other Chinese e-commerce compa- ies, but the company had refocused its energies on export- 20. eBay Inc. 2010. eBay acquires industry leading mobile application niented merchants in China who wanted to reach overseas uyers on its international websites. 34 Experts viewed China. All hopes were on Paypal's acceptance by Chinese was critical for eBay to partner with local Chinese compa nies rather than going alone in the world's biggest Internet ENDNOTES 1. Internet World Stats. 2010. Internet Usage Statistics, www internetworldstats.com/stars.htm 2. Wauters, Robin. 2012, eBay Style: Ecommerce giant inks deal with eBay had a number of opportunities in which it had Chinese fashion site Xiu.com, The Next Web, http://thenextweb.com already taken action. By 2011, eBay had made a number of asia/2012/11/17/ebay-style-ccommerce-giant-inks-deal-with-chinese- fashion-site-giu-com. strategic acquisitions that included Rent.com, international classified websites, Stubhub.com, and Shopping.com Galante, J. 2010. PayPal teams with China UnionPay to challenge Alipay. Bloomberg News, March 17, www.bloomberg.com/appshews These acquisitions added to and complemented eBay's ?pid=newsarchive&sid=audisvaUINQ product offerings and further diversified the company's 4. Mark Greeven, Shengyun Yang. Tao Yue, Eric van Hect and Barbara targeted market. With increased competition from Google Krug. March 12, 2012. How Taobao bested Ebay in China. Financial and other major online companies, eBay had to continue Times, http://www.ft.com/intl/cms/0/52670084-6c2c-1 lel-boor- 00144feab49a.html#axzz2E2E007wp. 10 diversify and provide depth in its product offerings to 5. Mark Greeven, Shengyun Yang. Tao Yue. Eric van Heck and Barbara remain competitive. Creating options and targeting distinct Krug, March 12, 2012. How Taobao bested Ebay in China. Financial market niches would enable eBay to distinguish itself from Times, http://www.ft.com/intl/cms/s/652670084-6c2c-llel-600r- competitors. This was particularly important because, as 00144feab49a.html#axzz2E2E007wP.. e-commerce and Internet usage rates continued to grow, 6. Doyle, R. A. 2002. The history of auctions. Auctioneer, November I. www.absoluteauctionrealny.com/history_detail.php?id=5094. so would the market opportunity for eBay. Because of its 7. Internet Moms. 2007. Pierre Omidyar--the man behind eBay. market-leading brand, eBay was in a unique position to April capture a significant share of the market at an early stage. 8. Academy of Achievement. 2005. Biography-Pierre Omidyar. eBay could also expand its existing products and services, November 9, www.achievement.org. such as PayPal. The product was relatively new and had the 9. eBay Inc. 2008. Meg Whitman to step down. potential to grow and attract new customers, especially in inter- 10. eBay corporate website, ebevinc.com 11. eBay Inc. 2008. Meg Whitman to step down. national markets. Expanding PayPal into international markets 12. O'Brien, Chris November, 42012. Is eBay's John Donahoe would enable eBay to provide a simple way to conduct trans the best CEO in Silicon Valley?. Mercurynews.com, http:// actions across market borders. Considering the growth poten www.mercurynews.com/chris-obrien/ci_21908264 tial in developing markets, such as those in Africa, Asia, and obrien-is-ebays-john-donahoe-best-ceo-silicon the Middle East, expanding PayPal would attract many new 13. O'Brien, Chris. November, 4 2012. Is eBay's John Donaboe the best CEO in Silicon Valley? Mercurynews.com, http:// customers, thus increasing eBay's revenue base. In line with www.mercurynews.com/chris-obrien/ci_21908261/ e-commerce growth, as more customers felt comfortable with obrien-is-ebays-john-donaboe-best-ceo-silicon conducting transactions online, PayPal had the potential to be 14. Galante, J. 2011. PayPal's revenue will double by 2013, Thompson the preferred form of payment over the Intemet. says. Bloomberg News, February 10, www.businessweek.com However, for eBay to capitalize on these opportunities, news/2011-02-10/paypal-s-revenue-will-double-by-2013-thompson- the says.html. company would have to overcome the challenges of 15. eBay Inc. 2008. eBay Inc. buys leading payments and classifieds expanding into large foreign markets such as China and businesses, Streamlines existing organization to improve Japan. With almost 79 percent of the North American growth. Press release, October 6, www.ebayinc.com/content/ Population using the Internet and only a 27.5 percent usage press_release/20081006005605. Tale in the Asia Pacific area, eBay had a tremendous oppor 16. eBay Inc. 2009. Annual repon. unity to expand and gain new customers. Considering that 17. Stone, B. 2009. In a sale, Skype wins a chance to prosper. New York Times, September 1, www.nytimes.com/2009/09/02/technology companies02ebay.html?_=. 18. MacMillan, D. 2010. EBay buys bar-code app. Bloomberg this market was critical for eBay to expand. haline usage growth percentages in the world, tapping into Businessweek, June 23. www.businessweek.com/technology/contend jun 2010/1c20100623_901 174.htm eBay's operations in China remained small compared 19. eBay Inc. 2010. eBay acquires Milo, a leading local shopping engine. Press release, December 2, www.ebayinc.com/content press release/2010/202006358 developer. Press release, December 15, www.ebayinc.com/contenu press_release/2010/215006520. CASE 13 CASE 13 players such as Yahoo and Amazon posed a major threat to eBay's top management felt that the company would end up little threat from these major competitors. The company had no plans for further big acquisitions but intended to expand CASES EBAY Expanding into China* Like many U.S. Internet companies, eBay has repeatedly and sellers interact with one another. Alipay, an online tried to broaden its reach by entering new appealing sec payment system, was started a year later. By 2010 Tan tors, such as mobile commerce, and expanding into other bao assisted over 80 percent of the e-commerce Market geographical sectors, especially in Asia, where local rivals in China, with roughly 170 million registered users. Al had strong ties to users. With Asia's population exceeding the same time, eBay decided to concentrate its focus on 4 billion, more than half the world's population, and Inter- cross-border e-commerce, where Chinese consumers sell net usage in the region skyrocketing at 620 percent,' eBay to consumers overseas. It currently operates as the leader needed to develop a strategy that would successfully adapt in that segment. to Asian local markets and compete with local competitors such as Taobao, China's top auction site. eBay In 2012 Xiu.com and eBay partnered up to launch an Since its inception in 1995, eBay has enjoyed strong reve- online shopping platform, named eBay Style, that aimed nue growth and been a dominant player in the online auction to "bring the very best of eBay to Chinese consumers, industry. The company posted net income of $3.2 billion particularly in fashion." Xiu.com focuses on the sale of and revenue of $11.65 billion for 2011 (see Exhibit 1). products from overseas to Chinese customers in a way eBay's founder, Pierre Omidyar, envisioned a commu- that they are comfortable with. The company is based in nity built on commerce, sustained by trust, and inspired by Shenzhen and has roughly 800 employees. With the new opportunity. The company's mission was to enable indi- partnership in place, Chinese consumers are able to access vidual self-empowerment on a global scale" and employ the global collection of products on eBay's platform, while "business as a tool for social good. Omidyar cited "trust Xiu.com took control of managing all sales, logistics, and between strangers" as the social impact tied to eBay's customer service. Xiu.com also took responsibility for ability to remain profitable. curating and translating the inventory and implementing The company's unique business model, which united a product search function suitable for Chinese customers. buyers and sellers in an online marketplace, attracted over The new eBay Style included only new items from a 221 million registered users. eBay has enabled e-commerce collection of 5,000 brands across all categories, including at multiple levels (local, national, and international) through apparel, handbags, shoes, accessories, health and beauty an array of websites, including eBay Marketplaces, Pay- products, and other lifestyle categories. At the time of the Pal, Rent.com, Shopping.com, and its newest addition, deal's fruition, Xiu said it employed almost 1,500 people eBay Style. The company's range of products and services in China and mentioned new smartphone and tablet apps evolved from collectibles to household products, customer that were in the making. Even with this new deal, eBay services, automobiles, and the mobile industry. The variety Style faced unyielding competition, especially Alibaba's of products attracted a range of users that included students, Taobao.com, the largest Chinese online retailer. Also, Ali- small businesses, independent sellers, major corporations, pay, a payment processing company and another unit of and government agencies. the Alibaba Group, had 300 million users, three times as Despite eBay's outstanding growth performance, the many as PayPal in China. company still faced a number of challenges in both domestic Taobao, eBay Style's largest threat, consciously por and international markets. The low entry barriers in the trays itself as a Chinese company. For example, online online marketplace attracted a number of large dot-com moderators use screen names imitative of popular charac- competitors, including Amazon, Yahoo, uBid, and Over ters from Chinese kung-fu novels. Taobao also strived to implement a more interactive and user-friendly customer competitors, such as Stubhub (tickets), but established stock. Historically, the company had acquired other online service initiative. In 2003 Taobao began using an communication tool called Aliwangwang to help buyers eBay's market share and ability to sustain profitability. Still *This case was prepared by Professor Alan B. Eisner and graduate students David J. Morates and Shruti Shrestha of Pace University. This case was solely as a specialty business, an idea suggesting that it would face based on library research and was developed for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright 2013 Alan B. Eisner. and identify synergies within existing business lines. C74 CASE 13: EBAY Nol EVENNOIN Cont of not revenues eBay needed to develop an effective strategy to compete in EXHIBIT 1 Income Statements (In millons, except per-share amounts; year-end December 31) 2009 2010 2011 2012 $8,727 $9,156 $11,652 $14,072 2,480 2,565 3,460 4,216 Gross profil 6,248 6,592 8,191 9,856 Opornting expondos: Sales and marketing 1,886 1,947 2,435 2.913 Product dovelopment 803 908 1,235 1,573 Goneral and administrative 1,418 1,079 1,364 1,567 Provision for transaction and loan lossos 383 392 517 580 Amortization of acquired intangible assets 263 190 267 335 Rostructuring 38,187 21,437 (489) Total operating expenses 4,791 4,538 5,817 6,968 Income from operations 1,457 2,054 2,373 2,888 Interest and other income, not 1,422 45 1,537 196 Income before income taxes 2,879 2,098 3,910 3,084 Provision for Income taxes (490) (297 (681) (475) Net Income $2,389 $1,801 $3,229 $2.609 Net Income per share: Basic $1.85 $1.38 $2.50 $2.02 Diluted $1.83 $1.36 2.46 1.99 Weighted average shares: Basic 1,289 1,305 1.292 1,292 Diluted 1,304 1,327 1,312 1,313 eBay did however acknowledge its inability to grow Evolution of Auctions and compete in certain international markets. The com- pany created localized sites in 24 countries and established Traditional Auctions presence in Latin America through its investment in According to Greek scribes, the first known auctions Mercadolibre.com. However, eBay's numerous attempts occurred in Babylon in 500 BC. At that time, women were to penetrate the Asia Pacific market, specifically China sold on the condition of marriage, and it was considered and Japan, ended in failure, with the company pulling out illegal for daughters to be sold outside auctions. Auctions of Japan and buying out Chinese start-up Eachnet, essen- evolved during the French Revolution and throughout the tially canceling years of invested work. According to many American Civil War, where colonels auctioned goods that analysts, the company's recent interest in its South Korean were seized by armies. Although there were various types Tiwal Gmarket Inc. and joint venture with Beijing-based of auctions, they all provided a forum where sellers could Tom Online were further indications that eBay couldn't find buyers. Auctions were considered one of the purest compete in these countries. To remain successful and markets, because buyers paid what they were willing to muy the same financial performance as it had in the past, spend for an item, thereby determining the true market value of the item. Over time, auction formats evolved, and major Asian markets and mitigate the risk of existing local through technological advances and improved communi- cation they found a new home the Internet. competitors. CASE 17MIY MT Online Auctions E-Commerce The primary difference between traditional and online Although Vannevar Bush originally conceived the idea auctions is that the online auction process occurs over the of the Internet in 1945, it wasn't until the 1990s that Internet as opposed to at a specific location where both the Internet became overwhelmingly popular. Accord- buyers and sellers were present. Online auctions offer ing to Internet World Stats, in June 2012 there were over strategic advantages to both parties that are not typically 2.4 billion Internet users in over 150 countries. Exhibit 2 available in traditional auctions. Buyers can select from shows world Internet usage and population as of June 30. millions of products and engage in multiple auctions 2012, and Internet usage growth between 2000 and 2012. simultaneously. Given the massive inventory of an online As of 2012, North America was the region most pen- auction market, items are usually available in multiple auc etrated by the Internet, with approximately 78.6 percent tions, allowing buyers to compare starting bid prices and of the population already online. However, Internet usage search for better prices. Sellers are exposed to millions of growth between 2000 and 2012 was considerably less in buyers, since more buyers have access to the Internet and North America than in other regions. Internet usage growth feel comfortable making purchases online. Thus, the Inter was highest in developing regions, such as Africa, the Middle net gave buyers and sellers access to a marketplace that East, Latin America, and Asia, where penetration was low, spanned the world. Considering that close to 80 percent of the world's popula- Online auctions also offer the following strategic tion resides in these areas, it is inevitable that Internet usage advantages: growth will continue to increase dramatically in these regions. Although Asia constituted approximately 56 percent 1. No time constraints. A bid can be placed at of the world's population, its penetration rate was only any time. 27.5 percent. Compared to other regions with high usage 2. No geographic constraints. Sellers and buyers can growth rates, such as Africa and the Middle East, Asia participate from any location with Internet access. invested more in its technology infrastructure and con- 3. Network economies. The large number of bidders tained by far the most current Internet users, making it a attracts more sellers, which attracts more bidders, more attractive market. and so on. This creates a large system that has As the usage growth of the Internet increased, so did more value for both parties. Online auctions also the popularity of e-commerce. E-commerce, or electronic allow businesses to easily sell off excess inventory commerce, is the concept of conducting business transac- or discontinued items. This is done through either tions over the Internet. Like online auctions, e-commerce business-to-business (B2B) or business-to-consumer eliminates boundaries such as time and geography, (B2C) auctions. Offering products and services allowing businesses and customers to interact with one in an online auction helps small businesses build another constantly. As more users were exposed to the their brand and reputation by establishing a devoted Internet, they became comfortable with the idea of con- customer base. Finally, some businesses use the ducting transactions online. In correlation with Internet online marketplace as an inexpensive yet effective way to test-market for upcoming products. growth usage, revenue generated through e-commerce has increased dramatically since the 1990s. Usage as Percentage of World Total Usage Growth 2000-2012(%) 3,606.7 7.0 EXHIBIT 2 World Internet Usage and population Statistics, as of June 30, 2012 Percentage Population Internet Usage of Population World Regions (millions) (millions) Penetrated Africa 1,073,380,925 167.3 15.6 Asia 3,922,066,987 1076.7 27.5 Europe 820,918,446 518.5 63.2 Middle East 223,608,203 90.0 40.2 North America 348,280,154 78.6 Latin America 593,688,638 254.9 42.9 Australia 35,903,569 24.3 67.6 7,017,846,922 2405.5 34.3 44.8 841.9 21.5 393.4 3.7 273.8 11.4 2,639.9 153.3 1,310.8 10.6 Total 1.0 218.7 100.0 566.4 Source: Internet World Stats. 2012. Usage and Population Statistics, www.internetworldstats.com C76 CASE 13 : EBAY impediments. Company Background manage the In Asia, e-commerce has grown rapidly since China's Echo Bay was unavailable, so he decided to use the abbre- admission into the World Trade Organization (WTO) on December 11, 2001. Induction into the WTO allowed China to conduct business with other nations more freely San Francisco residents to the site and prompt them to buy by reducing tariffs and eliminating market and government Computer programmer Pierre Omidyar founded the online auction website in San Jose, California, on September 3, 1995. Omidyar was born in Paris, France, and moved to Maryland with his family when his father took graduated from Tufts University with a degree in computer viated version eBay, which also stood for electronic bay area." The company's name was also selected to attract and sell items. Initially, the company did not charge fees to either buy. ers or sellers, but as traffic grew rapidly, Omidyar was forced to charge buyers a listing fee to cover Internet ser- vice provider costs. When Omidyar noticed that the fees had no effect on the level of bids, he realized the potential for profitability of his business. To handle and company's day-to-day operations, Omidyar hired Jeffrey on a residency at Johns Hopkins University Medical Cen- Skoll (B.A.Sc. University of Toronto, MBA Stanford Uni- and he wrote the business plan that eBay later followed science. While living and working in the San Francisco from its emergence as a start-up to its maturity as a finan- Bay area, he met his current wife, Pamela Wesley, a man cial success. The two worked out of Skoll's living room agement consultant, who later became a driving force in and various Silicon Valley facilities until they eventually launching the auction website. The couple's vision was to settled in the company's current location in San Jose, establish an online marketplace where people could share California. the same passion and interest as Pamela had for her hobby By the middle of 1997, after less than a year under of collecting and trading Pez candy dispensers. Omidyar the name eBay, the company was hosting nearly 800,000 also envisioned an online auction format that would create auctions a day. Although the rapid expansion of eBay's a fair and open marketplace, where the market truly deter traffic caused the company to suffer a number of service mined an item's value. To ensure trust in the open forum, interruptions, the site remained successful and continued Omidyar based the site on five main values: to gain the confidence of its strong customer base. Skoll remained president until early 1998, when the company 1. People are basically good. hired Meg Whitman as president and CEO. At the time, the 2. Everyone has something to contribute. company had only 30 employees and was solely located 3. An honest, open environment can bring out the best in the United States; in a decade the number of employees in people. went up to over 15,000. In September 1998 eBay launched 4. Everyone deserves recognition and respect as a a successful public offering, making both Omidyar and Skoll instant billionaires. By the time eBay went public, unique individual. less than three years after Omidyar had created the com- 5. You should treat others the way you want to