Online Auctions

1
Online Auctions

• Fred Lizotte

2
Mission and Vision

• Ebays mission Statement
• to provide a global trading platform where
  practically anyone can trade practically
  anything.

3
History

• Ebay began in 1995 as AuctionWeb, a site that
  Pierre Omidyar launched. Our book says that Mr.
  Omidyar launched the site to find an outlet for
  his girlfriends Pez dispensers, but later we
  found out it was fabricated by a public relations
  manager in 1997 to interest the media. This was
  revealed in Adam Cohen's 2002 book1 and
  confirmed by eBay.
• By 1997 AuctionWeb was boasting about 2.5 million
  in monthly transactions. Later that year in
  September the site was reengineered and launched
  under the name we know today as Ebay.
• 1 a b Cohen, Adam. The Perfect Store. ISBN
  0-316-16493-3. 

4
History Cont.

• In September 1998 Ebay went public with a total
  of 63 million in IPOs. Ebay got more the next
  year in its second offering for 1.1 billion.
• In 2000, Ebay had started a powersellers program.
  Ironically 20 of the sellers on ebay accounted
  for 80 of the profits so ebay put these 20 in a
  category and made it known to other people that
  these people are powersellers.
•  Sellers who sustain a monthly sales of at least
  2000 were considered part of it.

5
History cont.

• In 1999 ebay was seeing an evolution in the way
  consumers wanted to purchase goods. They wanted
  to start using credit cards to complete
  transactions to make the process faster. Paypal
  came into the picture offering an easy way for
  consumers to complete transactions with credit
  cards.
• In 2000 ebay has been expanded internationally to
  countries such as Australia, Canada, United
  Kingdom, Japan, Germany, and France.

6
Acquisitions

• Ebay has acquired many companies over the years
  of its existence.
• 1998, Up4Sale.com
• 1999 Billpoint an unsuccessful competitor to
  PayPal, which they closed following the 2002
  acquisition of the latter.
• 1999 Butterfield Butterfield, which it sold in
  2002 to Bonhams.
• 1999 eBay acquired the auction house Alando for
  43 million, which changed then to eBay Germany.
• 2000 eBay acquired Half.com for 318 million,
  which was later integrated with the eBay
  Marketplace.
• 2000 eBay acquired the Precision Buying Service
  portion of Deja.com.
• 2001, eBay acquired Mercado Libre and Lokau,
  Latin American auction sites. eBay also acquired
  iBazar, a French auction site.
• 2002 eBay acquired PayPal, for 1.5 billion in
  stock.
• 2003, eBay acquired CARad.com, an auction
  management service for car dealers.
• 2003 eBay Inc. acquired EachNet, a leading
  ecommerce company in China, paying approximately
  150 million in cash.
• 2004, eBay acquired all outstanding shares of
  Baazee.com, an Indian auction site for
  approximately US 50 million in cash, plus
  acquisition costs. Baazee.com subsequently became
  eBay India.
• 2004, eBay took a 25 stake in Craigslist by
  buying out an existing shareholder who was once a
  Craigslist employee.
• 2004, eBay moved forward on its acquisition of
  Korean rival Internet Auction Co. (IAC), buying
  nearly 3 million shares of the Korean online
  trading company for 125,000 Korean won (about
  US125) per share.
• 2004, eBay acquired Marktplaats.nl for 225
  million. This was a Dutch competitor which had an
  80 market share in the Netherlands, by
  concentrating more on small ads than actual
  auctions. Marktplaats is the Dutch word for
  Marketplace.
• 2004, eBay acquired Rent.com for 415 million in
  cash (original deal was for 385 million of the
  amount in eBay stock plus 30 million in cash).

7
Acquisitions

• 2005, eBay acquired Gumtree, a network of UK
  local city classifieds sites.
• 2005, eBay acquired the Spanish classifieds site
  Loquo.
• 2005, eBay acquired Shopping.com, an online
  comparison site for 635 million.
• 2005, eBay acquired the German language
  classifieds site Opus Forum.
• 2005, eBay bought Skype, a VoIP company, for 2.6
  billion in stock and cash.
• 2006, eBay invested 2 million in the Meetup.com
  social networking site.
• 2006, eBay acquired Tradera.com, Sweden's leading
  online auction-style marketplace for 48 Million.
  
• 2006, eBay announced international cooperation
  with Google. Financial details have not been
  disclosed by either party.
• 2007, eBay acquired online ticket marketplace
  StubHub for 307 million.
• 2007, eBay acquired a minority stake in
  GittiGidiyor.
• 2007, eBay acquired the website StumbleUpon for
  approximately 75 million.

8
Management Team, Creator

• Pierre M. Omidyar 
• 32 of the forbes top 400 Americans in 2006
• Chairman of the Board
• officer since 05/96
• Age 39
• Net worth 7.7 billion

9
Margaret C. Whitman

• 322 of the forbes top 400 Americans in 2006
• President, Chief Executive Officer and Director
• Officer since 02/1998
• Age 51
• Net worth 1.2 billion

10
Robert H. Swan

• Chief Financial Officer, Senior Vice President
  Finance
• Officer since 03/16/2006
• Age 46
• Mr. Swan served in executive positions at Webvan
  Group, Inc. from 1999 to 2001, including Chief
  Executive Officer from April 2001 to July 2001,
  Chief Operating Officer from September 2000 to
  July 2001 and Chief Financial Officer from
  October 1999 to July 2001.

11
William C. Cobb

• President ebay marketplaces, North America
• Age 50
• Known as a professional in building and expanding
  brands for large companies such as Pepsico, inc
  and pizza hut.

12
John J. Donahoe

• President ebay Marketplaces
• Officer since 03/2005
• Age 46
• Earned an M.B.A. from Stanford university

13
Rajiv Dutta

• President of Paypal
• Officer since 08/1999
• Age 45
• Mr. Dutta holds a B.A. degree in Economics from
  St. Stephen's College, Delhi University in India
  and an M.B.A. degree from Drucker School of
  Management.

14
Michael Van Swaaij

• Acting Chief Executive Officer
• Officer since 10/01/2007
• The CEO of SKYPE

15
More managers on team

• Niklas Zennstrom Non-exectutive Chairman -
  Skype
• Michael R. Jacobson Senior vice president of
  Legal Affairs, General counsel, and secretary
• Elizabeth L. Axelrod Senior vice president
  human resources.

16
Important stakeholders

• Butterfield Butterfield This company that was
  bought by ebay was designed to make ebay an
  online auction site for large ticket items such
  as vehicles.
• Paypal Paypal was designed to replace ebays
  billpoint that failed. They provided a way
  consumers could use credit cards.
• Half.com Half.com was designed to sell items at
  half price, it was not an auction site like ebay,
  but it was used nonetheless
• Foreign online auction companies these
  companies that were already doing online auctions
  were bought out by ebay and the customers and
  inferstructure was already in place to use.

17
Goals and Strategies

• They are looking for heavy growth.
• Strong branding
• They were looking to create a community that
  allowed feedback and communication from buyer to
  seller. Key words Trust and respect building
  from buyer to seller and visa versa.
• Treating their highest profit sellers with
  special privileges and features.

18
Goals and strategies cont.

• Ebay saturated the market and in 1999 ebay was
  trying really hard to encourage the selling of
  big ticket items, such as automobiles.

19
Facts of the case

• To Generalize what we see here with ebay we see
  the following
• Up to 1995 The opportunity arises that online
  auctions can be utilized
• Ebay began in 1995 as AuctionWeb, a site that
  Pierre Omidyar launched. Some other online
  auction sites already existed, but were also just
  beginning.
• Ebay created a community of consumers and sellers
  to create trust and respect, making transactions
  easier.
• Ebay grew fast, and ate up its competition either
  by buying them out or simple competition to get
  them out.
• This continues and we see ebay evolving to the
  needs of the consumers, via paypal, ebaymotors.

20
E-Commerce opportunities

• The opportunities that ebay saw
• They were ahead of the game, they saw the
  problem, and bam they would most likely get close
  to a company until they decided to buy it.
• Technology was changing, Meaning that ebay had to
  adapt to fit the needs of a technological world.
• They have deep pockets to buy out or compete with
  rival companies.
• The fact that auctions need many people in order
  to not have market inefficiencies, means that it
  is hard for new companies to compete with ebay.

21
Prospective analysis

• The company used the perspective of Economics of
  Internet-based commerce.

22
Why?

• Ebay did not sell products, they simply
  facilitated trade among consumers and buyers.
• In doing so they allowed for the goods that were
  purchased to be valued by many bidders and bought
  by one bidder.
• The amount of consumers on ebay allowed for a
  slightly efficient marketplace.

23
DSIR

• DSIR is this company.
• Ebay Used DSIR for these reasons.
• In order to create an efficient marketplace,
  there needs to be people valuating what is to be
  bought constantly, many items on ebay are unique
  in their own way and it is important that people
  valuate it.
• Ebay used this knowledge to their advantage and
  got rid of its competition.
• The switching cost was high, especially due to
  ebays community and feedback system.

24
Competitive risks

• Ebay has dealt with their fair share of
  competitive risks.
• They had other auction sites boast lower fees,
  different features, but the cost of switching
  seemed to high to reliable ebay users.
• Successful competitors was bought out as well and
  utilized in ebays plan, especially auction sites
  from overseas.

25
Competition

• Yahoo auctions
• Yahoo! US Auction sites will no longer be
  accepting listings as of June 3, 2007.
• Ubid
• Amazon.com

26
Missed opportunities

• Looking at ebay, we see a successful business
  from the start to the end. They have just about
  completed their vision of being the global
  trading platform where practically anyone can
  trade practically anything.

27
Ubid

• uBid.com's mission is to be the most recognized
  and trusted business-to-consumer and
  business-to-business marketplace, consistently
  delivering exceptional value and service to our
  supplier partners and consumers.

28
History

• uBid Inc., founded in 1997 and headquartered in
  Chicago,Illinois
• The online auction site that calls itself "The
  Marketplace you can Trust".
• The company claims this title based on the secure
  nature of transactions on the site compared to
  other companies such as ebay.
• The site tries to eliminate fraud by having
  products being sold by other Program.
• The site specializes in new, refurbished and
  overstock consumer electronics such as computers
  and cellular phones, but has recently expanded to
  offer other services such as travel packages and
  jewelry.

29
Not done yet, there is more

• The case study in the book, also included ubid as
  a major part of online auction, so I have a small
  section for them too.

30
Overview

• We see Ubid coming in two years later in 1997.
• They are ironically focusing on what ebay is
  doing wrong and trying to eliminate those
  problems.
• Ebay has a problem with fraud, they had in the
  past they are having it now and possibly it will
  continue in the future. Ubid designed a system
  that tries to eliminate fraud.
• They try to focus on how much it costs as well,
  they are not charging for a listing fee as ebay
  does, which means that if your item doesnt sell,
  you dont incur a cost.
• They get the money if the item does sell, then
  they will take the fees out.
• They have decided to have a payment system set up
  on ubid instead of having a third party payment
  system such as Paypal.

31
Analysis

• Unlike ebay, where they got in first and expanded
  fast, ubid was trying to get it right first. Its
  an interesting paradox that is going on right
  now.
• September of 2007, Ubid announced that Robert H.
  Tomlinson, Jr., the old CEO, is stepping down and
  a new CEO, Jeffrey D. Hoffman will be taking his
  place.
• Jeffrey D. Hoffman is known to launch businesses
  and make them successful, such as Virtual
  shopping, Priceline.com, and many more. I will be
  interested in seeing what Jeff is planning on
  doing to ubid.com.