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| Company type | Public (NASDAQ: EBAY) |
|---|---|
| Industry | Auctions |
| Founded | San Jose, California USA (1995) |
| Founder | Pierre Omidyar  |
| Headquarters | San Jose, California USA |
| Key people | Meg Whitman, CEO & President Pierre Omidyar, founder |
| Products | Online auction hosting, Electronic commerce, Shopping mall PayPal, Skype |
| Revenue |  $4.55 billion USD (2005) |
| Operating income | 2,350,000,000 United States dollar (2022) |
| Net income | −1,269,000,000 United States dollar (2022) |
| Total assets | 23,847,000,000 United States dollar (2016) |
| Number of employees | 11,600 (Q1 2006) |
| Website | www.ebay.com |
eBay Inc. (Nasdaq: EBAY) manages an online auction and shopping website, where people buy and sell goods and services worldwide.
Origins and early history
Founded in San Jose on September 4, 1995 by Computer Programmer Pierre Omidyar as Auctionweb, part of a larger personal site that included, among other things, Omidyar's own tongue-in-cheek tribute to the Ebola virus.
The first item ever sold on eBay was Omidyar's broken laser pointer for $14.83. Astonished, he contacted the winning bidder and asked if he understood that the laser pointer was broken. In his responding email, the buyer explained: "I'm a collector of broken laser pointers." The frequently repeated story that eBay was founded to help Omidyar's fiancée trade PEZ Candy dispensers was fabricated by a public relations manager in 1997 to interest the media. This was revealed in Adam Cohen's 2002 book and confirmed by eBay.
Jeff Skoll was hired as the company's first president and full-time employee in 1996. The company officially changed its name to eBay in September 1997. Originally, the site belonged to Echo Bay Technology Group, Omidyar's consulting firm. Omidyar had tried to register the domain name EchoBay.com but found it already taken by the Echo Bay Mines, a gold mining company, so he shortened it to his second choice, eBay.com.
Items and services
Millions of collectibles, appliances, computers, furniture, equipment, vehicles, and other miscellaneous items are listed, bought, and sold daily. Some items are rare and valuable, while many others are dusty gizmos that would have been discarded if not for the thousands of eager bidders worldwide, proving that if one has a big enough market, one will find someone willing to buy anything. Anything can be sold as long as it is not illegal or does not violate the eBay Prohibited and Restricted Items policy. Services and intangibles can be sold too. It is fair to say that eBay has revolutionized the collectibles market by bringing together buyers and sellers internationally in a huge, never-ending yard sale and auction. Large international companies, such as IBM, sell their newest products and offer services on eBay using competitive auctions and fixed-priced storefronts. Regional searches of the database make shipping slightly faster and cheaper. Software developers can create applications that integrate with eBay through the eBay API by joining the eBay Developers Program. As of June 2005, there were over 15,000 members in the eBay Developers Program, comprising a broad range of companies creating software applications to support eBay buyers and sellers as well as eBay Affiliates. Controversy has arisen over certain items put up for bid that can be considered as violating ethical standards. For instance, in late 1999 a man offered one of his kidneys for auction on eBay, attempting to profit from the potentially lucrative (and, in the United States, illegal) market for transplantable human organs. On other occasions, people and even entire towns have been listed, often as a joke. In general, the company removes auctions that violate its terms of service agreement within a short time after hearing of the auction from an outsider; the company's policy is to not pre-approve transactions. eBay is also an easy place for unscrupulous sellers to market counterfeit merchandise, which can be difficult for novice buyers to distinguish without careful study of the auction description.
eBay's Latin American partner is MercadoLibre.
eBay's main rivals are Amazon.com Marketplace and Yahoo! Auctions.
eBay Express
In April of 2006, eBay opened its new eBay Express site, which is designed to work like a standard Internet shopping site to consumers. Select eBay items are mirrored on eBay Express where buyers shop using a shopping cart to purchase from multiple sellers.
Profit and transactions
eBay generates revenue from a number of fees. There are fees to list a product and fees when the product sells. The eBay fee system is quite complex and takes $0.25 to $80 per listing and 2-8% of the final price. In addition, eBay now owns the PayPal payment system which has fees of its own.
Under current U.S. law a state cannot require sellers located outside the state to collect a sales tax, making deals more attractive to buyers.
The company's current business strategy includes increasing revenue by increasing international trade within the eBay system. eBay has already expanded to almost two dozen countries including China and India. The only places where expansion failed was Japan and Hong Kong where Yahoo had a head start.
Acquisitions & Investments
- In May, 1999, eBay acquired the online payment service Billpoint, which it shut down after acquiring PayPal.
- In 1999, eBay acquired the auction house Butterfield & Butterfield, which it sold in 2002 to Bonhams.
- In 1999, eBay acquired the auction house Alando for $43 million, which changed then to eBay Germany.
- In June, 2000, eBay acquired Half.com for $318 million, which was later integrated with the eBay Marketplace.
- In August, 2001, eBay acquired Mercado Libre, Lokau and iBazar, Latin American auction sites.
- On January 31, 2003, eBay acquired CARad.com, an auction management service for car dealers.
- On July 11, 2003 eBay Inc. acquired EachNet, a leading ecommerce company in China, paying approximately $150 million in cash.
- On June 22, 2004, eBay acquired all outstanding shares of Baazee.com, an Indian auction site for approximately US $50 million in cash, plus acquisition costs.
- On August 13, 2004, eBay took a 25% stake in Craigslist by buying out an existing shareholder who was once a Craigslist employee.
- In September 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 US$109) per share.
- In November 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.
- On December 16 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).
- In June 2005, eBay acquired Shopping.com, an online comparison site for $635 million.
- At the end of June 2005, eBay acquired the German language classifieds site Opus Forum.
- In April 2006, eBay acquired Tradera.com, Sweden's leading online auction-style marketplace for $48 Million.
Controversy
eBay has its share of controversy, ranging from its privacy policy (eBay typically turns over user information to law enforcement without a subpoena) to well-publicized seller fraud. eBay claims that their data show that less than .01% of all transactions result in a confirmed case of fraud.
Fraud
The major fraud prevention mechanism for eBay users is its feedback system. After every transaction both the buyer and seller have the option of rating each other. They can give a "positive", "negative", or "neutral" rating and leave a short comment. So if a buyer has problems, he can rate the seller "negative" and leave a comment such as "never received product". Learning the system and examining a seller's feedback history is a buyer's best protection.
The feedback system can protect sellers as well as buyers; a seller can reject a bid from a potential buyer if the buyer's feedback rating isn't to the seller's liking.
Weaknesses of the feedback system include:
- Small and large transactions carry the same weight in the feedback summary.
- A user may be reluctant to leave honest feedback out of fear of negative retaliatory feedback (including "negative" in retaliation for "neutral").
- The receiver of a negative feedback is allotted only 80 characters to type a response in their defense, making a thorough rebuttal extremely difficult to write.
- eBay's policies make it nearly impossible to remove unfair or retaliatory feedback.
When a user feels that a seller or buyer has been dishonest, a dispute can be filed with eBay. An eBay account (whether seller, buyer or both) may be canceled if there are too many complaints against the account holder. Of course, all laws still apply and legal action may also be possible.
Many complaints have been made about eBay's system of dealing with fraud, leading to it being featured on the British consumer rights program Watchdog. The claims generally are that eBay fails to respond when a claim is made to eBay.
Frauds that can be committed by sellers include:
- Receiving payment and not shipping merchandise
- Shipping items other than those described
- Shipping faulty merchandise
- Counterfeit merchandise
- Selling stolen goods
- Inflating total bid amounts by bidding against their own auction with a "shill" account (either the seller under an alternate account or another person bidding under agreement with the seller)
Frauds committed by buyers include:
- PayPal fraud (e.g. Filing a shipping claim for damaged merchandise and collecting the money from the shipping company, then filing a chargeback on PayPal for damaged merchandise, then refusing to return goods. Buyer then has free goods and has income equal to the amount he spent on the item.)
- Credit card fraud both from stolen credit cards and fraudulent chargebacks.
- Receiving merchandise and claiming otherwise
- Returning items other than received
Other controversial practices of users
- Bid sniping is placing a high bid during the last few seconds of an auction such that no time remains for other users to counterbid. This practice is allowed on eBay. Many other auction sites, such as Yahoo! Auctions, offer an option which extends the auction by some minutes when a last-minute bid is placed, in order to prevent sniping. eBay's "proxy bidding" feature allows the buyer to specify the maximum they are willing to pay for an item regardless of "snipes".
- Some users try to sell something which, on first glance, appears to be an expensive item for cheap (game console boxes are quite popular), and state inconspicuously in the description that they are paying for an item which is not the one implied. This is not allowed by eBay, but is difficult to enforce once the sale has closed.
- Conversely, sometimes very cheap items, like envelopes, are sold for high prices because they come with free airline vouchers or concert tickets, in order not to violate the terms on these items. In similar fashion, some listed items are unauthorized or bootleg recordings (such as The Grey Album) in violation of eBay policy, but escape removal from the site by listing the item as a "CD insert" or "cover artwork" with an included CD as a "bonus" for bidding. Listings with titles using Leet-speak (such as "B00tleg") also aim to similarly subvert eBay policy.
- Some users sell items for extremely low prices (usually using the Buy It Now feature) and then make up for it by overcharging on shipping. Since eBay charges their fees based on final sales price and not shipping, this allows sellers to reduce the amount they pay eBay in fees and for buyers to avoid importing fees and taxes into their country. This is called "fee avoidance", and is prohibited by eBay policy, as are excessive shipping and handling charges. A danger to the buyer in such cases is that in the event of defective merchandise, the seller may claim to have met his refund obligations by returning only the (minimal) purchase price.
Other eBay controversies
Other notable controversies involving eBay include:
- On 28 May 2003 a US District Court federal jury found eBay guilty of patent infringement and ordered the company to pay US$35 million in damages. The jury found for plaintiff MercExchange, which had accused eBay in 2001 of infringing on three patents (two of which are used in eBay's "Buy It Now" feature for fixed-price sales) held by MercExchange founder Tom Woolston. The decision was appealed to the US Federal Court of Appeals and was upheld in part and rejected on others. As of Nov 2005, eBay has appealed to the US Supreme Court to effectively block injunctive relief to patent holder MercExchange. The Supreme Court has agreed to hear the case in 2006. Note that business method patents are themselves a highly controversial subject as many people, even in the United States, contest their validity.
- On 28 July 2003 eBay and its subsidiary PayPal agreed to pay a $10 million fine to settle allegations that they aided illegal offshore and online gambling. According to the settlement, PayPal between mid-2000 and November 2002 transmitted money in violation of various US federal and state online gambling laws. PayPal was also forced out of this market, which accounted for some 6% of its volume. These offenses occurred prior to eBay's purchase of PayPal.
- On June 2004 the jeweler Tiffany & Co. sued eBay claiming that eBay profits from the sale of counterfeit Tiffany products. As of March 2006, a trial date has still not been set. ]
- On 17th December 2004 Avnish Bajaj, CEO of eBay's Indian subsidiary Baazee.com, was arrested after a video clip showing oral sex between two Indian students was sold online. The company denied knowing the content of what they were selling (because it is a venue, not a retailer) and removed the offensive material as soon as they became aware of it. The Indian government attempted to make the case that Bajaj broke a law under India's IT Act, that forbids "publishing, transmitting or causing to publish" obscene material, even though the actual material was never published on Baazee's servers. eBay strongly supported Baazee.
- On 14th June 2005 eBay removed auction listings for originally free tickets to the Live 8 charity auction amid hundreds of complaints about such auctions. Following a statement from Bob Geldof that declared eBay a "cyber pimp", many of these auctions were bombarded with fake bids. Normally, selling of charity tickets is legal under UK law.
- In 2005, the Australian NRL tried unsuccessfully to persuade eBay to prevent touts (scalpers) from selling grand final tickets online.
- Under its Verified Rights Owner (VeRO) policy, eBay permits intellectual property holders (such as software manufacturers) to directly close auctions where its products are being resold. Though the first sale doctrine permits the resale of such licenses and a court in California (where eBay is based) has upheld it, eBay sides with the copyright holders.
- PayPal accounts that are frozen without it being the seller's fault (sometimes frozen without reason) have resulted in ebay accounts being banned.
- Some argue that eBay has engaged in anti-trust activities through Billpoint and then PayPal. Currently, eBay forbids sellers from accepting the services of independent money-wiring companies such as Western Union and MoneyGram. Cash payments by post are also prohibited.
Trivia
Some expensive items sold on eBay
- Grumman Gulfstream II jet ($4.9 million)
- 1993 San Lorenzo 80 Motoryacht (1.935.300)
- 1909 Honus Wagner baseball card ($1.265 million)
- Diamond Lake Resort, western Kentucky ($1.2 million)
- Enzo Ferrari ($975,000, October 2004)
- Shoeless Joe Jackson's "Black Betsy" baseball bat ($577,610)
- Round of golf with Tiger Woods ($425,000)
- Portions of the 1996-2001 Jeopardy! set. The 9-foot-high Jeopardy! logo that was etched in glass as the backdrop sold for approximately $100,000. One of the contestant podiums sold for nearly $10,000 (proceeds of the set's sale went to charity)
Large items
- One of the largest items ever sold was a World War II submarine, sold by a small town in New England that decided it did not need the historical relic anymore.
- One of the diggers involved in the construction of the Channel Tunnel was auctioned on eBay in 2004
- One of the largest items ever to be put up to auction and not sold was a decommissioned aircraft carrier, the HMS Vengeance. The auction was placed by an anonymous seller from Brazil, but was removed before the auction completed because eBay forbids the sale of military ordnance.
- The town of Bridgeville, California was sold for $1,777,877. However the winning bidder backed out of the deal and Bruce Krall subsequently purchased it for $700,000. It was placed for sale on eBay once again on Apr-04-06 with a starting price of $1,750,000.
Unusual sale items
- In June 2005, Karolyne Smith sold the right to permanently tattoo an ad on her forehead to GoldenPalace.com for $10,000.
- Also in June 2005, the wife of Tim Shaw, a British radio DJ on Kerrang! 105.2 sold Tim's Lotus sports car with a Buy It Now price of 50p. This was after Tim's wife heard him flirting with model Jodie Marsh on air.
- In May 2005, a Volkswagen Golf that had previously been registered to Cardinal Josef Ratzinger (who had been elected Pope Benedict XVI the previous month) was sold on eBay's German site for €188,938.88. The winning bid was made by the GoldenPalace.com online casino, known for their outrageous eBay purchases.
- In 2004, a Seattle man posted pictures of himself wearing his ex-wife's wedding dress. In more than one way, the seller received much more than he expected. While he initially admitted he was selling the dress to earn some money for Mariners tickets, the bidding got into the thousands of dollars, and the seller actually had received a number of marriage proposals from users.
- In September 2004, the owner of MagicGoat.com sold the contents of his trash can to a middle school language arts teacher, who had her students write essays about the trash.
- Paper mache Keaton masks, of a mask that appears in a Nintendo videogame, were fan pleasers and fetched a higher than usual price for a homemade item.
- There was at one point an auction for the first ride on Kingda Ka, the tallest roller coaster on Earth. The winning bid was $1691.66, and the winner rode in the front seat.
- On November 23, 2004, a grilled cheese sandwich with a likeness of the Virgin Mary on it sold for $28,000 to the online casino GoldenPalace.com. The seller claimed to see the Virgin Mary toasted into the bread when she made the sandwich in 1994.
- A Sydney man pocketed AUS$1,035 after auctioning a piece of Nutri-Grain resembling ET, in Dec 2004.
- A 50,000-year-old mammoth. Max was put up for sale in 2004 with a minimum bid set at US $250,000 by his Dutch owner due to lack of space, and sold for £61,000. This was a bargain considering he was one of the five best and most complete mammoth skeletons in the world, consisting of 90% of his original bone material.
- The owner of Cockeyed.com sold advertising space comprising a single pixel on its homepage for 21 days for $100 .
- An incomplete package of diapers, bought and opened in the 1980s, raised more than $700US for the Children and Families Ministry at a United Church in Victoria, British Columbia (Canada).
- Water that was said to have been left in a cup Elvis Presley once drank from was sold for $455. The few tablespoons came from a plastic cup Presley sipped at a concert in North Carolina in 1977.
- A Coventry University student got £1.20p for a single cornflake.
- A European buyer sold a Vauxhall VX220 that was said to be baptized.
- 2001 - John Freyer catalogued and sold nearly everything that he owned, from his kitchen cutlery to his personal hygiene products, his Star Wars sheets and finally even the domain name Allmylifeforsale.com itself. He then visited many of the places where his items had been sold.
- A 1980s cartoon character, SuperTed, had his magic words listed.
- In 2006 Jeremy from the internet show Pure Pwnage sold some of his hair for $4,200.
Prohibited items
eBay in its earliest days was essentially unregulated. But as eBay grew, it found it necessary to restrict or forbid auctions for various items. Among the hundred or so banned categories (note that some of these relate to ebay.com (the US site), while other restrictions apply to specific European sites (such as Nazi paraphernalia). Regions may vary in their rules) :
- Tobacco (tobacco-related items and collectibles are allowed)
- Alcohol (alcohol-related collectibles, including sealed containers, as well as wine sales by licensed sellers are allowed)
- Nazi paraphernalia
- Bootleg recordings
- Firearms and ammunition
- Dirty used clothing
- Human parts and remains
- Certain copyrighted works or trademarked items.
- Many other items are either wholly prohibited or restricted in some manner.
See also
Further reading
- Nissanoff, Daniel (2006). FutureShop: How the New Auction Culture Will Revolutionize the Way We Buy, Sell and Get the Things We Really Want. The Penguin Press. ISBN 1-594-20077-7. (Hardcover, 246 pages)
- Cohen, Adam (2002). The Perfect Store: Inside eBay. Little, Brown & Company. ISBN 0-316-15048-7. (Hardcover, 336 pages)
- Collier, Marsha (2004) eBay For Dummies, 4th Edition, John Wiley ISBN 0764556541. (Softcover 408 pages)
- Belbin, David (2004). The eBay Book: Essential tips for buying and selling on eBay.co.uk. Harriman House Publishing. ISBN 1-897-59743-6.
- Cihlar, Christopher (2006). The Grilled Cheese Madonna and 99 Other of the Weirdest, Wackiest, Most Famous eBay Auctions Ever. Random House. ISBN 0-7679-2374-X.
- Eric M. Jackson (2004). The PayPal Wars: Battles with eBay, the Media, the Mafia, and the Rest of Planet Earth. World Ahead Publishing. ISBN 0-974-67010-3. (Hardcover, 360 pages)
External links
- eBay US
- Auctionbytes - online auction news service