ebay company profile (swot) analysis

5/24/2018 Ebay Company Profile (Swot) Analysis

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eBay Inc.

Company Profile

Publication Date: 23 Aug 2010

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ABOUT DATAMONITOR

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eBay Inc. Page 2 Datamonitor

eBay Inc.


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TABLE OF CONTENTS

Company Overview..............................................................................................4

Key Facts............................................................................................................... 4

Business Description...........................................................................................5

History................................................................................................................... 6

Key Employees.....................................................................................................9

Key Employee Biographies................................................................................10

Major Products and Services............................................................................16

Revenue Analysis...............................................................................................17

SWOT Analysis...................................................................................................18

Top Competitors.................................................................................................25

Company View.....................................................................................................26

Locations and Subsidiaries...............................................................................28


eBay Inc.TABLE OF CONTENTS


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COMPANY OVERVIEW

eBay is an online provider of marketplaces for the sale of goods and services. It also providescommerce, platforms, online payments services and online communications offerings to individualsand businesses.The company operates in the US and other international markets. It is headquarteredin San Jose, California and employs 16,400 people which include some part time workers too.

The company recorded revenues of $8,727.4 million during the financial year ended December 2009(FY2009), an increase of 2.2% over 2008.The operating profit of the company was $1,456.8 millionin FY2009, a decrease of 29.8% over 2008. The net profit was $2,389.1 million in FY2009, anincrease of 34.3% over 2008.

KEY FACTS

eBay Inc.Head OfficeeBay Inc.Whitman Campus2065 Hamilton AvenueSan JoseCalifornia 95125USA

800 322 9266Phone

408 516 8811Fax

http://www.ebayinc.com/Web Address

8,727.4Revenue / turnover(USD Mn)

DecemberFinancial Year End

16,400Employees

EBAYNASDAQ Ticker


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BUSINESS DESCRIPTION

eBay operates a website, eBay.com which facilitates the exchange of goods and services over theInternet. It also provides platforms, online payments services and online communications offeringsto individuals and businesses. eBay owns and leases properties in the US and 25 other countriesaround the world.

The companys business is divided into three segments: marketplaces, payments andcommunications.

The marketplaces segment consists of online commerce platforms that enable a global community

of buyers and sellers to interact and trade with one another.The platforms include software toolsand services, some available at no charge and others for a fee.The marketplaces platforms consistof our core online commerce platform, eBay.com and its localized counterparts, and other adjacentplatforms like classifieds websites, StubHub, Shopping.com, Half.com, and Rent.com. The finalvalue, listing, feature and subscription fees, lead referral fees, transaction fees and advertising feesare various means through which this segment generates revenue. By the end of 2009, the companyhad approximately 90.1 million active users, compared to approximately 87.7 million at the end of2008. An active user is a person who has bid on, bought or listed an item during the preceding12-month period.

The payments segment consists of two online payment brands i.e. PayPal and Bill Me Later. PayPalenables individuals and businesses to securely send and receive payments online in approximately

190 markets worldwide and Bill Me Later enables online US merchants to offer, and US consumersto obtain transactional credit at the point of sale.

Communications segment consists of Skype. Skype is a global Internet communications companythat enables people to stay in touch over the Internet through free voice and video calls, instantmessages, SMS or file transfers, and by making low-cost calls to landline and mobile numbers. Thesegment primarily generated revenue through fees charged to users to connect Skypes Internetcommunications products to traditional fixed-line and mobile telephones. In November 2009, thecompany sold 65% interest in Skype to a group of investors.


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HISTORY

eBay was formed as a sole proprietorship in 1995, when Pierre Omidyar, a computer programmer,wrote the code for an auction website that he ran from his home computer.The company wasincorporated in California in 1996. The company reincorporated in Delaware in 1998 and becamepublic in the same year. Around the same time, America Online (AOL) and eBay signed a three yearagreement under which AOL received guaranteed payments totaling $12 million from eBay. Thenew alliance secured eBay a large potential customer base in the form of AOL members.

The company acquired several entities in 1999. eBay acquired Butterfield & Butterfield, an auctionhouses; Alando.de, Germany's largest online auction house; and Kruse International, one of thelargest land-based auctioneers of collectible cars in the world. Kruse Internationals acquisitionprovided expertise in the automobile market and led to the launch of eBay's collectibles and usedcars categories online.

eBay expanded through joint ventures in Australia and Japan in 2000. The company entered a jointventure with Australias eCorp and also moved into the Japanese market assisted by an alliancewith NEC. In the same year, eBay took an equity stake in the online used-car dealer AutoTrader.comand also acquired Half.com.

During 2001-02, the company further expanded with the acquisition of entities. eBay acquired theFrench internet auction firm iBazar, which operated online trading sites in Belgium, Brazil, France,Italy, the Netherlands, Portugal, Spain, and Sweden. Later eBay sold iBazar's Brazilian subsidiary

to MercadoLibre in exchange for a stake in MercadoLibre. In late 2001, eBay Singapore was launched.

The company acquired Taiwan's Neocom; EachNet, China's leading online trading community; andPayPal, a web micro payments platform. PayPal went public in 2002 and continued to offer itsservices as an independent brand following the completion of the acquisition. eBay introduced itsnew business-to-business site, eBay Business in 2003.The site brought together all of eBay's businessand industry listings under one web destination. During 2003-04, the company acquired all of FairMarkets technology and business assets; Marktplaats.nl (www.marktplaats.nl), a classifieds websitein the Netherland; Mobile.de, an online classifieds websites for vehicles in Germany; and Baazee.comto expand its business in India. In the same year, eBay raised its stake in internet auction of SouthKorea from 62% to 86%.

From 2005-06, eBay acquired several online sites to expand its business.The company acquiredKurant's and Rent.com; Gumtree.com and LoQUo.com, an international classifieds websites;Shopping.com, an online comparison shopping resources; Skype, a Luxembourg based companyand a provider of software that enables VoIP calls between Skype users online; and Tradera.com,an online auction style marketplace in Sweden. In the same period, the company launched eBayPoland (www.ebay.pl).


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eBay continued its expansion in 2007 with the acquisition of other entities. The company acquiredStubHub, GittiGidiyor.com, an online marketplace, in Turkey; and StumbleUpon, an early-stagecompany that helps people discover and share content online. In Germany, eBay acquired ViA-Online,an auction management software company which operated Afterbuy.com to enable professionaltrading on eBay.de and other online marketplaces. In Thailand, eBay entered an agreement withSanook!, an online portal, to launch a regional e-commerce site.The site enabled individuals andbusinesses in Thailand, to participate in local and international trade through eBay's global websites.

In 2008, eBay agreed to a settlement with MercExchange to dismiss all claims and appeals stemmingfrom the patent lawsuit filed by MercExchange in 2001. eBay and MercExchange had been engagedin litigation over MercExchange's patents and eBay's online auctions and fixed price-relatedecommerce operations. The company also launched a new application in 2008. The new product

was a new mobile application

eBay Mobile, available for iPhone and iPod Touch users in Europe.The new free applications gave Apple users the freedom to bid, buy and pay for items directly fromtheir mobile devices. It also launched a new marketplace called WorldofGood.com for the ethicallysourced and eco-friendly product range.

eBay continued to grow inorganically in 2008. The company acquired Den Bla Avis and BilBasen,providers of leading online classifieds sites in Denmark. The acquisitions strengthen eBays Danishand global classifieds portfolio.The company also acquired Bill Me Later, an online-oriented paymentsbrand for approximately $820 million in cash and approximately $125 million in outstanding options.The acquisition extended eBay's leadership in payments by combining Bill Me Later with eBay'sPayPal, eBays leading online-oriented payments brand. eBay Motors, eBays online automotivemarketplace, tied-up with Hollander, a provider of auto recycling and parts yard management solutions

in the US and Canada, in May 2009, to provide access to over $2.7 billion in retail value of usedparts inventory on eBay Motors.

In April 2009, eBay entered into a partnership with Gmarket to combine Gmarket, Koreas leadinge-commerce business, with its existing online marketplace in Korea.

eBay signed an agreement in September 2009, to sell Skype communications unit in a deal worth$2.75 billion. Sales of 65% of business stake in Skype, was made to an investor group that comprisedof Silver Lake and includes Index Ventures, Andreessen Horowitz and the Canada Pension PlanInvestment Board.

In October 2009, Skype announced a new business funded click-to-call product in partnership withEuropean Directories that will turn online search for businesses into calls for businesses.Thepartnership will offer consumers free calls to up to 700,000 businesses across Europe.

eBay launched a new digital magazine The Inside Source, in November 2009 featuring insightsand stories based on what more than 89 million active users are searching for, buying and sellingon eBay. The Inside Source offers fresh daily content with original articles, analysis and opinionsfrom journalists as well as eBay community contributors. In the same month the PayPal unveiled


eBay Inc.History


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new application programming interfaces, a new developer portal and introductory services pricingto help developers reap the financial benefits of building businesses on PayPal X.

eBay introduced eBay Fashion, a new enhanced shopping destination for clothing, shoes andaccessories on its online marketplace in April 2010. eBay Fashion aims to delivers a richer, morevisual shopping experience that surfaces and showcases selection of new, vintage, branded anddesigner merchandise available on eBay.

In June 2010, the company acquired RedLaser, a popular barcode-scanning application for iPhone,and related technology from Occipital. RedLaser provides iPhone barcode-scanning application forcomparison shopping and finding product information using a mobile device.

eBay became the first customer of Microsofts Windows Azure platform appliance, in July 2010.

eBay will incorporate the Windows Azure platform appliance into two of its data centers to furtheroptimize its platform and achieve greater strategic agility and datacenter efficiency.

In August 2010 eBay launched its Shopping Basket customer beta test on its eBay UK online site,with a new features that enables users to compare the total price of items, take advantage of shippingdiscounts, and pay for multiple items from various sellers in one checkout flow.


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KEY EMPLOYEES

CompensationBoardJob TitleName

10132748 USDExecutive BoardPresident and Chief ExecutiveOfficer

John J. Donahoe

330472 USDNon Executive BoardDirectorThomas J.Tierney

312972 USDNon Executive BoardDirectorDavid M. Moffett

314984 USDNon Executive BoardDirectorFred D. Anderson

359732 USDNon Executive BoardDirectorEdward W. Barnholt

359954 USDNon Executive BoardDirectorScott D. Cook

337959 USDNon Executive BoardDirectorMarc L. Andreessen

342959 USDNon Executive BoardDirectorWilliam C. Ford, Jr.

304984 USDNon Executive BoardDirectorDawn G. Lepore

12714 USDNon Executive BoardDirectorPierre M. Omidyar

306484 USDNon Executive BoardDirectorRichard T. Schlosberg, I II

Senior ManagementSenior Vice President, HumanResources

Elizabeth Axelrod

3463752 USDSenior ManagementChief Technology Officer and SeniorVice President, Global Products,Marketplaces

Mark Carges

Senior ManagementSenior Vice President, Legal Affairs,General Counsel and Secretary

Michael Jacobson

Senior ManagementSenior Vice President, CorporateCommunications

Alan L. Marks

3184136 USDSenior ManagementPresident, eBay MarketplacesLorrie M. Norrington

5900390 USDSenior ManagementSenior Vice President, Finance andChief Financial Officer

Robert H. Swan

Senior ManagementPresident, PayPalScott Thompson


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KEY EMPLOYEE BIOGRAPHIES

John J. Donahoe

Board: Executive BoardJob Title: President and Chief Executive OfficerSince: 2008Age: 49

Mr. Donahoe has been the President and Chief Executive Officer at eBay since 2008. He has beenthe President at eBay marketplaces since 2005. Prior to joining eBay, he served as the Worldwide

Managing Director at Bain and Company. Prior to that, he worked for the Rolm and Salomon Brothers.Currently he also serves on the Board of Intel and on the Board of Trustees at Dartmouth College.

Thomas J.Tierney

Board: Non Executive BoardJob Title: DirectorSince: 2003Age: 55

Mr.Tierney has been a Director at eBay since 2003. He is the Founder of The Bridgespan Group

and has been its Chairman of the Board since 1999. Prior to founding Bridgespan, He served asChief Executive Officer of Bain & Company, from 1992 to 2000. He is also the Co-author of a bookcalled Aligning the Stars.

David M. Moffett


Mr. Moffett has been a Director at eBay since 2007. He has more than 30 years of strategic financeand operational experience in banking and payment processing. He joined Star Banc in 1993 as theChief Financial Officer. He served as the Vice Chairman and Chief Financial Officer of US Bancorp.Prior to 1993, Mr. Moffett held executive level positions at some of the nation's leading financialservices companies, including Bank of America and Security Pacific.

Fred D. Anderson

Board: Non Executive Board


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Job Title: DirectorSince: 2003Age: 65

Mr. Anderson has been a Director at eBay since 2003. He has been a Managing Director at ElevationPartners, since 2004. From 1996 to 2004, he served as the Executive Vice President and the ChiefFinancial Officer at Apple Computer. Prior to joining Apple, he was the Corporate Vice Presidentand the Chief Financial Officer of Automatic Data Processing, from 1992 to 1996. Mr. Anderson alsoserves on the Board of Directors at Move and Palm.

Edward W. Barnholt



Mr. Barnholt has been a Director at eBay since 2005. He has served as the President and ChiefExecutive Officer at Agilent Technologies from 1999 to 2005, and as the Chairman of the Board ofAgilent from 2002 till 2005. Before joining Agilent, he was the Executive Vice President and GeneralManager at Hewlett-Packard Company's Measurement Organization from 1998 to 1999. From 1990to 1998, he served as the General Manager at Hewlett-Packard Company's Test and MeasurementOrganization. He was elected the Senior Vice President at Hewlett-Packard in 1993 and the ExecutiveVice President in 1996. He also serves as the Non-Executive Chairman of the Board of KLA-Tencor.He is also a member of the Board of Directors at Adobe Systems, and a member of the Board ofTrustees at the David and Lucile Packard Foundation.

Scott D. Cook


Mr. Cook has been a Director at eBay since 1998. He is the Founder of Intuit, a financial softwaredevelopment firm. He has been a Director at Intuit since 1984 and is currently the Chairman of the

Executive Committee of the Board at Intuit. From 1993 to 1998, he was the Chairman of the Boardof Intuit. From 1984 to 1994, he served as the President and the Chief Executive Officer at Intuit.Currently he also serves on the Board of The Procter and Gamble Company, The Asia Foundationand The Intuit Scholarship Foundation.

Marc L. Andreessen





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Mr. Andreessen has been a Director at eBay since 2008. He is also a Co-founder and Chairman atNing. From 1999 to 2007, he was the Chairman of the Board of Directors at Opsware, (formerlyknown as Loudcloud). Prior to that in 1999 he was the Chief Technology Officer at America Online.From 1994 to 1999, he was a Co-founder at Netscape Communications, where he also served asChief Technology Officer and Executive Vice President of Products. He also serves on the Boardof Directors at Facebook, Stanford Hospital, Hewlett-Packard, and Room to Read.

William C. Ford, Jr.


Mr. Ford has been a Director at eBay since 2005. He has also been the Executive Chairman of theBoard of Directors at Ford Motor since 2006 and the Chairman of the Board at Ford since 1999.From 2001 to 2006, he was Ford's Chief Executive Officer. He has held a number of managementpositions at Ford since 1979. He also serves as Vice Chairman at The Detroit Lions, and Chairmanof the Board of Trustees at The Henry Ford. He is also a Vice Chairman of Detroit Renaissance.

Dawn G. Lepore


Ms. Lepore has been a Director at eBay since 1999. She has served as Chief Executive Officer andChairman of the Board of drugstore.com, since 2004. From 2003 to 2004, she was the Vice Chairmanof Technology, Active Trader, Operations, Business Strategy, and Administration for the CharlesSchwab and Charles Schwab & Co. She has held various positions with the Charles SchwabCorporation including: Vice Chairman of Technology, Operations, Business Strategy, and

Administration. Currently she also serves on the Board of Directors at The New York Times.

Pierre M. Omidyar





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Mr. Omidyar has been a Director and Chairman of Board at eBay since 1996. He founded thecompany as a sole proprietorship in 1995. He has also served as the companys Chief ExecutiveOfficer, Chief Financial Officer, and President from inception to 1998, 1997 and 1996, respectively.Prior to founding eBay, he was a Developer Services Engineer at General Magic, from 1994 to 1996.He co-founded Ink Development 1991 and served there as a Software Engineer from 1991 to 1994.Prior to this, he was a developer at Claris and other Macintosh-oriented software developmentcompanies. He is currently Co-founder and Chairman at Omidyar Network. He also serves on theBoard of Trustees at Tufts University, Omidyar-Tufts Microfinance Fund, the Santa Fe Institute andthe Punahou School.

Richard T. Schlosberg, III



Mr. Schlosberg has been a Director at eBay since 2004. Prior to this, from 1999 to 2004, he wasthe President and Chief Executive Officer at David and Lucile Packard Foundation. Prior to joiningthe foundation, he was Executive Vice President at The Times Mirror and Publisher and ChiefExecutive Officer of the Los Angeles Times. Prior to that, he served in the same role at the DenverPost. Currently he serves on the Board of Directors at Edison International. He is also a member ofthe USO World Board of Governors, a trustee at Pomona College and a Founding Director at theUS Air Force Academy Endowment and Chairman of the Board at the Kaiser Family Foundation.

Elizabeth Axelrod

Board: Senior ManagementJob Title: Senior Vice President, Human ResourcesSince: 2005Age: 47

Ms. Axelrod has been the Senior Vice President, Human Resources at eBay since 2005. She hasserved as the Chief Talent Officer at WPP Group, where she was also an Executive Director. BeforeWPP, she was a Principal with McKinsey & Company where she was Co-leader of its globalorganization and leadership practice.

Mark Carges

Board: Senior ManagementJob Title: Chief Technology Officer and Senior Vice President, Global Products, MarketplacesSince: 2008Age: 48




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Mr. Carges has been the Chief Technology Officer and Senior Vice President, Global Products,Marketplaces at eBay since 2008. Prior to joining the company he was the Executive Vice President,Products and General Manager for the Business Interaction Division at BEA Systems. Prior to BEA,he designed and developed early versions of Tuxedo at Bell Labs, Unix System Labs and Novell.

Michael Jacobson

Board: Senior ManagementJob Title: Senior Vice President, Legal Affairs, General Counsel and SecretarySince: 1998Age: 55

Mr. Jacobson has been the Senior Vice President, Legal Affairs, General Counsel and Secretary at

eBay since 1998. He joined the company in 1998. Prior to joining eBay, he was a partner with CooleyGodward.

Alan L. Marks

Board: Senior ManagementJob Title: Senior Vice President, Corporate CommunicationsSince: 2008Age: 47

Mr. Marks has been the Senior Vice President, Corporate Communications at eBay since 2008. He

has more than 20 years of experience in managing communications for top global consumer brands.Prior to joining eBay in April 2008, he was at Nike, where he served as a member of its globalcommunications leadership team from 2005 to 2008. Prior to Nike, he headed corporatecommunications for Gap from 1999 to 2005. He also led corporate media relations for global productlaunches, communications of the company's growth strategy, and Nike's industry-leading corporateresponsibility strategies.

Lorrie M. Norrington

Board: Senior ManagementJob Title: President, eBay Marketplaces

Since: 2008Age: 50

Ms. Norrington has been President, eBay Marketplaces Operations at eBay since 2008. Previously,she was President at eBay International. She joined eBay in 2006. Prior to joining the company shewas President and Chief Operation Officer (CEO) of Shopping.com. She joined Shopping.com in2005 after spending four years as Chief Operating Officer at Intuit. Before joining Intuit, for 20 yearsshe served GE in various roles in the information services, medical systems, industrial systems andfinancial services businesses. Currently she is also on the Advisory Board of the Catalyst Group.




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Robert H. Swan

Board: Senior ManagementJob Title: Senior Vice President, Finance and Chief Financial OfficerSince: 2006Age: 49

Mr. Swan has been the Senior Vice President, Finance and Chief Financial Officer at eBay since2006. Prior to joining the company, he was the Chief Financial Officer and Executive Vice Presidentat Electronic Data Systems (EDS). Prior to EDS, he served as the Chief Financial Officer and theExecutive Vice President at TRW. He also held Executive-level positions at Webvan Group. Hebegan his career with General Electric (GE) in 1985 and spent 15 years in a various positions,including Corporate Audit Staff and Chief Financial Officer at GE Transportation Systems and GE

Medical Systems-Europe. He left GE in 1999 as the Vice President of Finance and the Chief FinancialOfficer of GE Lighting.

Scott Thompson

Board: Senior ManagementJob Title: President, PayPalSince: 2008Age: 52

Mr. Scott has been the President of PayPal at eBay since 2008. Prior to this, he was PayPal's Senior

Vice President and Chief Technology Officer. Before joining PayPal in 2005, he was the ExecutiveVice President of Technology Solutions at Inovant. He has also been the Chief Information Officerof Barclays Global Investors. Prior to that, he worked with Coopers and Lybrand. Currently he serveson the Board of Directors at F5 Networks and Zuora.




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MAJOR PRODUCTS AND SERVICES

eBay is an online company that provides online marketplaces for the sale of goods and services.The company's key products and services include the following:

Services:

Online services for the sale of goods and servicesOnline communication servicesOnline payment and transactional credit servicesOnline classifiedsAdvertising

Brands:

eBayHalf.comPayPalSkypeBill Me LaterShopping.comStubHubRent.comWorldofGood.com


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REVENUE ANALYSIS

eBay

The company recorded revenues of $8,727.4 million during the financial year ended December 2009(FY2009), an increase of 2.2% over 2008. For FY2009, US, the company's largest geographicmarket, accounted for 45.7% of the total revenues.

eBay generates revenues through three business divisions: marketplaces (60.9% of the total revenuesduring fiscal year 2009), payments (32%) and communications (7.1%).

Revenues by Division*

In FY2009, the marketplaces division recorded revenues of $5,311 million, a decrease of 4.9% over2008.

The payments division recorded revenues of $2,795.9 million in FY2009, an increase of 16.3% over2008.

The communications division recorded revenues of $620.4 million in FY2009, an increase of 12.6%over 2008.

* Revenues rounded off

Revenues by Geography**

The US, eBay's largest geographical market, accounted for 45.7% of the total revenues in FY2009.Revenues from US reached $3,985.1 million in 2009, an increase of 0.4% over 2008.

Germany accounted for 13.1% of the total revenues in FY2009. Revenues from Germany reached$1,140.2 million in 2009, a decrease of 6.6% over 2008.

UK accounted for 12.1% of the total revenues in FY2009. Revenues from UK reached $1,054.7million in 2009, a decrease of 1.7% over 2008.

Rest of world accounted for 29.2% of the total revenues in FY2009. Revenues from Rest of worldreached $2547.4 million in 2009, an increase of 11.8% over 2008.

** Percentages rounded off


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SWOT ANALYSIS

eBay is an online provider of marketplaces for the sale of goods and services. It also providescommercial platforms, online payments services and online communications offerings to individualsand businesses.The company has grown to establish a strong brand value and market position.However, eBay faces high risk of internet fraud due to which it is involved in various litigations andthe companys transition from an auction price sales format to a fixed price format could erode itscompetitive differentiation.

WeaknessesStrengths

Companys inability to counter the sale ofcounterfeit products

Efficient business model that is helpingeBay to expand its customer base as wellas revenue Failed synergies between eBay and its

acquired entitiesAugmenting revenue with the growth ofinternet display advertising and classifiedsStrong market position and brand value thathas ensures customersloyalty even in thedownturn

ThreatsOpportunities

Main Street Fairness Actand the resulting

high rate of internet sales tax

Expanding Chinese e-retail market and

subsequently the need for safe paymentsystems Increasing internet fraud and the

subsequent problem of litigationThe growing secondary market that includeliquidation, out of season, excess andoff-price inventory

Moving away from auction based sale tofixed price sales could erode eBayscompetitive differentiationRising demand for alternative payment

systems to ensure security and keep creditcard balances low

Strengths

Efficient business model that is helping eBay to expand its customer base as well as revenue

eBay operates on a unique business model which unites buyers and sellers in an online marketplace.This business model overcomes the inefficiencies of traditional marketplaces, which tend to befragmented and offer a relatively limited variety of goods. This business model also saves on thetransaction costs per sale, due to absence of intermediaries. Further eBay maintains zero inventoryunlike amazon.com and its other competitors and therefore costs related to inventory management


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is negligible. In particular, this model has been successful in addressing markets of new and scarcegoods, end-of-life products, and used and vintage items, which would otherwise be difficult to locateand purchase.

The size of eBays marketplaces is one of the largest in the world, with its gross merchandise volume(total value of goods sold in all of eBays marketplaces) at nearly $50,000 million in 2009. More than3 million items are bought daily across 50,000 categories on ebay.com, with listings of more than150 million by over 25 million sellers in multiple formats. Presently, ebay.com accounts forapproximately 13% share of the global eCommerce.

eBays efficient business model has given it flexibility and cost efficiency that helps it to continuouslyincrease the number of members without adding significantly to its cost structure and hence increasethe companys revenue base.

Augmenting revenue with the growth of internet display advertising and classifieds

Internet advertising revenues in the US reached $5.9 billion for the first quarter of 2010, an increaseof 7.5% over the same period in 2009. It is the highest first-quarter revenue level ever for the industry.The Internet combined with technological innovation in devices and platforms has transformedconsumerslives, expanding their access to entertainment and information. In 2009, the displayadvertising accounted for 35% of online advertisement revenue, an increase of 33% over 2008.Digital video, a component of display advertising, increased by 38% in 2009 over 2008. Displayrelated advertising revenues were $8 billion or 35% of the full year 2009 online advertising revenues,an increase of 4% from the $7.6 billion (33% of total revenue) in 2008. Whereas revenues fromclassifieds accounted for 10% of 2009 full year revenues or $2.3 billion, a decrease of 29% over

2008 figures.

eBay generates considerable revenues from advertising and classifieds. Marketing services andother revenue increased 6.6% y-o-y to $1.05 billion in FY09, representing 12% of total net revenue,the increase was primarily driven by the growth in text and graphical advertising revenue andclassifieds revenue. eBays classifieds websites are available in over 1,000 cities around the worldand are primarily designed to help people trade on a local level. Its classifieds websites include DenBla Avis, BilBasen, eBay Classifieds (eBay Anuncios, eBay Kleinanzeigen and eBay Annunci),Gumtree, Kijiji, LoQUo, Marktplaats.nl and mobile.de.The company also has non-controlling equityinvestment in craigslist, which operates the craigslist classifieds websites around the world.

Den Bla Avis (dba.dk) and BilBasen (bilbasen.dk) are two leading online classifieds sites in Denmark,which were acquired by the company in 2008. In 2008, eBay launched its own advertising serviceso that third parties can buy advertising text directly from eBay. Increasing online advertising hashelped the company to generate additional revenues directly from selling advertising space. Withthe companys efforts to expand this service and the growth in online advertising expenditure, thecompany stands to boost its revenue significantly.

Strong market position and brand value that has ensures customersloyalty even in the downturn




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eBay has a strong market position. Over the years, the company has built a strong brand value. In2009, Interbrand Design Forum ranked eBay 11th in the category of the most valuable US retailbrands. Besides eBay the other retailers with only online presence on the list were Dell Company(6th position), Amazon.com (14th position) and Netflix (32nd position).eBay currently accounts forapproximately 13% of all e-commerce globally. The company has focused on a swift increase in thenumber of users and number of product listings. By the end of 2009, the company had approximately90.1 million active users, compared to approximately 87.7 million at the end of 2008. In the firstquarter of 2010, customers bought goods worth over $13,000 million across 50,000 categories; morethan 25 million sellers have over 15 million listings in multiple formats on the companys site.Increasing number of customers has been contributing to the growth of the company and it hasemerged as one of the largest global online auction website with presence in 25 countries. In arecession, brand can act as a very powerful too, as retailers with a well-positioned brand have theopportunity to thrive and seize a bigger chunk of the market, in terms of customers. Strong customerbase and market position provides competitive advantage and gives eBay considerable bargainingpower.

Weaknesses

Companys inability to counter the sale of counterfeit products

On one hand online retail has proved a boon for many retailers by increasing their revenue andlowering their cost but on the other hand it has also resulted in the growth of online sales on counterfeitproducts. Sales of counterfeit products through online commerce platforms like eBay, Amazon andothers has become easy because its very difficult to trace the identity of the seller of these goods.According per the US Chamber of Commerce, counterfeiting activities cost the US economy morethan $250,000 million a year.

Over the years, eBay too has been fighting against litigations against it with respect to sale ofcounterfeit products over its website. In 2008, eBay had to pay 40 million euros to Louis VuittonMalletier for the alleged sales of counterfeit purse of the brand over its website. The company hasended up in paying huge fines to many other cosmetics and apparel brands over the issue. eBaylacks an effective tools to monitor and weed out such sales. In most cases, the company is able toidentify counterfeit products only after they are listed. This has negatively affected the companysimage in media. It could also affect eBays reliability as the customers and public would form anegative perception. It can have a serious bearing on the companys brand image and also affect

its sales.

Failed synergies between eBay and its acquired entities

In 2009, eBay sold Skype to a group of investors for a sum of $2.75 billion. Skype was acquired bythe company only in 2005 for $2.6 billion with the expectation that its online phone service andinnovative peer to peer (P2P) technology would complement the other segments of the company.Acquisition of Skype did add a high-growth business to eBay, generating $526 million in revenuesand adding 129 million users in 2008. Skype has over 480 million registered users and an 8% market




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share of global international call minutes However the company realized that as a standalonecompany Skype would do well but as a part of eBay it would be difficult to integrate its offerings withthe companys online auction and payments businesses.

Something of the same nature happened with StumbleUpon, a social web site discovery tool, whichthe company acquired in 2007 for $75 million. eBay sold StumbleUpon in 2009 to its original foundersbecause of lacking synergies.This move can reduce the overall growth of eBay and potentially leadinvestors to lower the amount they would be willing to pay for eBay shares and also put a questionmark on the leadership capabilities of the top level managers.

Opportunities

Expanding Chinese e-retail market and subsequently the need for safe payment systems

In 2009, China's e-commerce market stood 263 billion RMB (approximately $38.5 billion). Itrepresented a year-on-year growth rate of about 105%. China's e-commerce transaction volumewent up to 1.02 trillion RMB in the first quarter of 2010. At present, the consumer-to-consumer (C2C)represents the largest segment of China's e-commerce market. As per a report by the Chinae-Business Research Center, China's B2B market will continue to grow rapidly in the next few yearswith the nation's economic growth and rising e-commerce penetration. The business-to-consumer(B2C) has also been increasingly because traditional retailers are developing e-commerce platformsas additional channels to get consumers to buy their products. The B2C transactions are also on arise because more and more individual entrepreneurs are finding success on the existing C2C sites

like Taobao.com. As per the report, the number of e-commerce websites is expected to reach 23,000by the end of 2010.

Seeing the current trend, eBay has been quick in increasing it presence in the market.The companyplans to double its workforce from 1,000 to 2,000 in the Asia Pacific region in 2010. In March 2010,PayPal partnered with China UnionPay Co, an electronic-payment service provider, to allow Chineseconsumers to shop from and make payments to overseas merchants.This partnership will help eBayto expand its business to Chinas massive consumer market. From 3rd quarter of 2010, ChinaUnionPay cardholders within China will be able to link their bankcard accounts with PayPal andaccess a network of almost eight million online merchants world-wide, including US retailers likeWal-Mart and Zappos.com. and others.

PayPal also entered into an agreement in March 2010, with DBS Bank based in Singapore to offer4 million DBS customers with an alternate payment choice for their online purchases via PayPal.DBS customers make up 90% of the bank account holders in Singapore.These strategic allianceswill help the company to expand its market and increase its revenue too.

The growing secondary market that include liquidation, out of season, excess and off-price inventory




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After the economic crisis in the US consumer spending has gone down. Home budgets are tight andpeople are looking at all the opportunities to save on every possible purchase. In the US, householdsavings in 2009 increased by 51.6% and the private final consumption decreased by 4.7%. Accordingto Datamonitor's consumer survey, most respondents across the 15 countries questioned agreedthat they had been "making an effort to save more money" during the recession. Business budgetstoo have taken a battering and every expense is being scrutinized to maximize profit margins.Thesituation for many distributors and suppliers has not turned out too well. Many of them are stuck withsurplus goods that are either gathering dust in retail stores or using up expensive space atwarehouses. eBay estimates the global secondary market to be worth $500,000 million.

eBay can provide these retailers and distributors with the ideal platform for the sale of their products.The company has the required infrastructure in place that can help these parties. Since eBay is anonline retail platform, the parties will not be required to invest huge sum of money in real estate,

personnel, electricity, and other utilities necessary to a physical establishment. By targeting thesecustomers, the company can expand its revenue base.

Rising demand for alternative payment systems to ensure security and keep credit card balanceslow

More and more customers are moving towards making payment through means other than cardsand cash. This shift has been due to increased risk of identity and information thefts. Retailers arenow providing other forms of payment through their platform such as debit card processing, PayPal,virtual cash in the form of Ukash and Paysafecard, inbound bank transfers and payout solutionssuch as cheques and bank transfer issuing services and prepaid cards.

According to a study released in February 2010, prepaid cards, gift cards and alternative paymentsare projected to have the highest rates of compound annual growth for e-commerce purchasesthrough 2014. The growth will be fuelled by the need to keep credit card balances down or deferpayments. Security will also be a main driver for consumers using alternative payment methods.

The company through its offering of PayPal and Bill Me Later can hugely benefit from this trend.Both these payment alternatives enjoy high degree of market penetration due to the already wellestablished reach of the companys e-commerce platform. In fact it has the potential to grow evenbigger than eBay marketplaces because they targets all of e-commerce and not just the ones thattake place on the companys marketplace.

Threats

Main Street Fairness Actand the resulting high rate of internet sales tax

In July 2010, a bill Main Street Fairness Actwas introduced by Congress in US. The bill if passedwould allow states to collect sales tax for online purchases.The implementation of the bill will enablethe Congress to provide fiscal relief worth $23 billion, to the states without any financial help from




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the federal government. Earlier the state governments were not able to collect sales tax on mostinternet purchases due to a 1992 Supreme Court Decision that said that retailers can only chargetax in states where they have a physical presence.

On the flip side, if the internet sales taxes recommend legislation is passed it would mean new costson hundreds of thousands of online small businesses and ecommerce entrepreneurs.The complexinternet sales taxes could discourage buyers at it will raise products prices, and create an enormousadministrative burden on sellers, forcing them to keep track of thousands of different taxing

jurisdictions.The small online retailers will be required to comply with varying and regularly changingsales tax rules and rates for thousands of tax jurisdictions and to collect and remit sales taxes fromeach customer. It can result in lower number of transactions on the companys online commerceplatforms thereby adversely affecting its revenue.

Increasing internet fraud and the subsequent problem of litigation

Exposure to internet fraud will increase costs and affect customer confidence adversely Onlinemarketplaces have a high exposure to different types of fraud. There are various types of internetfrauds including sale of fake or counterfeit products, credit card fraud or non delivery of goods, etc.According to Internet Crime Complaint Centers (IC3) statistics, internet fraud has been on a rise.During 2009, IC3 registered 336,655 complaints which indicate an increase in complaints by 22.3%over 2008.The total dollar loss due to these frauds has been $ 559.7 million which works out to bean average loss of $16612 per complaint. Auction fraud, which is misrepresentation of the productssold in auction sites like eBay, comprised 5.7% of the internet fraud. eBay has constantly beeninvolved in long trials related to various internet frauds. Internet frauds are difficult to curb as theyare often obscure and place the company in a vulnerable position. Effectively eliminating frauds is

costly as the company has to incur large recurring expenses to monitor and prevent such frauds. Incase the company gets involved in any litigation then it would have incur legal expenses and thereis a possibility that heavy penalty or compensation has to be paid. Internet frauds may also affectthe brand image of eBay adversely and might dissuade online shoppers.These factors may proveto be unfavorable for eBays business and will affect both revenues and bottom line negatively.

Moving away from auction based sale to fixed price sales could erode eBays competitivedifferentiation

As soon as Mr. Donahoe became eBays President and Chief executive Officer in 2008, he announcedhis plans that the company would be focusing on increasing sales through the fixed price formatrather than the auction based sales. This was followed with a revision of fee structure for sellerspushing it to a higher level. As a result, sellers boycotted the companys site in February 2008 therebyaffecting its daily product listing by almost 13%. In 2008, eBay partnered with Buy.com that offeredfixed price listings on the companys website. The partnership with Buy.com indicated eBay's slowtransition away from its core auction format toward a more Amazon-like marketplace.The movehowever was not favorable to sellers in the categories in which Buy.com sells, as their sales werehurt by Buy.com listings.




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In 2009, the fixed-price listing format accounted for approximately 53% of eBays gross merchandisevolume (GMV), and the auction-style format accounted for the remaining 47% of GMV. In 2nd quarterof 2009 eBays marketplace revenues decreased by 14% over 2008 to $1.3 billion. While transactionrevenues decreased by 14% over and marketing services revenues fell 10%. The fixed-price GMVexcluding vehicles grew 19% on a fixed currency basis. However the auctions GMV excludingvehicles remained under pressure, and decreased by 17% in the quarter. This show that eBaysshift away from its core auction platform toward a more traditional fixed-priced platform has helpedit to stabilize revenue declines. However, an increasing emphasis on the fixed price format couldtransform eBay into a more traditional commerce site, thus eroding its competitive differentiation.The more eBay tweaks its business model the more it competes directly against Amazon and othere-commerce players offering fixed-price sales.




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TOP COMPETITORS

The following companies are the major competitors of eBay Inc.

Yahoo! Inc.Amazon.com, Inc.Buy.com, Inc.Costco Wholesale CorporationHome Shopping Network IncJC Penney Company IncMacys, Inc.OfficeMax, Inc.Office Depot, Inc.QVC Inc.Sears Holdings CorporationStaples, Inc.Target CorporationWal-Mart Stores, Inc.Google Inc.Nochex Ltd.Liquidity Services, Inc.Overstock.com, Inc.U.S. Auto Parts Network, Inc.BIDZ.com, Inc.


eBay Inc.Top Competitors


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COMPANY VIEW

A statement by John J. Donahoe, President and Chief Executive Officer of eBay is given below.Thestatement has been taken from the companys 2009 annual report.

For most of fiscal 2009, we operated three primary business segments: Marketplaces, Paymentsand Communications. Our Marketplaces segment provides the infrastructure to enable global onlinecommerce on a variety of platforms, including the traditional eBay.com platform and our other onlineplatforms, such as our online classifieds businesses, our secondary tickets marketplace (StubHub),our online shopping comparison website (Shopping.com) and our apartment listing service platform(Rent.com), as well as our fixed price media marketplace (Half.com).

Our Payments segment is comprised of our online payment solutions PayPal (which enablesindividuals and businesses to securely, easily and quickly send and receive payments online inapproximately 190 markets worldwide) and Bill Me Later. Our Communications segment, whichconsisted of Skype, enabled Internet communications calls between Skype users and providedlow-cost connectivity to traditional fixed-line and mobile telephones.

On November 19, 2009, we completed the sale of Skype to an investor group. Skype was consolidatedwith our results of operations through November 19, 2009, but was not consolidated with our resultsof operations after November 19, 2009. Following the completion of the sale of Skype, we operatedand continue to operate two primary business segments: Marketplaces and Payments.

Overall, revenue increased 2% to $8.7 billion in 2009 compared to 2008. The increase was drivenprimarily by PayPal offset by a decline in revenues generated from our Marketplaces business.Weachieved an operating margin of 17% in 2009 compared to 24% in 2008 driven by the impact of alegal settlement charge, acquisitions and foreign currency movements against the U.S. dollar. Dilutedearnings per share increased to $1.83 in 2009 compared to $1.36 in 2008 driven primarily by thegain on the sale of Skype. Operating cash flow increased to $2.91 billion in 2009 from $2.88 billionin 2008.

Some key operating metrics that members of our senior management regularly review to evaluateour financial results include net promoter score (NPS), market share, gross merchandise volume(GMV), GMV excluding vehicles, number of sold items, net total payment volume (TPV), net numberof payments, free cash flow, and revenue, excluding acquisitions and foreign currency impact.

We are cautiously optimistic about the current economic environment for fiscal 2010.We will continueto focus on driving operational efficiencies designed to enable us to reallocate resources into strategiesand initiatives that we believe will directly benefit our customers and increase activity on our platforms.

In 2010, we plan to continue our emphasis on becoming a more customer-focused and technologydriven company with clear priorities for our Marketplaces and Payments businesses. The 2010strategy for our Marketplaces business is to make more progress in trust, value and selection by:


eBay Inc.Company View


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Offering buyers great experiences they can trust; providing innovative shopping experiences thatdeliver great value and selection; and providing tools and pricing to make eBay more attractive toentrepreneurial sellers, casual consumer sellers and large sellers.

The 2010 strategy for our Payments business is to strengthen and expand its position as a leaderin on-line payments by: growing our Merchant Services business through merchant acquisition andincreased consumer preference as we expand our global footprint; continuing to penetrate the eBayMarketplace, especially internationally; and launching new products and accelerating innovation offour platform.

Net Revenues

We generate two types of net revenues: net transaction revenues and marketing services and other

revenues. Our net transaction revenues are derived principally from listing fees and final value fees(which are fees payable on transactions completed on our Marketplaces trading platforms), feespaid by merchants for payment processing services and, until the sale of Skype on November 19,2009, fees charged to users to connect Skypes Internet communications products to traditionalfixed-line and mobile telephones. Our marketing services revenues are derived principally from thesale of advertisements, revenue sharing arrangements, classifieds fees and lead referral fees. Otherrevenues are derived principally from interest earned on certain PayPal customer account balances,interest and fees earned on the Bill Me Later portfolio of receivables from loans and from contractualarrangements with third parties that provide services to our users.

We generate the majority of our revenue internationally and, accordingly, fluctuations in foreigncurrency exchange rates impact our results of operations. We have a foreign exchange risk

management program that is designed to reduce our exposure to fluctuations in foreign currencies;however, the effectiveness of this program in mitigating the impact of foreign currency fluctuationson our results of operations varies from period to period, and in any given period our operating resultsare usually affected, sometimes significantly, by changes in currency exchange rates. For the yearended December 31, 2009, foreign currency movements against the U.S. dollar negatively impactednet revenues by approximately $354.2 million compared to the prior year.

On a business segment basis for the year ended December 31, 2009, foreign currency movementsagainst the U.S. dollar negatively impacted Marketplaces, Payments and Communications netrevenues by approximately $247.7 million, $62.1 million and $44.4 million, respectively, comparedto the prior year. For the year ended December 31, 2008, foreign currency movements against theU.S. dollar positively impacted net revenues by approximately $70.7 million compared to the prioryear. On a business segment basis for the year ended December 31, 2008, foreign currencymovements against the U.S. dollar positively impacted Marketplaces, Payments and Communicationsnet revenues by approximately $37.5 million, $1.5 million and $31.7 million, respectively, comparedto the prior year. Revenues are attributed to U.S. and international geographies primarily basedupon the country in which the seller, payment recipient, customer, Skype users Internet protocoladdress, website that displays advertising, or other service provider, as the case may be, is located.


eBay Inc.Company View


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LOCATIONS AND SUBSIDIARIES

Head Office

eBay Inc.eBay Inc.Whitman Campus2065 Hamilton AvenueSan JoseCalifornia 95125USAP:800 322 9266F:408 516 8811http://www.ebayinc.com/

Other Locations and Subsidiaries

PayPalPayPal, Inc.12312 Port Grace BoulevardeBay Park NorthLa Vista2211 North First StreetNebraska 68128San JoseUSACalifornia 95131

USA


eBay Inc.Locations and Subsidiaries

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