Online Auction Business Model

1. Online Auction Business Model NeBCC Autumn 2008 SEMC 06 Transferable Skills Carol Shen Jung Pai

2. Introduction: • Current Research Interests • Online auction platform’s feasibility in the current and future markets • eBay’s strength and weakness • Rival: Amazon.com • Recommend some solutions to solve eBay’s existing problems and to secure eBay’s leading position in the action market

3. Online Action Environment • Thanks to technology • Online sales estimate: ￡19.5 billion in 2008 • Online store (Amazon) vs. Online Auction (eBay) • Price-driven competitive market • Buyer: Easier, faster, and more convenient • Seller: save on operating and overhead costs, more potential customers

4. eBay • The leader of the online auction markets • Founded by Pierre Omidyar in 1995 • Auction: matches sellers and buyer’s needs • Millions of products listed and sold everyday

5. eBay Facts

6. Companies Related to eBay • PayPal • online money transfer • Middleware between seller and buyer • Skype • Ease the communication between seller and buyer through chat, phone, and video conferencing

7. eBay’s Revenue Diversification

8. eBay’s Strength • Current leader in the online auction market • fame and popularity • 309 million registered users • 39 localized websites with 28 different languages • Cooperate with other Skype and PayPal • Marketing features - boost up sales

9. eBay’s Weakness • Fraud ( <0.1% on total transactions) • Identity theft (needs to strength security and privacy protection) • Competitive rival: amazon.com • Loop holes in the feedback system • Limited control over buyers and sellers • mainly rely on mutual trust

10. Problem 1: Fraud Accounts • Most serious problem on eBay • Registered with false personal information • Fraudulent sellers: • Listed false descriptions • Do not possess the items that listed • Fake feedback history • Collect money from the buyers and then disappear from eBay or register with another user ID

11. Solutions to Problem 1 • Limit one account per person (request personal ID: SS# or drivers license • discourage payments with cash, cheques, bank transfers, and direct debit / credit card • Encourage paying with PayPal • Enhance buyer protection policies • Categorized feedback system – grouping feedbacks by transaction prices

12. Problem 2: Unauthorized Access / Identity Theft • Hackers try to break in other users’ accounts – for financial rewards or for FUN? • Methods of break-in • Guess password – least technical • Use “I forgot my password” features • Break into eBay’s member database system – most technical

13. Solutions for Problem 2 • Guess password and use “I forgot my password” featurescan be solved easily – changing password frequently, combination of letters and numbers, notify the user through e-mail when password is requested • Break into eBay’s database • Safer security system – block all potential hackers • Firewalls –physical and software – strict access • Security software – keep undated

14. Problem 3: Quality Control • To protect the buyers • Difficult to regulate: no one will check the products physically if they match the descriptions – based on mutual trusts • Problems: Law-suits • Ex. Louis Vuitton suits eBay for allowing the sellers to sell fake items on eBay

15. Solutions to Problem 3 • Quality control system (different for each category) • Luxury items: source and proof of purchase if necessary • High-value listings (properties, automobiles): work with appraisal or credit check companies • Second-hand products: grading scales to reveal the true condition of the products

16. Problem 4: Database Storage • Needs to store massive database in a secure environment • 84.5 millions active users • 112 million listings at any given time worldwide • Localized websites in 39 countries • Efficiency vs. costs vs. security

17. Solution to Problem 4 • Currently uses Sun Microsystems’ Sun Fire T2000, X4100 servers, and Solaris 10. • Negotiate a better deal: customized software and date storage system (feasibility & efficiency) • US – primary marketplace (>50% transactions) • Keep stability, security, and speed • Invest heavily – perhaps supercomputer • International marketplace • Clusters or grids depends on the country • Joint venture with local IT infrastructure companies

18. Conclusion • Challenge of the rival (amazon.com) • Declined revenue in 2007 (Amazon’s revenue ↑41%) • Amazon: warehouse, guaranteed delivery, efficient (fixed low cost – no need to wait) • Methods to ensure eBay’s leading position • Launch e-stores with other warehouses and brands • Future Market trend • eBay’s online auction market (both US and international) - slow growth rate • Revenue growth mostly from: • Communication transaction – Skype • Payment transaction – PayPal • Invest in the Fast growth markets instead of slow growing ones

19. Bibliography • Ackerman, Elise. “eBay’s Biggest challenge: Amazon.com.” San Jose Mercury News. • 27 Aug. 2008. Pop Matters. 07 Nov. 2008 • <http://www.popmatters.com/pm/article/ebays-biggest-challenge-amazoncom>. • “eBay” 2008. Wikipedia. 20 Oct. 2008 <http://en.wikipedia.org/wiki/EBay>. • “eBay Inc.: A Short History.” ebay Media Center. 2008. eBay Inc. 18 Oct. 2008 • <http://news.ebay.com/about.cfm>. • “eBay Drives Explosive Growth using Sun Technology and Sun Services.” Customer • Snapshot: Technology – eBay. 2008. Sun Microsystems. 06 Nov. 2008 • <http://www.sun.com/customers/servers/ebay.xml>. • “eBay Inc. Reports Third Quarter 2008 Results.” Fast Facts. 2008. eBay Inc. 06 • Nov. 2008 <http://files.shareholder.com/downloads/EBAYPRESS/451409559x • 0x204060/29A0BEDF-A666-4654-B1E4-C1D6DDC294A8/eBayIncFactsheet.pdf>. • “eBay Marketplaces Fast Facts.” Fast Facts. 2008. eBay Inc. 06 Nov 2008 • <http://files.shareholder.com/downloads/EBAYPRESS/451409559x0x223370/C99E1580-C708-46FA-A1B5-3FB94A64ABB2/eBayMarketplacesFastFacts.pdf> • “Online Action Business Model.” 2008. Wikipedia. 25 Sept. 2008 • <http://en.wikipedia.org/wiki/Online_auction>. • “Online Shopping Continues to Boom.” 16 April 2008. Which News. 28 Oct. 2008 • <http://www.which.co.uk/news/2008/04/online-shopping-continues-to-boom-136546.jsp>. • “PayPal.” Security and Resolution Center. 2008. eBay Inc. 02 Nov. 2008. • < http://pages.ebay.com/paypal/index.html>. • “Registration & Sign In.” Help. 2008. eBay Inc. 01 Nov, 2008 • <http://pages.ebay.com/help/account/registration.html#>.

20. Thank You Q&A