EBay

eBay Inc. is a very successful online auction website, at which people from all around the world buy and sell goods and services.

About

eBay was founded in 1995 by 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. Originally marketed to investors as a place to sell and trade PEZ dispensers, the site belonged to Echo Bay Technology Group, Omidyar's consulting firm. He had tried to register the domain name "EchoBay.com" but found it already taken, so he shortened it to his second choice, "eBay.com". eBay is headquartered in San Jose, California. Meg Whitman has served as eBay's president and CEO since March 1998. In terms of revenue growth, eBay is the fastest-growing company of all time.

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. A recent search of eBay uncovered thousands of passé beanie babies and hundreds of vintage Kewpie Dolls. 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 more rapid or cheaper. Software developers can create applications that integrate with eBay through the eBay API by joining the eBay Developers Program.

In June 2004, eBay prohibited the sale and auction of both alcohol and tobacco products on the english site ebay.com. Some exceptions to this rule are made for rare aged liquors, where a bottle may sell for many times higher than its actual value in alcohol.

There has also been controversy regarding items put up for bid that violate ethical standards. Once, a man put his kidney on eBay, attempting to profit from the potentially very lucrative (and illegal) market for transplantable human organs. On other occasions, people and even entire towns have been listed, often as a joke. eBay is also a repository for cheap imitations, which can be difficult for novice buyers to distinguish without careful study of the auction description.

EBay's Latin American leg is MercadoLibre.

Profit and transactions

eBay generates revenue from sellers, who pay a fee based on the selling price of each item, a fee based on the starting price, and from advertising. In February 2005 it was announced that eBay would increase fees it charges to eBay Stores sellers, which caused considerable enough controversy among eBay users that the President of eBay's North America business recently emailed all eBay users with news that other fees would be decreased. eBay does not handle the goods, nor does it transact the buyer-seller payments, except through its subsidiary PayPal. Instead, much like newspaper want-ads, sellers rely on the buyers' good faith to make payment, and buyers rely on the sellers' good faith to actually deliver the goods intact. To encourage fidelity, eBay maintains, rates, and publicly displays the post-transaction feedback from all users, whether they buy or sell. This way, the buyer is encouraged to examine the sellers' feedback profile before bidding to rate their trustworthiness. Sellers with high ratings generally have more bids and garner higher bids. However it is possible for sellers to make their feedback private and just leave the numbered rating (Number of positive, negative and neutral feedback with a positive feedback percentage) this means that bidders and sellers cannot see the comments other users have left. eBay also has a significant affiliate program, and eBay affiliates can, for example, place live eBay product images and links on their web sites, such as Sports Internet Destination, www.hscpub.com

Acquisitions

• In July, 2002, eBay acquired all PayPal, for $1.5 billion in stock. PayPal provides a service which allows people to send money electronically by tying credit card numbers to email addresses. At the time of the acquisition, 60% of PayPal's business came from people using Ebay.

• On 11 July 2003 eBay Inc. completed its previously announced investment in EachNet, a leading ecommerce company in China. eBay has acquired all of the remaining outstanding common stock of EachNet Inc., the Delaware-based company that, in cooperation with local subsidiaries, operates www.eachnet.com. In accordance with the terms of the transaction as announced on June 11, 2003, eBay will pay approximately $150 million in cash to acquire the remaining 67% of the stock of EachNet Inc. eBay and EachNet first formed a strategic relationship in March 2002, at which time eBay acquired a 33% interest in the company.

• In 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.

• 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.
  

  Controversy

Seller Fraud

While eBay has various measures in place to prevent seller fraud, it remains essentially an honor system: buyers send their money to sellers and trust that they will receive the promised goods. Predictably, this has led to frequent problems with seller fraud, including:

• Paying and not receiving for merchandise
• Paying and receiving items other than those ordered
• PayPal fraud
• Credit card fraud with information illegally acquired via an eBay auction.
• Fake goods. Most clothing items on eBay which are new are fake and often come from China, Bulgaria, Turkey etc.
  

  Other Controversies

• On 28 May 2003 a U.S. 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. This decision is currently (November, 2004) under appeal.

• 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 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 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 is strongly supporting Baazee.
  

  See also

• Electronic commerce
• Online auction business model

Further reading