Ebay Assignment

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Assignment No 3

Assignment No 3

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Submitted by

Group 10

Group 10

Udita Banik 1527360

Udita Banik 1527360

Pravin Shinde 1527229

Pravin Shinde 1527229

Beauty Singh 1527242

Beauty Singh 1527242

Karthik Kumar 1527132

Karthik Kumar 1527132

Simran Batra 1527161

Simran Batra 1527161

Reetika 1527353

Reetika 1527353

Udharshini 1527359

Udharshini 1527359



 Looking for Pez Dispensers: 1995



Paris- born Pierre Omidyar, who immigrated with his family to the United States when he was six, graduated from Tufts University in 1988 with a degree in computer science. While at Tufts, Omidyar met his future wife, Pam, who had an unusual hobby: she collected and traded Pez candy dispensers. When Pam complained it was hard to find people with similar interests, Omidyar decided to create a small online auction service. AuctionWeb was launched Labor Day weekend in 1995. Set up as a sole proprietorship in San Jose, California, the online bazaar was considered a "grand experiment" by its creator. Little did he know the impact his brainchild would have on the Internet, auctions, and corporate history.

At the time he launched AuctionWeb, Omidyar was working at the General Magic Corporation as a software developer. His background included cofounding Ink Development Corp., which became eShop, a pioneer of online shopping before it was bought by Microsoft. Omidyar also developed consumer applications for Claris, a subsidiary of Apple Computer, and had even written a software  program for his high school library at the age of 14.

For the first five months of AuctionWeb's existence, Omidyar offered the new service for free,  building a base of buyers and sellers through word of mouth. In May 1996 he incorporated eBay

(which stood for "electronic Bay Area"), becoming its chief executive and qu it his day job. By the end of 1996 the company had six employees, including Jerry Skoll, eBay's original president.

 The Concept

Prior to AuctionWeb, online auctions were either business-to-business or business-to-consumer. There was nothing comparable to Omidyar's concept either online or offline; flea markets and yard sales were the most similar kind of person-to-person interaction offered by the precursor of eBa y. Unlike traditional auctions, there was no auctioneer. At AuctionWeb sellers posted information about their items, and buyers were able to browse the site and submit bids by electronic mail (mail). The actual auction for an item was held over three to four days, with bidders receiving e-mail notices when someone made a higher bid. They could then counter the bid or drop out. The winning bidder made arrangements with the seller for payment and shipping.

eBay served the role of a broker; the firm did not own any of the items being sold and was not responsible for distribution. Bidding was free, but it did cost between 25 cents and $2 to list an item for sale, plus a commission of between 2.5 and 5 percent of the sale price. The site was  profitable almost from the beginning, unlike the vast majority of e-commerce sites. Much of the

site's success appeared due to Omidyar's sense of what people wanted: a simple, central location to buy and sell items, and the ability to talk with (and perhaps eventually meet) people with similar interests. From the beginning, eBay's auction service sought to create the sense of an old-fashioned marketplace and encouraged communication between hobbyists and collectors.


During 1996 the site hosted more than 250,000 auctions in some 60 categories including Beanie Babies, stamps, coins, and computers. By the end of the year it was overseeing about 15,000 simultaneous auctions daily, with 2,000 of them new each day. The site received over two million hits a week, and the amount of money exchanged for goods sold exceeded $6 million for the year.

 Fighting Fraud: 1997

The site's popularity continued to increase and in the first quarter of 1997 AuctionWeb saw over 330,000 completed auctions, with the total transaction value of goods sold worth more than $10.2 5 million. Among these items was an original 1959 "Suburban Shopper" Barbie doll, which sold for $7,999. In a May 1997 press release, eBay President Jerry Skoll stated that the growth "clearly demonstrates the receptivity and the eagerness of the general public to participate in online commerce. Our goal is to provide a fun, efficient, and reliable forum for both buyers and sellers." Omidyar and Skoll decided the company needed venture capital and a more experienced management team. In mid-1997 Benchmark Capital, a venture capital firm in Menlo Park, California, put $5 million into the company to acquire a 22 percent stake. With their advice, the company began targeted advertising, renamed itself eBay in September, and launched a second-generation service with a redesigned site. By the end of the year the company had about 340,000 registered users and was hosting approximately 200,000 auctions at any given time. eBay had also established a relationship with America Online Inc. (AOL), and eBay became featured in AOL's Hobby and Classifieds prompts. A year later, in 1998, eBay became the exclusive auctioneer in the Classifieds area, paying AOL a guaranteed $12 million over three years.

Internet fraud soon became a growing concern, with buyers paying for goods that were never delivered. In November 1997 the U.S. Senate's Permanent Subcommittee on Investigations conducted hearings into Internet commerce. The National Consumers League found fraud reports had tripled after it created its Internet Fraud Watch project in March 1996. In addition to false  promises for discounted services and charges for Internet services that were supposed to be free,  people were experiencing problems at auction sites such as eBay as well. Between January and October 1997, Internet Fraud Watch received 141 complaints about auction sites. As Susan Grant of the National Consumers League told Internet World, "The problem basically is that auction sites really don't take responsibility for the sales if they go bad. They merely put the buyer together with the seller."

In the same article, eBay reported it had only 27 disputes from over one million transactions  between May and August 1997. To keep such disputes to a minimum, eBay instituted a feedback

system for buyers to post reviews of their transactions. Sellers were then given a rating based on the number of their successful auctions: positive comments received one point, neutral responses a zero, and negative comments a minus one. Potential buyers were able to read the comments as well as view the rating. A rating of minus four ( – 4) resulted in a seller being denied use of the service.


eBay grew phenomenally, recording gross merchandise sales of $100 million and revenues of $6 million in the first quarter of 1998. The first quarter had become the company's best, as eBay  promoted the auctioning off of unwanted Christmas gifts.

Some competition, however, was beginning to develop. Late 1997 saw the business-to-business auction service OnSale Inc. add person-to-person auctions and the launch of Auction Universe Inc., a web auction firm owned by Los Angeles Times parent Times Mirror Company. During 1998 Auction Universe began providing city-oriented auction sites through a group of affiliated newspapers, each offering its own local auction site (but run by Auction Universe). Such web sites, aimed primarily at the newspapers' local areas, made it easier to auction large items, since it was expensive to ship a used car or a large piece of furniture across the country. It also offered newspapers a way to regain revenues lost when classified ads became too expensive for low cost items.

eBay bought Jump, Inc., the developer and operator of Up4Sale, an advertising-supported trading/auction site, launched in 1997. Planning to use Up4Sale to introduce complementary future services, eBay operated the site as a separate service. In May, Meg Whitman was appointed  president and CEO of eBay, with Pierre Omidyar becoming chairman. Whitman came from Hasbro

Inc.'s preschool division, where she had been general manager. She had previously headed FTD Inc., where she launched its web site and oversaw the transition of the organization from a network of individual florists to a private company. Known for her experience in managing and marketing consumer brands, including Teletubbies and Playskool, Whitman concentrated on raising eBay's  profile through increased advertising aimed at hobbyists and groups of collectors.

Initial Investments

Some Initial Investments of ebay are:

 In 1995, after the traffic increased on ebay site his personal internet account could not

support it. So Omidyar moved eBay to a much more expensive business account which was an initial investment.

 In November 1996, eBay entered into its first third-party licensing deal, with a company

called Electronic Travel Auction to use SmartMarket Technology to sell plane tickets and other travel products. This was one of the major initial investments.

 With growing popularity, in 1998, ebay hired Margaret Whitham as the CEO. She invested

 by creating a new marketing division.

 As the company expanded product categories beyond collectibles into almost any saleable

item, business grew quickly. In February 2002, the company purchased iBazar, a similar European auction web site founded in 1998, and then bought PayPal on October 3, 2002.


Pierre Omidyar

Founder of eBay Inc.

Founded: 1995

" I never had it in mind that I would start a company one day and it would really be successful. I have just been motivated by working on interesting technology."-Pierre Omidyar

Omidyar was born in Paris in 1967, but moved to Baltimore when his father began his medical residence at the Johns Hopkins University Medical Center. A precocious teen, he became interested in computers and would regularly sneak out of physical-education classes to play with his high school's PCs. Rather than punish Omidyar for ditching class, the principal hired him to write a computer program to print catalog cards for the school library at $6 per hour. It wasn't much, but it was a beginning.

In 1991, Pierre and three of his friends founded a company to write programs for the pen-computing market. As a lark, he set up an early e-commerce site called eShop on the company's Web site. Pen computing turned out to be one of the more notable technology flops, but the eShop site proved lucrative enough to attract the attention of Microsoft, who later bought the company. Fed-up with start-ups, Omidyar took a job as a developer relations engineer for software-maker General Magic in 1994, and was making a little money on the side as a freelance Web page designer. It was about this time that he met his spouse-to-be, Pamela Wesley. An avid collector of Pez dispensers, Wesley complained that she was having difficulty finding like-minded souls on the Internet. Eager to help out, Omidyar included a small online auction service on his personal Web page so Wesley could communicate, buy from and sell to other collectors from all over the United States.

Launched on Labor Day 1995, the fledgling auction site which Omidyar dubbed eBay (for "electronic Bay," a reference to the San Francisco Bay area) bore little resemblance to the company that would make Omidyar a fortune. Back then, Omidyar made no guarantees about the goods  being offered, took no responsibility and settled no disputes. He simply offered a place where users

could go online, interact and bid for items.

Much to Omidyar's surprise, collectors of Barbie dolls, Beanie Babies and household junk of all sorts seized upon eBay almost immediately. By February, the site had become so popular that it outgrew Omidyar's personal Internet account. With the help of his friend and fellow computer  programmer Jeff Skoll (who would later become eBay's president) Omidyar moved eBay to a much more expensive business site and to cover his increased costs, began charging a few cents to list an item and collecting a small commission if it was sold.

Unknowingly, Omidyar had tapped one of the richest veins in the online world-the desire of people to connect with others who share their interests. And he quickly realized that few interests generate more passion than collecting. "I thought people would simply use the service to buy and sell


things," he says. "But what they really enjoyed was meeting people." Encouraged by this early success, Omidyar quit his day job, and he and Skoll devoted their time to building eBay's community and technology. The duo rationalized that as long as the system worked, the community (and the profits) would continue to grow. And grow they did. By mid-1997, eBay had become the one of the most visited sites on the Web, with more than 150,000 u sers  bidding on 794,000 auctions every day. The average eBay shopper was spending nearly 3.5 hours  per month on eBay, longer than the average shopper on any other site.

Growth of the Company

 EBay recorded net revenue of $2.14 billion in the period, which was up 3.7% from the

$2.06 billion in the first three months of 2015.

 Analysts projected an average revenue estimate of $2.08 billion and eBay previously stated

that it had expected sales for the quarter to fall between $2.05 billion and $2.1 billion.

 EBay’s ticket reseller subsidiary posted net revenue for the quarter of $177 million, up

34% from the same period last year, while classifieds grew 15% year-over-year with sales of $186 million.

 EBay also said that it grew the number of active buyers, or users that have closed a

transaction in the previous 12 months

 For the first quarter, it said active buyer count was at 162 million, up 4% from the same

 period last year but flat compared to the fourth quarter of 2015. Gross merchandise volume, or the value of goods transacted across eBay’s platforms, came in at $19.58 billion, up half a percentage point from the first three months of 2015.

 EBay expects second quarter net revenue to fall between $2.14 billion and $2.19 billion

compared to an average estimate from analysts of $2.14 billion. The company also  projected adjusted earnings per share to land between 40 cents and 42 cents a share while analysts predicted 44 cents a share. For 2016, eBay expects revenue of $8.6 billion to $8.8  billion, compared to analysts’ average estimate of $8.73 billion.

 EBay’s shares briefly climbed  more than 4% in after-hours trading before falling back

down toward Tuesday’s closing price of $24.49. Since the start of 2016, the company’s stock has fallen nearly 11%.


Life Cycle of EBay

In the past, eBay has really focused on optimizing for sales transactions. During the height of this  phase, community-focused initiatives were closed off as a specialized project that really didn't

transcend borders within the company. The company now is entering a new phase:

 Bringing back its social roots to offer a truly social experience for users  Focusing on its product offerings and marketplace platform.

Consumers are engaging in a social product life cycle, where they're engaging their family and friends and also connecting with people that share their interests and inspire them. And what they want is a social marketplace and social shopping experience that is as private or as social as they desire.

Essentially, eBay is now developing products based on the way people purchase items. The traditional purchase funnel also known as the marketing funnel or customer funnel is outlined by five key stages:

 Awareness

 Consideration

 Preference

 Action


 A consumer becomes aware of a product, considers various options or brands, chooses the one she wants, buys that one, and then eventually either repurchases or defects.

EBay considers this product life cycle when taking user feedback and designing products. In 2010, eBay developed one of its first social experiments, Group Gifts, which enabled users to source the power of their social networks to collectively purchase gifts. While it is a lesser-used  product on eBay, the company found that when groups of buyers use it, they are four times more

likely to finish the purchase cycle than if they tried to purchase a group gift otherwise. Recognizing the difficulty of buying event tickets as a group, eBay launched another social  product called “eBay Go Together”. The product enables users to discover tickets as a group,

split the purchase cost, plan the event and discuss the event afterwards, serving as a part of the experience from start to finish.

Venture Capital Investments:

Date Invested In Round Partner(s) Jul, 2015 Giosis $82.1M / Series A  —  Jul, 2015 Qoo10-Indonesia $82M / Series A  —  Sep, 2014 Quikr  $60M / Series G  —  Aug, 2014 ticketstreet $3M / Venture (Lead)  —  Mar, 2014 Quikr  $90M / Series F  —  Feb, 2014 Snapdeal $133.7M / Series D (Lead)  —  Jan, 2014 Volta Industries $1.88M / Seed  —  Dec, 2013 Emissary $2M / Seed  —  Jul, 2013 Appcelerator  $12.1M / Series C  —  Apr, 2013 Bypass Mobile $3.5M / Venture (Lead)  —  Apr, 2013 Snapdeal $50M / Series C (Lead)  —  Jun, 2012 Just Dial $57M / Series E  —  May, 2012 Quikr  $32M / Series E  —  Mar, 2012 Cuturia $200k / Seed  —   Nov, 2011 Appcelerator  $15M / Series C  — 


Date Invested In Round Partner(s) Jul, 2011 Shipwire $6M / Venture (Lead) Jean-Francois

Van Kerckhove May, 2011 Quikr  $8M / Series D  — 

May, 2011  baixing.com $28M / Series C  —  Oct, 2010 Appcelerator  $9M / Series B  —  Mar, 2010 Magento

Commerce $22.5M / Venture (Lead)  —   Nov, 2009 Skype $50M / Debt Financing  —  Sep, 2008 ChannelAdvisor  $20M / Series D  —  May, 2008  baixing.com $23M / Series B  —  Aug, 2007  baixing.com $4M / Series A  —  May, 2007 ChannelAdvisor  $30M / Series C  —  Mar, 2006 Meetup $4.5M / Series C  —  Apr, 2005 ChannelAdvisor  $18M / Series B  —  Apr, 2005  baixing.com $2M / Seed  —  Aug, 2004 Craigslist $13.5M / Venture (Lead)  —  Jan, 2004 ChannelAdvisor  $7M / Series A  —  Mar, 2000 Autotrader  undisclosed amount /Venture (Lead)  —   Nov, 1999 TradeOut.com $22M / Series C (Lead)  — 




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