"I got it on eBay" has barreled its way into the lexicon of the new millennium, placing a cyber-grin on the corporate face of this online auctioneer. Trading about $2,000 worth of goods every second, eBay offers an online forum for selling merchandise worldwide, from fine antiques to the latest video games. eBay generates revenue through listing and selling fees and through advertising, and boasts more than 120 million users. Its online payments assets consist of PayPal and Bill Me Later; other e-commerce platforms include StubHub and Half.com. eBay also has a mobile version of its service, and owns e-commerce services provider GSI Commerce, as well as a minority stake in online classifieds service craigslist.
More than half of eBay's revenues are generated outside the US. eBay has a strong focus on Europe. Its top-earning foreign markets include Germany, the UK, and Canada. The company's classified websites are available in more than 1,000 cities around the world, and PayPal allows customers with credit cards to send payments from 190 markets and in 25 currencies.
eBay operates through three segments: Marketplaces, Payments, and GSI. More than half of the company's revenue comes from its Marketplaces segment.
Its flagship eBay.com auction site is part of Marketplaces, whose websites consist of some 300 million listings in all. Marketplaces also houses Shopping.com and Half.com, as well as the StubHub ticketing business. In addition, the business segment is active in the global classifieds market through its eBay Classifieds Group, which complements eBay's minority stake in craigslist.
Meanwhile, its Payments segment is anchored by eBay's PayPal business, which boasted about 106 million registered users at the end of 2011. Payments also includes Bill Me Later, a service that processes deferred payments, and services both consumers and merchants such as Borders, Continental Airlines, and Walmart.com. Another component of Payments is mobile payments provider Zong.
eBay's GSI segment includes the e-commerce and interactive marketing services provided by GSI Commerce. The business offers website development and maintenance, order fulfillment, interactive marketing, and customer service functions, among others.
In addition to its three segments, eBay also operates X.Commerce, a platform for developers that is designed to house all of the company's major commerce and developer tools. With X.Commerce, developers can build commerce services such as virtual shopping carts, payment services, inventory control, and tax management. eBay’s developer community includes more than 800,000 members.
Sales and Marketing
eBay spent more than $1.1 billion on advertising during fiscal 2012 after spending $977 million in fiscal 2011 and $808 million back in fiscal 2010.
eBay’s revenue increased by 21% in fiscal 2012 compared to 2011, driven primarily by increases in net revenues from each of company’s business segments. Marketplaces segment revenues increased some $756 million, or 11%. Its Payments segment revenues increased $1.2 billion, or 26%. The GSI segment (acquired on June 17, 2011) reported revenue of $1.1 billion for fiscal 2012.
Even with the increased revenue the company’s profits declined by 19% in fiscal 2012 due to increased operating cost which includes sales and marketing, product development, and other administrative expenses.
Whether online, through the mobile channel, or offline, eBay’s monetization strategy remains the same. The company is primarily a transaction-based business model that generates revenue through its commerce and payments platforms. The company also generates revenue through marketing services, classifieds, and advertising.
eBay and credit card issuer Discover Financial services agreed to a partnership in 2012 that will enable some 50 million customers to use their online accounts at more than seven million bricks-and-mortar stores. Beginning in 2013, PayPal will issue cards that will allow users to make purchases from merchants on Discover's network using PayPal as they would other forms of payment. The partnership is an extension of PayPal's existing agreements with more than a dozen retailers such as Abercrombie & Fitch, Barnes & Noble, and Home Depot.
Mergers and Acquisitions
In 2012 eBay acquired additional shares in GittiGidiyor, the leading online marketplace in Turkey. The deal follows eBay's acquisition of a minority stake in the company back in 2007. eBay now owns approximately 93% of the outstanding shares of GittiGidiyor.
One of eBay's biggest acquisitions to date was the purchase of GSI Commerce in 2011, in a cash-and-debt deal valued at a whopping $2.4 billion. The company made the deal to gain new ground against Amazon.com, a chief rival it had in common with GSI. The purchase not only improved eBay's Marketplaces business, but it also extended its relationships with larger retailers. GSI clients included Adidas, Calvin Klein, Betsey Johnson, and Kenneth Cole.
To enhance its position in the cutting-edge mobile market, in 2011 eBay acquired cell phone payments provider Zong for about $240 million. With Zong, PayPal can offer its users the ability to fund their accounts through their mobile phones. eBay also owns mobile business Critical Path, an application developer that it acquired in 2010. With these assets, eBay is working to capitalize on the growing numbers of consumers who are shopping on their smart phones.
Back in 2010 the company acquired all of the remaining shares of brands4friends, Germany's largest online shopping club for fashion and lifestyle, for cash at a transaction value of approximately $200 million. The move was designed to strengthen eBay's position as a leading online fashion destination in Europe.
Company founder and chairman Pierre M. Omidyar owns about 10% of eBay.