Businessmodel of eBay

Customer Segments

eBay has a multi-sided business model, with two interdependent customer segments that are both needed in order to operate:

• Sellers: Individuals or businesses who put items up for auction.
• Buyers: Individuals who bid on items up for auction. ### Value Proposition

eBay offers four primary value propositions: accessibility, customization, risk reduction, and brand/status.

The company creates accessibility by providing a channel through which individuals can obtain items that might be difficult to find in brick-and-mortar venues or elsewhere. It also provides sellers with a customer base for such items.

The company’s platform enables users to personalize their usage in a number of ways. Sellers can list their products and services either through fixed-price listings (featuring a pre-determined price) or an auction-style format (featuring a minimum price for opening bids). Sellers can also specify item condition in a wide variety of ways, including new, used, refurbished, rare, branded, and unbranded. Lastly, buyers can either have items shipped to them or pick them up from a retailer’s physical store.

The company reduces risk for users through a number of special programs. For example, the eBay Money Back Guarantee protects buyers of qualified products when the items are not received or do not match their description. Other programs include Seller Performance Standards, Verified Rights Owner Program, and Feedback Forum. These help to create a sense of trust and safety for users.

The company has a strong brand. It is one of the first online auction sites, so it is well-established. It is also the largest online marketplace in the world, with over 800 million items listed as of December 2015.  About 59% of its Gross Merchandise Volume (GMV) is generated outside of the U.S.

Channels

eBay’s main channel is its website, through which it acquires users. The company also recruits customers through a mobile app. Furthermore, it promotes its offering through online (display, paid search, and affiliate) advertising and offline brand campaigns.

Customer Relationships

eBay’s customer relationship is primarily of a self-service, automated nature. Customers utilize the service through the main platform while having limited interaction with employees. The company’s website features a “Help” section with detailed answers to potential questions.

That said, there is a personal assistance component as the eBay offers phone and online chat support.

Key Activities

eBay’s business model entails maintaining a common platform between two parties: sellers and buyers.

Key Partners

eBay has two key partnerships:

• Shipping Partners: The company maintains alliances with USPS, UPS, and FedEx through which sellers can receive special discounts on shipping.
• Partner Network: The company maintains an affiliate marketing program. Sites that advertise its service, drive traffic towards it, and convert the visit into a purchase or winning bid earn a percentage of eBay’s revenue as a commission. ### Key Resources

eBay’s main resource is its proprietary software platform that connects buyers and sellers. The company also depends upon technology and engineering staff to maintain and update the platform. Lastly, it relies heavily on sales/marketing staff to promote and sell its offerings.

Cost Structure

eBay has a cost-driven structure, aiming to minimize expenses through significant automation and low-price value propositions. The size of its platforms are designed to enable users to leverage its economies of scale, e.g. in customer service and customer acquisition.

The company’s biggest cost driver is sales/marketing expenses, a fixed cost. Other major drivers are in the areas of administration and product development, both fixed costs.

Revenue Streams

eBay has two revenue streams:

• Net Transaction Revenues - The company generates revenues from three types of fees charged to sellers: listing fees, final value fees (fees payable on closed transactions), and other service fees.
• Marketing Services and Other Revenues - The company generates revenues from ad sales, marketing service fees, and lead referral fees, among others.