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COMPANY PROFILE

eBay Inc.

REFERENCE CODE: FCDBE4F6-2C00-4977-BF8F-1865C7FD2F86


PUBLICATION DATE: 13 Aug 2014
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eBay Inc.
TABLE OF CONTENTS

TABLE OF CONTENTS
Company Overview..............................................................................................3
Key Facts...............................................................................................................3
SWOT Analysis.....................................................................................................4

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eBay Inc.
Company Overview

COMPANY OVERVIEW
eBay Inc. (eBay or 'the company') is a global commerce platform. It provides online marketplaces
for the sale of goods and services, as well as online payment services to individuals and businesses.
The company operates in the US, the UK, Germany and other international markets. It is
headquartered in San Jose, California and employed about 33,500 people, including 1,700 temporary
employees, as of December 31, 2013.
The company recorded revenues of $16,047 million in the financial year ended December 2013
(FY2013), an increase of 14% over FY2012. The operating profit of the company was $3,371 million
in FY2013, an increase of 16.7% over FY2012. The net profit was $2,856 million in FY2013, an
increase of 9.5% over FY2012.

KEY FACTS
Head Office

eBay Inc.
2065 Hamilton Avenue
San Jose
California 95125
USA

Phone

1 408 376 7400

Fax
Web Address

http://www.ebayinc.com

Revenue / turnover 16,047.0


(USD Mn)
Financial Year End

December

Employees

33,500

NASDAQ Global
EBAY
Select Market Ticker

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eBay Inc.
SWOT Analysis

SWOT ANALYSIS
eBay is a global commerce platform. It provides online marketplaces for the sale of goods and
services, as well as online payment services to individuals and businesses. The company's strong
market position provides it with a competitive advantage in the market. However, the increasing
pressure on internet retailers to collect sales taxes could discourage customers from shopping at
such online stores, and this could result in loss of sales for eBay.
Strengths

Weaknesses

Efficient business model of marketplaces


Strong market position and brand value
Strong financial results

Increasing sales of counterfeit products

Opportunities

Threats

Rising popularity of online shopping


Rising demand for alternative payment
systems
Increasing focus on display advertising

Increasing pressure to collect sales tax on


merchandise sold through online websites
Increasing internet fraud and the
subsequent problem of litigation
Intense competition

Strengths

Efficient business model of marketplaces


eBay operates through a business model which unites buyers and sellers in an online marketplace.
The marketplaces segment includes the company's core e-commerce platform eBay.com, other
localized sites around the world such as eBay.de and eBay.co.uk, vertical shopping sites such as
StubHub, Fashion, Motors and Half.com, classifieds websites such as Marktplaats.nl and mobile.de,
and advertising services.This business model overcomes the inefficiencies of traditional marketplaces,
which tend to be fragmented and offer a relatively limited variety of goods. This business model also
saves transaction costs per sale due to the absence of intermediaries. In particular, this model has
been successful in addressing markets of new and scarce goods, end-of-life products, and used
and vintage items, which would otherwise be difficult to locate and purchase.
eBay is one of the largest marketplaces in the world, with its gross merchandise volume (total value
of goods sold in all of eBay's marketplaces) of $83,330 million in FY2013. More than 550 million
listings were available on all of eBay's marketplaces websites as of December 31, 2013. eBay's
efficient business model has given it the flexibility and cost efficiency that help it to continuously

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SWOT Analysis

increase the number of members without adding significantly to its cost structure and hence increase
the company's revenue base.
Strong market position and brand value
eBay has a strong market position, which is built on strong brand recognition. In 2014, the company
was ranked among top 10 most valuable US retail brands by an industry source specializing in brand
services and activities. It was also ranked among the world's most valuable 100 brands in 2014 by
another industry source specializing in brand valuation. eBay has focused on increasing its user
base as well as the number of product listings. By the end of 2013, the company had more than 128
million active users, as compared to 94.5 million active users at the end of 2010. An active user is
a person who bid on, bought or listed an item during the preceding 12-month period, excluding users
of Half.com, StubHub, and the company's Korean subsidiary. Increase in the customer base has
been contributing to the growth of the company and it has emerged as one of the largest global
online auction websites with presence in many countries. During weak economic condition, a brand
can act as a very powerful tool, as retailers with a well-positioned brand have the opportunity to
capture a bigger chunk of the market, in terms of customers. Strong market position provides a
competitive advantage and gives eBay considerable bargaining power.
Strong financial results
The company generated strong results during FY2013. eBays enabled commerce volume across
its platforms reached $212 billion in FY2013, an increase of 21% as compared to FY2012. The
company's revenues increased 14% in FY2013 compared to FY2012. The revenue growth was
primarily driven by increases in net revenues from each of its business segments. During FY2013,
the revenues of the marketplaces segment grew by 12% compared to FY2012, driven by an increase
in gross merchandise volume. The payments segment's revenues increased 18.9% in FY2013 over
FY2012, mainly due to a year-over-year increase in net total payment volume of 24% and strong
growth in Bill Me Later. The revenues of the enterprise segment grew by 2.7% in FY2013 compared
to FY2012, driven by a year-over-year increase in merchandise sales of 14%. The company's
profitability also increased significantly. The operating profit and net profit of eBay grew by 16.7%
and 9.5%, respectively, in FY2013 over FY2012. Apart from revenues, the company also generated
significant cash flow. eBay generated cash from operating activities of $5 billion in FY2013, an
increase of 31.6% over FY2012. At the end of FY2013, eBay had total cash and cash equivalents
of $4,494 million. Therefore, strong financial performance will provide the company with financial
flexibility and also helps in expansion activities.

Weaknesses

Increasing sales of counterfeit products


Increase in online sales has led to a growth in the sales of counterfeit products. Sale of counterfeit
products through online commerce platforms like eBay, Amazon.com and others is increasing

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SWOT Analysis

because it is very difficult to trace the identity of the sellers of these goods. Over the years, this has
resulted in various charges of intellectual property rights infringement and has resulted in threatened
and actual litigation against eBay by rights owners, including the lawsuit filed by various brand owners
such as Tiffany & Co, Rolex, Coty Prestige Lancaster Group, Louis Vuitton Malletier, Christian Dior
Couture, L'Oreal, Lancome Parfums et Beaute & Cie and Laboratoire Garnier & Cie. The petitioners
in these cases intend to hold eBay liable for the alleged counterfeit items listed on the company's
sites by third parties. For instance, in 2007, eBay users sold samples of L'Oreal perfumes and
cosmetics that were intended for free distribution, removing outer boxes from perfumes and cosmetics
before selling them via eBay, and selling L'Oreal products intended for markets outside of Europe.
In January 2014, L'Oreal and eBay have settled this dispute. In 2011, the European Court of Justice
stated that under European Union law, national courts can order operators, such as eBay, to take
measures to stop existing infringements of intellectual property rights and to prevent further
infringements. The court ruled that eBay and similar online marketplaces may be liable if their users
sell counterfeit goods through their websites. eBay does not have the required tools to monitor and
weed out such sales. The company is only able to identify counterfeit products after they are listed.
The company is also subject to claims of civil or criminal liability for unlawful activities carried out by
users through its services. In Turkey, local prosecutors and courts are investigating the company's
liability for allegedly illegal actions by users of its Turkish Marketplaces business (GittiGidiyor.com).
In 2012, eBay removed US listing of footwear with religious imagery from its local Indian site. Later
in 2012, a criminal case was filed against eBay in India in regard to these listings. In addition, the
German Federal Supreme Court has ruled that the company should take measures to prevent
prohibited digital versatile discs (DVDs) from being sold on its site to minors. Such instances will
result in customers and public forming a negative perception. It can have a serious bearing on the
company's brand image and also affect its sales.

Opportunities

Rising popularity of online shopping


E-commerce spending has been growing at a steady rate in recent years. Majority of the US
consumers have shifted their shopping habits online due to the convenience and lower prices offered.
Online sales are expected to continue to grow in the years to come. According to the US Department
of Commerce, online retail sales (adjusted for seasonal variation) in the US increased from $168.1
billion in 2010 to $263.4 billion in 2013, representing a compound annual growth rate (CAGR) of
16.1%. e-commerce sales increased 16.6% in 2013 over the previous year. Total retail sales, on
the other hand, grew by only 4.3% during 2013. e-commerce sales accounted for 5.8% of total retail
sales in 2013, compared to 4.4% in 2010. Furthermore, according to industry estimates, online
spending reached $1.2 billion on Black Friday in 2013, an increase of 15% compared to last year's
Black Friday.
A similar trend is noticed in the UK, one of the companys key markets. According to the Office for
National Statistics, non-seasonally adjusted average weekly value for internet retail sales in the UK
was 566.9 million (approximately $886.8 million) in January 2013; this increased to 614.6 million

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SWOT Analysis

(approximately $961.4 million) in January 2014, representing an increase of 8.4%. Internet sales
accounted for 10.5% of the total retail sales (excluding automotive fuel) in January 2013. This figure
increased to 10.7% in January 2014.
Increasing popularity of online spending can help the company attract more customers and increase
its revenues.
Rising demand for alternative payment systems
In the recent years, more and more customers are moving towards making payment through means
other than cards and cash. This is due to increased risk of identity and information thefts. Retailers
are now offering other forms of payment such as debit card processing, PayPal, virtual cash in the
form of Ukash and Paysafecard, inbound bank transfers and payout solutions such as cheques and
bank transfer issuing services and prepaid cards. Growing e-commerce market is driving the growth
of the alternative payment models. Security is also another reason for consumers resorting to
alternative payment methods.
eBay has been expanding its online payment services through strategic acquisitions. The company
acquired PayPal (a web micro payments platform) in 2002, Bill Me Later (an online-oriented payments
brand) in 2008 and Zong (a provider of payments through mobile carrier billing) in 2011. These
acquisitions enabled the company to establish a strong position in online payments market. The
acquisition of BillSAFE a provider of purchase-on-invoice technology), in 2011 further strengthened
the company's position in payments business by combining BillSAFE with PayPal. The company
continues to strengthen its payments business. In 2012, PayPal launched PayPal Here, the first
global mobile payments solution that allows small businesses to accept almost any form of payment.
To further expand PayPals availability as a payment option in stores, PayPal has also entered into
a partnership with Discover Financial Services in the US, and similar relationships with merchant
acquirers and ePOS (electronic point of sale) providers in the US and Europe, in 2012. Further, in
December 2013, eBay acquired Braintree, a global payment platform. Braintrees payment platform
features next generation innovators such as Airbnb, OpenTable, TaskRabbit and Uber.This acquisition
will further strengthen the companys payments segment.
Therefore, the company, through its payment services business, can hugely benefit from this trend.
These payment alternatives enjoy high degree of market penetration due to the well-established
reach of the company's e-commerce platform.
Increasing focus on display advertising
The online display advertising market registered a steady growth rate in the last few years. According
to industry estimates, internet advertising revenues in the US totaled $36.6 billion in 2012, an increase
of 15% compared to 2011. Display-related advertising revenues, the second largest contributor to
online advertising, increased 9% in 2012 compared to 2011. In the first half of 2013, display-related
advertising revenues totaled $6.1 billion, accounting for 30% of the online advertising revenues, and
increased by 9% compared to the first half of 2012. The online advertising market in Europe grew

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by more than 11% in 2012 compared to 2011, while the display advertising market registered a 9%
growth during the same period.
In order to capitalize on this growing market, in 2011, the company selected online ad services
specialist Triad Retail Media to build up its display business. Triad helps eBay sell and manage all
on-site display advertising for eBay.com and eBay Motors. Thus, increasing focus on internet display
advertising and classifieds will help the company generate additional revenues.

Threats

Increasing pressure to collect sales tax on merchandise sold through online websites
The momentum for imposing internet sales tax on merchandise sold on retail websites has been
gaining strength in the recent times. Many US state governments have been facing the problem of
budget deficit. In order to compensate for the deficit, certain state governments have been expanding
the items that can be brought under the taxable spectrum. Accordingly, many state governments
have started collecting tax on merchandise sold through internet. Besides budget deficit, other factors
such as stiff resistance from brick-and-mortar stores have also been playing force to intensify the
imposition of sales tax on merchandise sold on internet. Consequently, online retailers have come
under pressure in various states. In May 2013, the US Senate passed the Marketplace Fairness
Act, which requires all online retailers with revenues of $1 million a year or more outside their home
states to collect sales taxes for the states where they ship goods. This could affect eBay's many
sellers who do more than $1 million business in out-of-state annually. In a letter to eBay sellers, the
company suggested that the law should exempt taxes for any business with less than 50 employees
or that make less than $10 million a year in out-of-state sales. Increasing pressure to collect sales
tax on merchandise sold by the company through its websites could force customers to migrate to
other retailers offering similar goods at comparable price.
Increasing internet fraud and the subsequent problem of litigation
Online marketplaces have a high exposure to different types of internet fraud. There are various
types of internet fraud, including sale of fake or counterfeit products, credit card fraud or non-delivery
of goods, etc. According to Internet Crime Complaint Center's (IC3) statistics, internet fraud has
been on a rise. During 2012, IC3 registered 289,874 complaints. The total loss due to these frauds
grew by 8.3% over the previous year. eBay has constantly been involved in long trials related to
various internet frauds. Internet frauds are difficult to curb as they are often obscure and place the
company in a vulnerable position. Effectively eliminating frauds is costly as the company has to incur
large recurring expenses to monitor and prevent such frauds. In case the company gets involved in
any litigation, then it would have to incur legal expenses and there is a possibility that heavy penalty
or compensation has to be paid. Internet fraud may also affect the brand image of eBay adversely
and might dissuade online shoppers. These factors could prove to be unfavorable for eBay's business
and could affect both its revenues and bottom line.

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SWOT Analysis

Intense competition
eBay operates in highly competitive market. The company's marketplaces segment faces competition
from traditional department, warehouse, boutique, discount and general merchandise stores (as
well as the online and mobile operations of these traditional retailers), online retailers and their
related mobile offerings, online and offline classified services, and other shopping channels such
as offline and online home shopping networks. In the US, these include Wal-Mart, Target, Sears,
Macy's, JC Penney, Costco, Office Depot, Staples, Amazon.com, Buy.com, Yahoo! Shopping, MSN,
QVC and Home Shopping Network, among others. eBay's online shopping comparison site, eBay
Commerce Network, competes with sites such as Google Shopping, Bing Shopping, Buy.com,
Nextag.com, Pricegrabber.com, Shopzilla, Buscape in Latin America (owned by Naspers) and Yahoo!
Product Search. The international sites of the company also compete for sellers with general online
e-commerce sites such as Amazon, Rakuten.de, Quelle and Otto in Germany; Leboncoin.fr and
PriceMinister (owned by Rakuten) in France; Taobao Marketplace and Taobao Mall in China; Tradus
(owned by Naspers) in Poland; Yahoo-Kimo in Taiwan; Lotte, Naver and 11th Street in South Korea;
Trading Post and Quicksales in Australia; and Amazon and Play.com (owned by Rakuten) in the
UK and other countries.
PayPal faces competition from providers of traditional payment methods and digital wallets,
payment-card processors, Amazon Payments, providers of mobile payments, money remitters, bill
payment services, online payment-services providers, and other providers of online account-based
payments. Some of these competitors include American Express's Serve, Barclays Merchant Services,
MoneyGram, and CheckFree, among others.The enterprise segment's e-commerce services business
faces competition from in-house e-commerce solutions, technology and service providers that supply
one or more components of an e-commerce solution, and other providers of integrated e-commerce
solutions. The competitors for the enterprise segment include IBM, Omnicom Group, and ValueClick,
among others. Increased competition could affect the revenue growth and profitability of eBay.

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