Sean Thornton
Professor Paturi
CSE 91
20 November 2005
A Look Into eBay’s Business Model
The History
EBay is one of the world’s premiere online marketplaces connecting buyers and
sellers from around the world. The company was originally founded in 1995 by Pierre
Omidyar as part of a larger personal website. The website was owned by Omidyar’s
company Echo Bay Technology Group where eBay was initially called “AuctionWeb”
(Bjornsson). The “AuctionWeb” was later moved to eBay.com because the site
EchoBay.com was unavailable and thus the name eBay was born (Wikipedia). The
phenomenon of eBay’s success is based on its almost unique offering that allows people
to sell products without ever having to meet their customers who can be thousands of
miles away. EBay was one of the first auction based websites. This allowed the
company to create a large customer base before anyone else. Later, companies such as
Amazon.com and Yahoo! Auctions offered similar services at a cheaper price. However,
these companies were unable to attract eBay’s users. EBay’s business model is based on
its ability to effectively connect buyers and sellers. As of the third quarter in 2005, eBay
had a total of 168.1 million users and 458.6 million auction listings from the year before
(Red Herring).
Strengths & Weaknesses
The internet auction business model has many strengths. However, these
strengths are only available to the first few companies who use them. One of the greatest
strengths is that there is no immediate time restraint. Buyers have ample time to decide if
they want to bid on a product. With an internet auction, there is almost no restriction on
who in the world can buy it. This also allows for more people to see it than if it was at a
normal auction house (Wikipedia). This globalization attracts large numbers of buyers
and sellers. The buyers are looking for a wide variety of items at a cheap price while the
sellers are looking for a market for their goods where there ar