1. Online Auction Business Model NeBCC Autumn 2008 SEMC 06 Transferable Skills Carol Shen Jung Pai

2. Introduction: Current Research Interests –Online auction platform’s feasibility in the current and future markets –eBay’s strength and weakness –Rival: Amazon.com –Recommend some solutions to solve eBay’s existing problems and to secure eBay’s leading position in the action market

3. Online Action Environment Thanks to technology Online sales estimate: ￡ 19.5 billion in 2008 Online store (Amazon) vs. Online Auction (eBay) Price-driven competitive market Buyer: Easier, faster, and more convenient Seller: save on operating and overhead costs, more potential customers

4. eBay The leader of the online auction markets Founded by Pierre Omidyar in 1995 Auction: matches sellers and buyer’s needs Millions of products listed and sold everyday

5. eBay Facts

6. Companies Related to eBay PayPal –online money transfer –Middleware between seller and buyer Skype –Ease the communication between seller and buyer through chat, phone, and video conferencing

7. eBay’s Revenue Diversification

8. eBay’s Strength Current leader in the online auction market – fame and popularity 309 million registered users 39 localized websites with 28 different languages Cooperate with other Skype and PayPal Marketing features - boost up sales

9. eBay’s Weakness Fraud ( <0.1% on total transactions) Identity theft (needs to strength security and privacy protection) Competitive rival: amazon.com Loop holes in the feedback system Limited control over buyers and sellers – mainly rely on mutual trust

10. Problem 1: Fraud Accounts Most serious problem on eBay Registered with false personal information Fraudulent sellers: –Listed false descriptions –Do not possess the items that listed –Fake feedback history –Collect money from the buyers and then disappear from eBay or register with another user ID

11. Solutions to Problem 1 Limit one account per person (request personal ID: SS# or drivers license discourage payments with cash, cheques, bank transfers, and direct debit / credit card Encourage paying with PayPal Enhance buyer protection policies Categorized feedback system – grouping feedbacks by transaction prices

12. Problem 2: Unauthorized Access / Identity Theft Hackers try to break in other users’ accounts – for financial rewards or for FUN? Methods of break-in 1.Guess password – least technical 2.Use “I forgot my password” features 3.Break into eBay’s member database system – most technical

13. Solutions for Problem 2 Guess password and use “I forgot my password” features can be solved easily – changing password frequently, combination of letters and numbers, notify the user through e- mail when password is requested Break into eBay’s database Safer security system – block all potential hackers Firewalls –physical and software – strict access Security software – keep undated

14. Problem 3: Quality Control To protect the buyers Difficult to regulate: no one will check the products physically if they match the descriptions – based on mutual trusts Problems: Law-suits –Ex. Louis Vuitton suits eBay for allowing the sellers to sell fake items on eBay

15. Solutions to Problem 3 Quality control system (different for each category) –Luxury items: source and proof of purchase if necessary –High-value listings (properties, automobiles): work with appraisal or credit check companies –Second-hand products: grading scales to reveal the true condition of the products

16. Problem 4: Database Storage Needs to store massive database in a secure environment –84.5 millions active users –112 million listings at any given time worldwide –Localized websites in 39 countries Efficiency vs. costs vs. security

17. Solution to Problem 4 Currently uses Sun Microsystems’ Sun Fire T2000, X4100 servers, and Solaris 10. –Negotiate a better deal: customized software and date storage system (feasibility & efficiency) US – primary marketplace (>50% transactions) –Keep stability, security, and speed –Invest heavily – perhaps supercomputer International marketplace –Clusters or grids depends on the country –Joint venture with local IT infrastructure companies

18. Conclusion Challenge of the rival (amazon.com) –Declined revenue in 2007 (Amazon’s revenue ↑41%) –Amazon: warehouse, guaranteed delivery, efficient (fixed low cost – no need to wait) Methods to ensure eBay’s leading position –Launch e-stores with other warehouses and brands Future Market trend –eBay’s online auction market (both US and international) - slow growth rate –Revenue growth mostly from: Communication transaction – Skype Payment transaction – PayPal –Invest in the Fast growth markets instead of slow growing ones

19. Bibliography Ackerman, Elise. “eBay’s Biggest challenge: Amazon.com.” San Jose Mercury News. 27 Aug. 2008. Pop Matters. 07 Nov. 2008. “eBay” 2008. Wikipedia. 20 Oct. 2008. “eBay Inc.: A Short History.” ebay Media Center. 2008. eBay Inc. 18 Oct. 2008. “eBay Drives Explosive Growth using Sun Technology and Sun Services.” Customer Snapshot: Technology – eBay. 2008. Sun Microsystems. 06 Nov. 2008. “eBay Inc. Reports Third Quarter 2008 Results.” Fast Facts. 2008. eBay Inc. 06 Nov. 2008 <http://files.shareholder.com/downloads/EBAYPRESS/451409559x 0x204060/29A0BEDF-A666-4654-B1E4-C1D6DDC294A8/eBayIncFactsheet.pdf>. “eBay Marketplaces Fast Facts.” Fast Facts. 2008. eBay Inc. 06 Nov 2008 http://files.shareholder.com/downloads/EBAYPRESS/451409559x0x223370/C99E1580-C708-46FA-A1B5- 3FB94A64ABB2/eBayMarketplacesFastFacts.pdf “Online Action Business Model.” 2008. Wikipedia. 25 Sept. 2008. “Online Shopping Continues to Boom.” 16 April 2008. Which News. 28 Oct. 2008.http://www.which.co.uk/news/2008/04/online-shopping-continues-to-boom-136546.jsp>. “PayPal.” Security and Resolution Center. 2008. eBay Inc. 02 Nov. 2008.. “Registration & Sign In.” Help. 2008. eBay Inc. 01 Nov, 2008.http://pages.ebay.com/help/account/registration.html#

20. Thank You Q&A