EBay, the World’s Online Marketplace®

Introduction and Methods: eBay, The World’s Online Marketplace®

eBay, The World’s Online Marketplace®, headquarted in San Jose, California, was founded in 1995 as an online, person-to-person auction site. The organization’s new mission is simple: “to provide a global trading platform where practically anyone can trade practically anything.” eBay has become an Internet sensation. It is one of only a handful of truly successful ecommerce ventures. People spend more time on eBay than any other space on the Internet. It is also the most popular online shopping destination in the world.

Today, November 10, 2003, there are more than 16 million items up for auction listed across 27,000 categories on the position. eBay has more than 65 million registered members in more than 150 countries and operates sites in 27 countries in addition to the United States. The company employs over 5,000 people worldwide. Over 150,000 people run small businesses (eBay Stores) and make their living selling full-time on eBay. 5.5 million unique users will visit eBay today.

eBay is not an auction house, but rather a diverse “online trading community” of individuals and businesses. Most of the selling on eBay occurs in an auction or “Buy It Now” format. The “Buy It Now” format allows sellers to accelerate the auction process by offering a position price at which a buyer can acquire the item without going through a bidding process.

The trading eBay process is very simple. It begins when a seller posts an item for sale. Posting fees are charged at this time; but for as little as 30 cents, a seller can list an item and market it to millions of potential buyers. Bidders win an auction with either “Buy It Now” or when the auction ends and he or she is the highest bidder. At this point, the buyer and the seller make payment and shipping arrangements.

After payment is made and the item is delivered, the buyer and seller leave “feedback” for each other in eBay’s Feedback Forum. Positive, negative and neutral feedback comments are tallied to create an evolving reputation score. This feedback system and the policies that govern its use are designed to relieve an open and honest trading community. Many users, especially PowerSellers who use eBay to run an online business, have feedback ratings in the thousands, meaning that thousands of people have had a sure experience trading with a particular member.

Sales Promotions and Public Relations Objectives

Owing to the uniqueness of the trading community concept, eBay has an recent approach to sales promotion and public relations. eBay has created the largest and one of the most loyal trading communities on the Internet. This has been accomplished through the creation of marketplace conditions that promote successful business transactions among users.

Paramount among eBay’s sales promotions objectives is to offer incentives to users, which provide a “faster, easier and safer” online trading experience for both buyers and sellers. eBay accomplishes this by continuing to create and shape their payment services, expand geographically, grow auction categories in both number and size, enhance customer service offerings, develop a personalized shopping experience, and concentrate sales promotion efforts on the company’s primary partners, those sellers who form their living on eBay.

Throughout their short history, eBay has utilized a variety of push and pull sales strategies. For example, whenever a hot new item hits the market, such as the newest fad toy, maybe Furby or memorabilia associated with a sporting event such as The World Series, eBay creates a homepage for that specific category and “pulls” customers to that site from the homepage. One might visit eBay not knowing that they want a framed, autographed photograph of Celia Cruz, but because she has recently died, and because eBay has it’s finger on the pulse of popular culture, Celia Cruz memorabilia has taken center-stage and the photograph is suddenly a “must-have” item.

eBay has also developed a number of ways to incentive-ize their users to “sell, sell, sell.” After all, this is the primary blueprint in which eBay generates revenues. In 2002 alone, eBay users listed 638 million items for sale (51% increase over 2001 numbers). Cross merchandise sales (that being the value of all items sold on eBay) totaled nearly $15 billion for the same year. Revenues generated by those sales and modest on-site advertising sales totaled $1.21 billion for the year. Only $61 million of the $1.21 billion total revenues, or 5%, was gained through the sale of ads on eBay.

eBay also utilizes an aggressive public relations program to keep in constant contact with users and potential users. The eBay community is thriving on the successes of the company and the environment that the success has promoted. eBay promotes a wealth of access points to management such as suggestion programs, newsletters, community incentives, and a newly established trader conference held annually in Orlando, Florida.

Additionally, eBay established a foundation in 1998 with the donation of 643,500 shares of common stock to a tax-exempt public charity. Since it’s founding, the eBay Foundation has made millions of dollars in grants to programs focused on education and expanded access to technology.

eBay’s Successful Media Mix

Throughout its eight years of operation, eBay’s number one marketing tool has been word-of-mouth among users and non-users. This simple fact makes eBay an advertising anomaly among eCommerce ventures. At one point in time eBay seemed like the world’s best-kept secret. Now, less than a decade old, eBay is a household word. It holds a place in history as the world’s most incredible branding success story.

eBay is increasingly exploring methods to drive new or lost users to its site. It seems that management has an “okay, we have the money” attitude about utilizing a strategic marketing mix to boost both listings and sales.

Their latest advertising arrangement is something they are calling “Keywords on eBay.” This program was incepted in June, 2003 after a test program showed that a site-wide launch would prove to drive sales and serve as a source of non-competitive advertising revenues. Keywords works mainly as a plot for eBay users to advertise on the site, but some outside advertisers can buy ads as well.

The following is an example of how Keywords works. A user is in the market for a camera. He types “camera” into the eBay search engine. When the search returns the results, a banner ad pops up featuring a camera auction for the seller who purchased the keyword “camera.” If no one purchased that word, an ad for an outside user in a completely unrelated category, say carpet, pops up. This program is proving to be a fantastic success in the few short months it has been in utilize. Further, it is so subtle that most users do not notice the change.

eBay uses a host of other media in their efforts to drive up user ship. eBay partners with AOL, MSN and Disney to buy advertising and search result position on each of their sites. They also consume a company called Commission Junction to buy placements on thousands of web pages. These Internet advertising methods have proven to be a great source of exposure for eBay.

eBay partners with their biggest sellers to utilize their methods of personal selling and print advertising. For example, eBay has various co-op advertising programs that reimburse eBay sellers for their print advertising expenses. eBay believes that when a microscopic business that uses eBay to transact all of their sales advertises itself, they are also advertising eBay, and should be encouraged to advertise more by being reimbursed for the service. This co-op program is mutually beneficial and has received wide support since its inception in June, 2003.

To name just a few more media outlets eBay uses, they advertises on the television and radio. Their most recent campaign features a parody of the 1948 Frank Sinatra song, “I Did It My Way” by featuring people singing “Do It eBay!.” They have recently partnered with MBNA to send MasterCard applications featuring an eBay points rewards program to 2 million eBay users. And they are forging marketing relationships with completely unrelated industries such as Dr. Pepper/Seven Up on games and other programs to drive new market segments to eBay. These campaigns are too young as yet to be able to gage their impact on eBay user ship.

Recommendations / Future Media

I have been an eBay user since 1996 when I got into collecting Walt Disney World 25th Anniversary merchandise and ephemera. eBay was the most amazing thing I had ever seen, and in many ways it still is. What I find most incredible now is that no other company, no imitator, can touch it. They are controlling market share legally; not in the monopoly sense as we say with Microsoft or AT&T.

I hold that eBay is on the proper course for 2003. In their letter to shareholders on their 2002 Annual Portray they pledged that they would “focus heavily on marketing and promotional activities to accelerate trading on the site.” To date, they seem to have made serious inroads into marketing. Novel campaigns, new co-op programs, new sales promotions and selling incentives; all of their integrated communications efforts are focused on the common goal of driving users to the situation.

Any recommendations I have for the eBay management would be to continue doing what they are already doing. Focus on the community. Use the sellers who are interested in making money on eBay to help generate revenues for eBay. If the users succeed, eBay succeeds.

I also believe that the TV spots which, feature people collecting the uncommon and wonderful things you seem to only find on eBay, are the perfect way for the company to get back to basics. Bring the eCommerce playground that eBay has become for PowerSellers back around to being the online trading community founded and made profitable by the collector in all of us.