eBay North First Street satellite office campus (home to PayPal)
eBay Inc. (NASDAQ: EBAY) is an AmericanInternet company that manages ebay.com, an online auction and shopping website where people and businesses buy and sell goods and services worldwide. eBay Inc also owns PayPal, Skype, and other businesses.
The very first item sold on eBay was a broken laser pointer for $14.83. Astonished, he contacted the winning bidder and asked if he understood that the laser pointer was broken. In his responding email, the buyer explained: "I'm a collector of broken laser pointers."[2] The frequently repeated story that eBay was founded to help Omidyar's fiancée trade PEZ Candy dispensers was fabricated by a public relations manager in 1997 to interest the media. This was revealed in Adam Cohen's 2002 book[3] and confirmed by eBay.
Chris Agarpao was hired as eBay's first employee and Jeff Skoll was hired as the first president of the company in 1996. In November 1996, eBay entered into its first third-party licensing deal, with a company called Electronic Travel Auction to use SmartMarket Technology to sell plane tickets and other travel products. The company officially changed the name of its service from AuctionWeb to eBay in September 1997. Originally, the site belonged to Echo Bay Technology Group, Omidyar's consulting firm. Omidyar had tried to register the domain name EchoBay.com but found it already taken by the Echo Bay Mines, a gold mining company, so he shortened it to his second choice, eBay.com.[citation needed]
Items and services
Millions of collectibles, appliances, computers, furniture, equipment, vehicles, and other miscellaneous items are listed, bought, and sold daily. In 2004, eBay launched its Business & Industrial category, breaking into the industrial surplus business. Some items are rare and valuable, while many others are dusty gizmos that would have been discarded if not for the thousands of eager bidders worldwide. Anything can be sold as long as it is not illegal or does not violate the eBay Prohibited and Restricted Items policy.[4] Services and intangibles can be sold too. Large international companies, such as IBM, sell their newest products and offer services on eBay using competitive auctions and fixed-priced storefronts. Regional searches of the database make shipping slightly faster and cheaper. Separate eBay sites such as eBay US and eBay UK allow the users to trade using the local currency as an additional option to PayPal. Software developers can create applications that integrate with eBay through the eBay API by joining the eBay Developers Program.[5] As of June 2005, there were over 15,000 members in the eBay Developers Program, comprising a broad range of companies creating software applications to support eBay buyers and sellers as well as eBay Affiliates.
Controversy has arisen over certain items put up for bid. For instance, in late 1999 a man offered one of his kidneys for auction on eBay, attempting to profit from the potentially lucrative (and, in the United States, illegal) market for transplantable human organs. On other occasions, people and even entire towns have been listed, often as a joke or to garner free publicity. In general, the company removes auctions that violate its terms of service agreement within a short time after hearing of the auction from an outsider; the company's policy is to not pre-approve transactions. eBay is also an easy place for unscrupulous sellers to market counterfeit merchandise, which can be difficult for novice buyers to distinguish without careful study of the auction description.
HQ Community Building lobby, with PEZ dispenser display wall.
Since their introduction in 2002, eBay Stores have opened up ecommerce for eBay sellers and a way to have access to over 200 million shoppers worldwide.
eBay stores can be set up in a few minutes with subscription fees ranging from $15.95 for the basic store to $49.95 for a features store to $499.95 for an anchor store. The stores can be customized by the owner in various ways and sellers can showcase their items in the eBay store and sell at a fixed “buy it now” price.
eBay stores also offers several tools for promotion such as a newsletter, search engine keyword management, listing fees and a referral credit for external links coming in to the eBay store.
It is also possible for users to customize the look and feel of the eBay Stores to use their own HTML and images to better brand their eBay Store.
In April of 2006, eBay opened its new eBay Express site, which is designed to work like a standard Internet shopping site to consumers with United States addresses.(eBay Express) Selected eBay items are mirrored on eBay Express where buyers shop using a shopping cart to purchase from multiple sellers. The UK version was launched to eBay members in mid October 2006 (eBay Express UK), and differs from the US version by only offering brand new items from pre-vetted business sellers. The German version was also opened in 2006 (eBay Express Germany).
eBay Blogs and the eBay Community Wiki
In June of 2006, eBay added an eBay Community Wiki and eBay Blogs to its Community Content which also includes the Discussion Boards, Groups, Answer Center, Chat Rooms and Reviews & Guides.
Turbo Lister
Turbo Lister 2 is a software tool designed by eBay to streamline the process of creating large numbers of listings. It is provided as a free download for eBay users. [1]
eBay generates revenue from a number of fees. The eBay fee system is quite complex; there are fees to list a product and fees when the product sells, plus several optional fees, all based on various factors and scales. The U.S.-based ebay.com takes $0.20 to $80 per listing and 2–8% of the final price (as of 2006). The UK based ebay.co.uk (ebay.co.uk offices) takes from GBP £0.15 to a maximum rate of GBP £3 per 100 for an ordinary listing and from 0.75% to 5.25% of the final price. In addition, eBay now owns the PayPal payment system which has fees of its own.
Under current U.S. law, a state cannot require sellers located outside the state to collect a sales tax, making deals more attractive to buyers.
The company's current business strategy includes increasing revenue by increasing international trade within the eBay system. eBay has already expanded to almost two dozen countries including China and India. The only places where expansion failed were Taiwan and Japan, where Yahoo! had a head start.
In July, 2002 eBay acquired PayPal, for $1.5 billion in stock.
On January 312003, eBay acquired CARad.com, an auction management service for car dealers.
On July 112003 eBay Inc. acquired EachNet, a leading ecommerce company in China, paying approximately $150 million in cash.
On June 222004, eBay acquired all outstanding shares of Baazee.com, an Indian auction site for approximately US $50 million in cash, plus acquisition costs. Baazee.com subsequently became eBay India.
On August 132004, eBay took a 25% stake in Craigslist by buying out an existing shareholder who was once a Craigslist employee.
In September 2004, eBay moved forward on its acquisition of Korean rival Internet Auction Co. (IAC), buying nearly 3 million shares of the Korean online trading company for 125,000 Korean won (about US$109) per share.
In November 2004, eBay acquired Marktplaats.nl for €225 million. This was a Dutch competitor which had an 80% market share in the Netherlands, by concentrating more on small ads than actual auctions. Marktplaats is the Dutch word for Marketplace.
On December 162004, eBay acquired Rent.com for $415 million in cash (original deal was for $385 million of the amount in eBay stock plus $30 million in cash).
In May 2005, eBay acquired Gumtree, a network of UK local city classifieds sites.
On May 182005, eBay acquired the Spanish classifieds site Loquo.
In June 2005, eBay acquired Shopping.com, an online comparison site for $635 million.
At the end of June 2005, eBay acquired the German language classifieds site Opus Forum.
In September 2005, eBay bought Skype, a VoIP company, for $2.6 billion in stock and cash.
In April 2006, eBay invested $2 million in the Meetup social networking site.[7]
In April 2006, eBay acquired Tradera.com, Sweden's leading online auction-style marketplace for $48 Million.
In August 2006, eBay announced international cooperation with Google. Financial details have not been disclosed by either party.[8]
In January 2007, eBay acquired online ticket marketplace Stubhub for $310 million.
Accounting Ratios
eBay Incorporated Accounting Ratios
Fiscal Year
2005
2004
2003
2002
2001
Fiscal Year End Date
12/31/05
12/31/04
12/31/03
12/31/02
12/31/01
Receivables Turnover
7.9
9.0
7.1
7.0
7.4
Receivables - Number of Days
37.3
36.9
39.8
40.6
40.6
Gross Property, Plant & Equipment Turnover
3.1
2.9
2.5
3.2
2.8
Net Property, Plant & Equipment Turnover
5.7
4.6
3.6
5.6
5.3
Depreciation, Depletion & Amortization -
% of Gross Property, Plant & Equipment
26.0%
22.3%
18.2%
20.2%
32.8%
Depreciation, Depletion & Amortization -
Year to Year Change (Millions $US)
12.4
9.5
8.2
-1.0
4.9
Depreciation, Depletion & Amortization -
Year to Year % Change
49.1%
59.6%
107.6%
-11.6%
127.7%
Source: CorporateInformation eBay Incorporated Company Snapshot
Controversy and criticisms
This section does not cite its references or sources. Please help improve this article by introducing appropriate citations. (help, get involved!) Any unsourced material that has been or is likely to be challenged may be removed at any time. This article has been tagged since March 2007.
eBay has its share of controversy, ranging from its privacy policy (eBay typically turns over user information to law enforcement without a subpoena)[citation needed] to well-publicized seller fraud. eBay claims that their data shows that less than .01% of all transactions result in a confirmed case of fraud. However, eBay states that their stated fraud statistic both undercounts and overcounts fraud [2].
Fraud
A major fraud-prevention mechanism for eBay users is its feedback system. After every transaction both the buyer and seller have the option of rating each other. They can give a "positive", "negative", or "neutral" rating and leave a comment no longer than 80 characters. So if a buyer has problems, he or she can rate the seller "negative" and leave a comment such as "never received product". Learning the system and examining a seller's feedback history is a buyer's best protection.[citation needed]
Weaknesses of the feedback system include:
Small and large transactions carry the same weight in the feedback summary. It is therefore easy for a dishonest user to initially build up a deceptive positive rating by buying or selling a number of very low value items, such as e-books, recipes, etc., then subsequently switching to fraud.
A user may be reluctant to leave honest feedback out of fear of negative retaliatory feedback (including "negative" in retaliation for "neutral").
Feedback and responses to feedback are allotted only 80 characters each. This can prevent users from being able to fully list valid complaints.
Accounts with good feedback can be hijacked by phishing giving a con artist the appearance of an excellent trading history. This problem is particularly prevalent in certain areas, such as digital cameras.
When a user feels that a seller or buyer has been dishonest, a dispute can be filed with eBay. An eBay account (whether seller, buyer or both) may be suspended if there are too many complaints against the account holder.
Many complaints have been made about eBay's system of dealing with fraud, leading to its being featured on the British consumer rights television program Watchdog. It is also regularly featured in The Daily Mirror's Consumer Awareness page. The complaints are generally that eBay sometimes fails to respond when a claim is made, and since eBay makes its money on commissions from listings and sales may not be in eBay's interest to take action against large sellers.[citation needed]
Inflating total bid amounts by bidding on their own auction with a "shill" account, either the seller under an alternate account or another person in collusion with the seller. Shill bidding is prohibited by eBay and, in at least one high-profile case involving Kenneth Walton and two accomplices, has been prosecuted by the federal government as criminal fraud.
Frauds committed by buyers include:
PayPal fraud: Filing false shipping damage claim with the shipping company and with PayPal.
Credit card fraud, in the form of both stolen credit cards and fraudulent chargebacks.
Receiving merchandise and claiming otherwise
Returning items other than received
The buyer sends a forged payment-service E-mail which states that the buyer has made a payment to the seller's account. An unsuspecting seller may ship the item before realizing the E-mail was forged.
Other controversial practices of users
Sellers of inexpensive items may benefit from inflating the shipping cost while lowering the starting price for their auctions,[9] because some buyers overlook the shipping cost when calculating the amount they are willing to spend. Since eBay charges their fees based on final sales price without including shipping, this allows sellers to reduce the amount they pay eBay in fees (and also allows buyers to reduce or avoid import fees and sales taxes). This is called "fee avoidance", and is prohibited by eBay policy,[10] as are excessive shipping and handling charges.[11] A danger to the buyer in such cases is that in the event of defective merchandise, the seller may claim to have met his refund obligations by returning only the minimal purchase price and not the shipping costs.
Sellers sometimes charge fees for use of PayPal as well. Although this is officially banned by eBay and PayPal and is against some local laws as well as violating merchant agreements with Visa, Mastercard and Discover, eBay does not police for this and will only look at it if the auction is reported. Therefore inexperienced users often wind up paying these illegal and unenforceable fees.[citation needed]
Auction sniping is the process of watching a timed online auction, and placing a winning bid at the last possible moment (often literally seconds before the end of the auction), giving the other bidders no time to outbid the sniper. Some bidders do this manually, and others use online services and software designed for the purpose. While disliked by many eBay users, sniping is not against eBay rules, and is, in many cases, in the best interest of the bidder.[citation needed]
Intellectual property in auctions
Holders of intellectual property rights, have claimed that eBay profits from the infringement of intellectual property rights. eBay has responded by creating the Verified Rights Owner (VeRO) program, which provides to rightsholders expedited auction takedowns and private information on eBay users, but has likewise been criticized.
In June 2004 the jeweler Tiffany & Co. sued eBay claiming that eBay profits from the sale of counterfeit Tiffany products.[12] As of July 2006, a trial date has not been set.[13]
In September 2005, eBay's privacy practices relating to its VeRO program came under scrutiny when WNDU-TV reported that the Embroidery Software Protection Coalition was accusing United States buyers, identified by eBay, of copyright infringement, and demanding monetary settlements. eBay's privacy policy warns that eBay may disclose personal information on the request of any VeRO rightsholder investigating illegal activity;[14] in comparison, competing service Yahoo! Auctions may disclose personal information in response to a subpoena or court order.[15] Although, according to a University of Notre Dame law professor, there is no legal basis, in the United States, for copyright infringement claims against buyers,[16] eBay's VeRO program may have allowed the ESPC to obtain private information without judicial oversight.
Some manufacturers have abused eBay's VeRo program, through which copyright and trademark owners can quickly protect their rights, by seeking to prevent all sales of their products on eBay.[citation needed]
In November 2006, a U.K. High Court ruled that a VeRO rightsholder's takedown request to eBay constituted a legal threat under design patent law. Since groundless legal threats under design patent law are unlawful, the ruling holds that groundless VeRO takedown requests based on design patents are also unlawful. Further, the text of the ruling appears critical of the VeRO program in general: "It is entirely wrong for owners of intellectual property rights to attempt to assert them without litigation, or without the threat of litigation, in reply."[17]
Customer support
A source of frustration for some eBay users is that despite the company's size, it offers no customer support by phone, instead referring all ordinary members to its online help features. Apart from a library of self-help resources, these features consist mainly of e-mail contact forms and "Live Help," which lets users chat with customer service representatives via instant messaging. In fact, most visitors to the eBay site will not find any company phone number listed at all.
EBay does, in fact, have a phone support department, but that service is limited to members of the rank "Gold PowerSeller" and above, the company's term for members who sell at least $10,000 worth of goods per month on the site. The phone number for that service is kept closely guarded, though ordinary users persistent enough to discover it will usually be offered help as a one-time courtesy.
Other eBay controversies
Other notable controversies involving eBay include:
In May 2000, eBay seller Kenneth Walton auctioned an oil painting on eBay for $135,805, due to speculation that it might be the work of California modernist Richard Diebenkorn. Walton pretended to know nothing about art and claimed to be surprised by the price the painting fetched, and the auction attracted international media attention. In several investigative reports by The New York Times, it was revealed that Walton was in fact an experienced eBay art dealer with several unhappy customers, and that he had colluded with two other eBay sellers to bid up each other's auctions. The Times described this as a "shill bidding ring".[18] Walton and his cohorts were banned from eBay and eventually convicted of fraud by the federal government in the first ever prosecution for shill bidding on eBay.
On 28 May2003, a U.S. District Court jury found eBay guilty of willful patent infringement and ordered the company to pay US$35 million in damages. The plaintiff was MercExchange, which had accused eBay in 2000 of infringing on three patents (one of which are used in eBay's "Buy It Now" feature for fixed-price sales, 30 percent of eBay's business and growing). The decision was appealed to the U.S. Court of Appeals for the Federal Circuit (CAFC). The CAFC affirmed the judgment of willful infringement, and reversed the lower court and granted a permanent injunction. eBay appealed the permanent injunction to the U.S. Supreme Court, which on May 15, 2006 found an injunction is not required nor automatic in this or any patent case where guilt has been established. The case was sent back to the Virginia district court for consideration of the injunction and a trial on another MercExchange patent the inventor claims covers the remaining 70 percent of eBay's business model. (see EBay v. MercExchange[19]). This case has been particularly controversial since the patents involved are considered to be business method patents. (See also Software patent debate)
On 28 July2003, eBay and its subsidiary PayPal agreed to pay a $10 million fine to settle allegations that they aided illegal offshore and online gambling. According to the settlement, PayPal between mid-2000 and November 2002 transmitted money in violation of various U.S. federal and state online gambling laws.[20] eBay's announcement of its acquisition of PayPal in early July said that PayPal would begin the process of exiting this market, and was already doing so when the ruling occurred.[21] These offenses occurred prior to eBay's purchase of PayPal.
On 17 December2004, Avnish Bajaj, CEO of eBay's Indian subsidiary Baazee.com, was arrested after a video clip showing oral sex between two Indian students was sold online. The company denied knowing the content of what they were selling (because it is a venue, not a retailer) and removed the offensive material as soon as they became aware of it. The Indian government attempted to make the case that Bajaj had violated India's IT Act, which forbids "publishing, transmitting or causing to publish" obscene material, even though the actual material was never published on Baazee's servers.[22] eBay supported Baazee's defense.[23]
On 14 June2005, eBay removed auction listings for originally free tickets to the Live 8 charity auction amid hundreds of complaints about such auctions.[24] Normally, selling of charity tickets is legal under United Kingdom law.[citation needed]
On 18 December2006 eBay won a court case against Creative Festival Entertainment in Australia, allowing sellers to on-sell (or scalp) tickets for the Big Day Out concert.[26] The case was won due to the big day out organizers not being able to fully enforce an anti-scalping policy printed on the back of the tickets. The presiding judge described the decision as "unfortunate".[27]
Some have criticized the emphasis eBay places on its subsidiary PayPal as a method of accepting payments.[attribution needed] eBay discourages sellers from using independent money-wiring companies such as Western Union and MoneyGram (Moneybookers is now allowed instead), stating that it prohibits or discourages certain forms of payment in order to reduce fraud.[28] On the U.S. eBay, while sellers may accept such payments, they are prohibited from advertising them as a payment option. A similar policy applies to mailing cash as a payment option. Certain non-U.S. branches of eBay allow sellers to advertise wire transfers or mailed cash as payment options, provided such methods are not the only payment options the seller accepts.[29][30]
In late 2006 a change in eBay's policy which showed less information about sellers once auctions reached a certain value has been criticised for making shill bidding much harder to detect. This change is to the potential disadvantage of buyers and of significant advantage to unethical sellers who, sometime with the aid of accomplices, may artificially inflate the price of an auction.
An investigation by The Sunday Times in January 2007 uncovered substantial evidence of shill bidding. [See http://www.consumeraffairs.com/news04/2007/01/ebay_shilling.html]. eBay's decision to hide much information about bidders once an auction reaches a particular price have opened it to accusations of encouraging shill bidders by making them significantly harder to identify. The case has been put that it is in eBay's interests to protect high turnover sellers who profit from shill biding since they generate substantial income for eBay. There are claims that this change in policy, favouring unethical sellers over buyers, has significantly weakened eBay's reputation both amongst buyers and ethical sellers.
Prohibited items
eBay in its earliest days was essentially unregulated, but as eBay grew, it found it necessary to restrict or forbid auctions for various items. Note that some of the restrictions relate to eBay.com (the US site), while other restrictions apply to specific European sites (such as Nazi paraphernalia). Regional laws and regulations may apply to the seller or the buyer. Among the hundred or so banned or restricted categories:
Tobacco (tobacco-related items and collectibles are allowed) [3]
Alcohol (alcohol-related collectibles, including sealed containers, as well as wine sales by licensed sellers are allowed) [4]
In June 2005, the wife of Tim Shaw, a British radio DJ on Kerrang! 105.2, sold Tim's Lotus Esprit sports car with a Buy It Now price of 50 pence after she heard him flirting with model Jodie Marsh on air. The car was sold within 5 minutes, and it was requested that the buyer pick it up the same day.[31]
In May 2005, a Volkswagen Golf that had previously been registered to Joseph Cardinal Ratzinger (who had been elected Pope Benedict XVI) was sold on eBay's German site for €188,938.88. The winning bid was made by the GoldenPalace.com online casino, known for their outrageous eBay purchases.[32]
In September 2004, the owner of MagicGoat.com sold the contents of his trash can to a middle school language arts teacher, who intended to have her students write essays about the trash before it was cleared away by a well-meaning janitor.[33]
Water that was said to have been left in a cup Elvis Presley once drank from was sold for $455. The few tablespoons came from a plastic cup Presley sipped at a concert in North Carolina in 1977. [18]
A Coventry University student got £1.20 for a single cornflake. [19]
A man from Brisbane, Australia attempted to sell New Zealand at a starting price of $.01AUD. The price had risen to $3,000 before eBay closed the auction. [20]
A man from Arizona sold an air guitar on eBay for $5.50 [21].
A group of four men from Australia auctioned themselves to spend the weekend with the promise of "beers, snags, good conversation and a hell of a lot of laughs" for AU$1,300 [22]
In February2007, after Britney Spears shaved all of her hair off in a Los Angeles salon, it was listed on EBay for $1million USD before it was taken down after some considerable controversy. [27]
Charity auctions
Using MissionFish as an arbiter, eBay allows sellers to donate a portion of their auction proceeds to a charity of the seller's choice. Some high profile charity auctions have been advertised on the eBay home page, and have raised large amounts of money in a short time. For example, a furniture manufacturer raised over $35,000 for Ronald McDonald House by auctioning off beds that had been signed by celebrities. yea.
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