eBay’s Success

Business Week writes:

eBay’s revenues rose 62%, last year, to $1.1 billion. That’s its cut from nearly $15 billion in gross sales from member auctions of everything from baseball cards to catering trucks. Profit growth has been accelerating, too, as earnings jumped 172% last year, to $249 million.

eBay’s success comes as much from its 31 million active buyers and sellers as from executive brilliance. Members not only decide for themselves what to trade, they also handle all the inventory and shipping, and much of the commercial interaction — which explains the company’s juicy 80%-plus gross profit margins. The secret, says CEO Meg Whitman, “is the community of users who have built eBay.”

[Meg] moved the site beyond its auction roots, urging merchants to sell at fixed prices as well as at auction. Fixed-price trade now accounts for about 26% of the site’s gross sales, attracting new kinds of buyers and speeding the pace of commerce on the site. And last year, eBay bought payment processor PayPal, whose billing software lets buyers avoid sending checks in the mail and results in instant payments to merchants.


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Rajesh Jain

An Entrepreneur based in Mumbai, India.