eBay Marches on via PayPal

By James Fleet October 17th, 2007

I have really enjoyed following the progress of eBay these last few months. Over 5 years ago when I first became seriously interested in the Internet from a business perspective, eBay was the benchmark for me. Well eBay and amazon to be honest.

Where I come from (New Zealand) the big topic early in this century was ‘e-commerce’. This was a relatively new proposition down-under, a beast that kiwi business people new they would have to tackle. At the time there was only one local who had proven to have ability in this field, his name is Sam Morgan and he started trademe, basically a kiwi eBay. In a lot of ways the success of trademe further re-enforced my ongoing interest in the progress of eBay as an e-commerce business as there strategy and business model was the catalyst for the trademe auction site.

So recently I have posted about how eBay, like the rest of us Internet ‘nuts’, has had to adapt to the web 2.0 revolution in order to maintain their impressive growth figures since they launched on labor day in 1995. With roughly 89 million registered users these days, they sure do have a great testing resource!

The latest news from eBay is dominated by their two major acquisitions- Skype and PayPal. The 3rd quarter financial performance of eBay is public and it reveals some nice in-sights into the delta between the performance of these two arms of the eBay business. The fact that eBay overpaid when acquiring skype has been well documented and this fact is the only real blemish in a 3rd quarter that saw continued growth for eBay.

However, the ability for eBay to continue growing is in a large part driven by PayPal, the credit card payment alternative business the eBay acquired in 2003. Paypal accounted for approximately 25% of eBay’s total revenue in the fiscal quarter, an increase of 35% on the previous quarter last year.

In summary, it seems that eBay’s desire to improve it’s core online auction function is timely and required as this part of their business seems to be stabilizing. eBay chief Meg Whitman will now need to work on ensuring that the acquisition of Skype can provide the same benefits of those coming from her new cash cow Paypal.

Dan

One of the more interesting things about e-bay though is the defection of some of their sellers, a request from their sellers to increase and reemphasize the ebay store system, as well as the complex fee structure that ebay has when it comes to putting product on the ebay system. They have a lot of competition, and have not really made much value out of half.com or other acquisitions either. It makes for an interesting complex mixture of competition, and not using the systems they have bought to their best extent. As well, they need to reduce the complexity of fee structures to be more in line with what their competition is doing, amazon, alibris, and others. They might see better growth if they could get a handle on what they have, and start matching the simpler fee structures adopted by their competition. My 2 cents. thanks.