EBay's Pure Play Success

The EBay economy is quite possible one of the most impressive in its class of online exchange businesses. Everyday millions of collectibles, appliances, computers, furnishings, used vehicles, and other miscellaneous items are listed, bought, and sold among community members. Certainly the involvement of “managers” or users of this pure play business model have helped create such activity and have made EBay an exciting hub for global commerce. EBay has built the traffic volume needed to generate revenue from operations. It is important to analyze the specific business models used to ensure the business stays profitable.

EBay employs a brokerage business model by mediating transactions and interactions between buyers and sellers. Revenue is generated by acting as a broker. This concept is mainly seen with the banking system the business has adopted to keep the virtual economy running smoothly. PayPal is a convenient transaction brokerage. According to PayPal, “it is the safer, easier way to pay and get paid online. The service allows anyone to pay in any way they prefer, including through credit cards, bank accounts, buyer credit or account balances, without sharing financial information.” One can see how convenient it is to conduct business with almost anyone in the world with payment options that are flexible yet secure and private. I use EBay solely for buying and have never linked a bank account or card number to my PayPal account. I find this very reassuring as it helps to reinforce the value EBay has to me as a customer.

Another main business model that can be linked to the operations of EBay is the subscription model. EBay is basically a service provider who has the ability to charge a fee for the transactions that occur on the website. I have never directly sold anything on EBay however a quick investigation into the site’s “Help” section shows that both EBay and PayPal do charge for the services rendered. When you list an item on EBay, you're charged an insertion fee. If the item sells, you are also charged a final value fee. The total cost of selling an item is the Insertion Fee plus the Final Value Fee. The fees sought from Ebay continue to be broken down depending on whether you are selling the item using an auction-style listing or selling the item at a fixed price. PayPal also has a set of fees when payment received is funded by a credit card, debit card or buyer credit as all digital transactions are. It is obvious that the heavy volume of daily users of this pure play business is generating a large amount of funds for EBay as they employ a subscription business model.

Less popular business models can also be applied to EBay although most do not generate any revenue but rather good reputation and value for the customer. The infomediary and community models can be combined to provide a great deal of user content for the consumer. The rating system for each buyer and seller on EBay is a good way to patrol the listings for fraud and help kick out offenders of the system who are not so trustworthy. In this sense EBay is acting as a middleman to provide information to the perspective users of the platform. This helps EBay overall with its goal of satisfying consumer needs. This data on each community member can hopefully create loyalty among popular sellers and thus providing brand loyalty to EBay. The community business model overlaps here as users generate content within the network as each member goes on to rate one another on their satisfaction. As with most businesses operating even the slightest bit online there is obviously the likelihood that some advertisement revenue is generated with this pure play as banner ads are seen while navigating EBay’s listings.
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Measuring a company’s activities and performance is essential for both the desirable growth of the business as well as for the community members. If you were to turn inward and focusing on the performance of the organization, finance based metrics might be important to EBay. If possible, EBay would want to learn who the most valued and least valued customers are. This analysis should be considered since poor customers who never pay or ruin buyer and seller relationships maliciously can hurt the reputation of the business model EBay has created. If EBay has any outside investors who have a stake in the company it would want to look at the cash burn rate to determine where exactly investment is being made and if it is paying off. Although this is more important for a start up company, it is still valuable to look at where revenue could be lost. Sales and net income are also important to watch. EBay as pure play retailer must strive for an increase in site traffic and activity. This pure play business must try to continually attract those consumers who are keener on conducting business with the traditional brick and mortar retailer. Both financial and traffic forecasting should be done on a regular basis to ensure a good return for all shareholders. Without taking the consumer into account and solving their problems as a marketer, financial success will not be sustainable. EBay has opened up a whole new medium of exchange with their unique partner – millions of people.

Time to leave you with something ridiculous.