eBay is a California-based American multinational company that mainly deals in e-commerce founded by Pierre Omidyar in 1995. The online shopping site of almost everything facilitates consumer-to-consumer sales. The website allows sellers to get registered and use the platform to increase their sales. Users can use the same channel of eBay to buy as well as sell the goods. Here, let’s know How Does eBay Make Money?
eBay is a successful giant where buyers and sellers can meet, just like a marketplace. The operation of eBay started in 1995 and went public in 1998. After having a significant competition like Amazon, Alibaba, Walmart, Rakuten, and many more, the company is still holding its ground. It is ranked five, among Digital Commerce 360 Top 100 Online Marketplace. The total revenue generated by the company is around 2.67 billion dollars, which was an increased revenue compared to previous quarter results. Like every other e-commerce website, eBay also has multiple revenue-generating methods, but the major one is online shopping. They also make money from transaction fees, advertisements, classified ad sites, and various products. eBay also has the acquisition of different other websites as well as products. It is always the business model and how the company works to decide how much it will make money.
Business Model of eBay
eBay is a marketplace where merchants sell almost every product, ranging from pen to significant automobile spare parts. eBay attracted people to the platform as it also allowed everyone to sell or resell the products in good condition. So, eBay made a platform where every such thing is possible. The model of eBay is so efficient they eliminated the cost of inventory, as the buyers buy the product directly from the seller. To make a strong trust on eBay, they also let the seller list their first fifty products free on the platform; they charge a listing fee per product after that. eBay became so popular among consumers because of the bidding model. This option can also be called an auction option, where the buyer bids a price for the product, the buyer with the highest bid gets the product. The auction system helps adjust the cost of the product as per supply and demand. The business model also included advertisements to generate revenue for the company. eBay has many ways to generate revenue for the company. The design business model covers every aspect of the e-commerce business to make money.
Why do consumers Prefer eBay
eBay not only provides a flexible model but also a type of business model which the customers drive. The features and value proposition helps customers, sellers, and eBay to fulfill their needs.
- Value proposition
The value proposition is maintained by eBay successfully from the customer as well as the seller’s end. eBay is such a vast market with 19 million global sellers, which grew more than 5% than the previous year. The customer gets a large variety of options to buy for, as the sellers are at a large number. Due to such high competition, the seller will be motivated to improve and maintain the quality of their product. The product return policy also adds value to the customers. The bidding option helps customers keep the product’s price as per customer’s demand and helps sellers, as at the time of high need, for purchasing the product, consumers are ready to pay more, to be the highest bidder the product.eBay provides an efficient and extensive marketing and distribution channel, which benefits the sellers, as they get an excellent opportunity to enhance their sales.
eBay has one of the unique features of bidding, which makes its customers attracted to the platform. They also provide a return policy to the customer, where they get a 100% refund, or eBay guarantees the money back to the customers. Many e-Commerce giants do not give this satisfaction. The customer feels free as eBay is a global marketplace, where sellers and customers are from worldwide. For ease, eBay accepts almost all the online payment options, even allowing the EMI option. For eBay personally, to keep a check on all the sellers at the global level is impossible, so eBay has provided the responsibility to the buyers to report the sellers or fake products.
How does eBay Generate revenue?
The primary and straightforward way to generate money by eBay is from the e-Commerce marketplace. Buying and selling generate the majority of the revenue to the company that buyers and sellers pay. Apart from that, various methods for eBay to make money are:
- Insertion Fee
As the name suggests, they charge an Insertion fee when any seller inserts their product on the eBay platform. The first 50 products listed by the seller are not applicable for any charges. After the 50th product, eBay charges according to the category of the product. For example, if the products fall under the category of Books, Movies, CDs, and Games, then the seller has to pay 5 cents, and for any product which doesn’t fall under the given category, the seller has to pay a listing fee of 30 cents per listing. eBay makes money through insertion fees as the consumer’s product demand is higher, the seller will list more articles to the platform.
- Final Value Fee
A trade is successful when a buy and sell takes place. For listing any item by the seller, eBay charges them with insertion fee; on the other hand, for every sale by the seller, they charge a further commission which is a fee of 3.5% to 10% of the total sale value. The percentage commission depends on the category of products.
- Advance Listing
The seller gets an advantage to relist and promote the item on the platform of eBay. Sellers can list the things on the simple marketplace provided by eBay and the auction platform. eBay makes money from advance listings also.
Close5 is a subsidiary of eBay, which worked on the model of locating buyers and sellers in the neighborhood and for local trading. The model was similar to OLX.com, which uses ads and promoted posts to make money for the company.
eBay acquired StubHub for 310 million dollars. The model of StubHub was similar to the earning model of eBay, so they took an interest in the company. StubHub platform is an online ticket exchange company. Those consumers use StubHub who want to buy or sell tickets to events, movies, plays, sports, and many more. The basis of charges is simple commission-based. They charge the seller 15% of the ticket value once they sell a ticket. And buyers are charged 10% of the ticket fee. As a result, StubHub became the most significant online ticket buying and selling platform. As eBay owned the company, the revenue added up.
Kijiji is an online classified advertising company, which is now a part of eBay. The site was totally in service to the people of Canada, where they could connect to buy and sell the products. The company is known for hosting local advertisements and provides the facility of highlighting the promotions; as a result, they draw more focus towards it. Similar to Kijiji, eBay also has owned various online marketplaces, which help generate eBay its revenue.
eBay is known as a global marketplace, where the transaction is done, almost in every currency present. Therefore, the transaction fee generates a big part of the revenue on PayPal. The income is so significant, as only PayPal generates 41% of the revenue for eBay.
eBay owned the segment at 238 million dollars. Enterprise deals with the piece of brick and mortar. Till now there is no one to deal with these types of companies. The eBay enterprise helps retailers to create an online shopping platform for their products and brands.
Most people worldwide use eBay for their trading. It makes it a perfect platform to post the advertisement of any startup, company, or product. The promoter only pays when the ad results in the sale of the product. eBay is a perfect platform to host the first party as well as third party ads
eBay is one of the e-commerce giants, which competes with Amazon, Alibaba, OLX, and many more, but still able to be one of the top favored companies by the people. The money-making model of eBay is so efficient that now the total net income of eBay is 1.92 billion dollars. The services owned by the company also help them to generate more revenue. The investors are also confident in the growth of the company.
Frequently Asked Questions
1. From where does a significant chunk of revenue come from eBay?
They generate the majority of the revenue by the seller transactions and their listing items on the platform.
2. Does eBay earn from PayPal transactions as well?
Yes, every PayPal transaction made on eBay helps them to generate money as well.
3. What is the net worth of eBay?
eBay is also a NASDAQ-listed company, and its net worth is around 45.48 billion dollars.