eBay: Digital Media
eBay is an online auction and shopping website where people and businesses buy and sell goods and services worldwide. It is managed by ebay Inc., an American Internet company. Millions of people are brought together by eBay everyday on a local, national and international basis using an array of websites that focus on commerce, payments and communications. According to (2000) from eBay’s origin as a home business founderd by (“o-mid-ee-yar”), the company has become the world's leading auction market and one of a handful of major dotcom companies to actually turn a profit (). They further stressed that eBay is just one of many important players in an expanding e-commerce industry (p.6). eBay participates in the demand-based or dynamic pricing segment of online commerce. There, transaction prices are determined entirely by buyers. This is fundamentally different from what most of us are accustomed to. Usually, vendors make the pricing decisions, and we either accept their prices or look elsewhere for a better deal. In demand based pricing, buyers make these critical decisions. The auction is the most familiar form of demand-based pricing. Auction forums have been around since ancient times, and everything from foodstuffs, minerals, timber, animals, securities, and human beings have been bought and sold through them ( 2000, pp.8-9). The beauty of eBay's vision is that it has eliminated many of the inefficiencies of traditional person-to-person commerce. It provides a place where buyers and sellers can conveniently meet, exchange information about goods and prices, and transact sales at minimum costs. And it has made collecting and bargain hunting fun.
The Role of Digital Media and Internet:
Digital media particularly the Internet or the World Wide Web is the key to success of online auction sites such as eBay. eBay introduced several crucial innovations tailor-made for the internet. One was the model of online auctions bringing together buyers and sellers to establish prices for goods and services that had never been marketed before (2002). The online auction model developed by eBay marks an important extension of e-commerce, offering millions of individuals a low-cost opportunity to engage in a new type of economic activity which until now they had no chance of realizing. It has been reported that through the World Wide Web, eBay built an online person-to-person trading community in the Internet (2001). eBay users can browse through listed items in a fully automated way. The sellers are allowed to list items that they want to sell while the buyers bid on items of interest. The items on eBay’s site are arranged by topics and each type of auction has its own category. Person-to-person trading was both streamlined and globalized by the company. Using eBay’s web interface, the buyers can easily explore the site and the buyers can immediately list an item for sale within minutes of registering. The internet is a powerful tool in bringing together the buyers and sellers. Because of Digital Media and the Internet Ebay continues to grow.
Bringing the auction online was an important innovation, and is one of the greatest uses of Internet technology. The Internet has facilitated a variety of commercial activities. Many are lifted directly from offline models and provide no greater value or convenience for customers. Ordering a pair of gloves from an e-retail site is a prime example. From the customer's perspective, this is neither cheaper nor more convenient than buying the same gloves from the retailer's catalog using an 800 number. Online auctions, in contrast, have created something very new. It has been reported that the computer revolution ushered in totally new types of businesses based on the Internet (2000). If the Internet has introduced a revolution in the pace and the manner in which we do business, the leaders of that revolution are people who introduce new business designs and make them work. And the most successful of these have good heads for business, or work closely with people who do. This combination of a powerful business design tailored to the Internet economy, a philosophy of openness and community, and business savvy came together in the company the world now knows as eBay. Computing power is what makes an Internet auction effective. The combination of the digital media and eBay’s strategic business concept makes it possible for a few hundred people to handle transactions worth over 7 million dollars everyday of the year. Initially, eBay had developed proprietary software capable of supporting a robust, scalable user interface and transaction-processing system. Today, that system can handle all aspects of the auction process. It sends e-mails when users register for the service, when they place a successful bid, and when they are outbid, and it communicates the outcome of auctions in which they participate. The same system sends daily status updates to active sellers and bidders and maintains user registration information, account information, current auctions, and historical listings. All of this information is archived to a data warehouse. Working around the clock (with weekly scheduled downtime for maintenance), the eBay system keeps track of every listing and every seller-selected enhancement option. When an auction successfully closes, the system automatically calculates the fee, bills the seller's billing account, and sends a monthly invoice via e-mail. Most invoices are billed directly to seller credit-card accounts. Other parts of the eBay information infrastructure support eBay customer service and the various community bulletin boards and chat rooms that undergird the online user community. The entire system includes company-owned and -operated equipment and other equipment provided by outside service providers. eBay's share of the total system consists of Sun database servers running Oracle relational database management systems and a suite of Internet servers that operate on Microsoft's Windows NT. Loadbalancing systems and redundant servers provide for fault tolerance. System hardware is hosted in close proximity to the company's San Jose headquarters at the facilities of Exodus Communications and at AboveNet, where redundant communications lines and emergency power backup are maintained. Ebay is an online auction site that facilitates the process of listing and displaying goods, bidding, and payment. The Internet is the key element on eBay’s success. Over the Internet, participants bid for products and services. Sellers and bidders can participate wherever they are as long as they have an Internet connection. The Internet makes eBay more accessible to the bidders and sellers. The large number of bidders and sellers makes the system bigger and the auction site successful.
Key Strategic Decisions:
Several aspects of eBay have been specifically designed to support an almost freestanding economy (2000; 2003). eBay built a free market. As a facilitator, users are allowed to decide what they want to sell, encouraging continuous growth. The users or citizens are the ones who control the direction of the site. eBay created a legal system that promotes self-governance. The auction site devised a feedback forum to let users rate one another to discourage fraud. The users are constantly educated; eBay teaches people how to use the site. eBay also has its own banking system. eBay has been bounded by two things: a clear mission to be the world's largest person-to-person online auction company, and a focused strategy with five key elements
expanding the user base, strengthening the eBay brand, broadening the trading platform by increasing product categories and promoting new ones, Fostering community affinity and enhancing site features and functionality.
The arrival of Meg Whitman ( President and CEO of eBay since 1998) marked a watershed in the effort to build brand recognition at eBay. The company's early growth relied strictly on word of mouth. But as an old hand at consumer product marketing, Whitman made branding one of her first initiatives. In a series of meetings with the senior management team, she broke the problem into two parts. The first was clarifying what eBay stood for. In their judgment, it was a personal trading community where users could buy and sell almost anything. This definition set it apart from most existing auction competitors and the several that eventually followed. All market communications now reflect this unequivocal definition. Part two of Whitman's branding exercise came directly from Marketing 101: market segmentation. The user community was analyzed in terms of user segments. Serious collectors and small dealers were identified as the heaviest site users. These individuals and the people who sold to them accounted for 80 percent of total eBay revenues even though they represented only 20 percent of registered users. Based on this knowledge, the company decided to concentrate its marketing and brand-building resources on them ( 2000). eBay's boldest and most costly effort of gaining greater name recognition began in August 1998, when it entered into a three-year marketing deal with America Online (AOL). Under the terms of this relationship, AOL would feature eBay as its preferred provider of person-to-person trading services in its classifieds and interest areas. In addition, an eBay link would appear on the AOL home page, a portal for some 64 million subscribers. This threeyear deal was priced at $12 million (2000). The company has incrementally attacked the barriers to auction trading over the years, spending $4.6 million and $23.7 million in 1998 and 1999, respectively, on product developments aimed at site enhancement and valueadding features. The various SafeHarbor features such as the Feedback Forum, the Mister Lister bulk-listing tool, help boards, and My eBay, which allows a user to track multiple auctions simultaneously, fall into this category. Generally, the most important chore-reducing features have been added through arrangements with partner firms or third-party suppliers such as iEscrow, iShip, Mailbox Etc., and Wells Fargo's Billpoint credit-card arrangement ( 2000). Another strategic decision of eBay was top scale up the website. The number of users is growing at a breath-taking rate. The number of auction listings and transactions is creating a major challenge for the company management. Increasing traffic volume on the eBay Web site requires constant expansion and upgrading of technology, transaction-processing systems, network infrastructure, and the engineering staff required to maintain it. Meg Whitman's first taste of the scaling-up problem occurred within a month of joining the firm, when the site went down and stayed down for eight hours. An online auction has unique and difficult requirements that other systems do not face: constant processing and reprocessing of incoming bids. These place greater stresses on the site and reduce its stability. One solution to the stability problem was to build substantial excess capacity, something that the company previously avoided. Overcapacity is costly, but Whitman viewed this cost as small relative to the cost of outages and poor Web-site performance. She translated that insight into a corporate goal of gradually building the system's infrastructure to 10 times needed capacity. Whitman's strategy of building excess capacity, however, seems to be paying off. During the highly visible denialof-service attack against it and other major e-commerce sites in February 2000, eBay's problems were very limited. And by the spring of 2000, it appeared that the frequency and severity of past service outages was unlikely to repeat itself.
Lessons from eBay: Growth Strategy
eBay's success in its chosen market niche suggests a number of important lessons for any firm that aims for success in person-to-person online commerce: 1. Control the lion's share of transactions. Buyers and sellers gravitate to the site with the greatest volume of participants—the network effect.
2. Provide a large and interesting selection of goods. Product depth and variety attract buyers, which in turn will attract more sellers. 3. Achieve system reliability. Outages are costly and undermine user loyalty. 4. Provide high-quality customer service. Users need to have their questions answered and their problems resolved, otherwise they will stop trading or go elsewhere. 5. Assure the reliability of user deliveries and payments. These are absolute requirements for site credibility. 6. Enhance brand recognition. With millions of net users coming onstream in the years ahead, brand recognition is the surest single mechanism for increasing new site users and increasing transaction volume. 7. Increase Web site convenience and accessibility. If a site is easy to access and navigate, more people will log on, stay longer, and make more transactions. 8. Develop high-quality search tools. People will not buy what they cannot locate quickly on the site (2000).
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