The Auction Network Making Dominance A Bid For On-Line Dominance - eBay Inc - Statistical Data Included

DSN Retailing Today, May 8, 2000 by Robert Scally

When early Internet pundits predicted that e-commerce would revolutionize retail, there were many questions about the future of the middleman. How would distribution change? Would manufacturers sell direct to consumers? Could Web sites cannibalize store sales?

But the one question most failed to ask was whether the Internet could play a role in eliminating the retailer altogether. Like it or not, they got their answer in the early '90s, when a computer scientist named Pierre Omidyar had a great idea that created a new way for people to buy and sell on line.

Omidyar and his wife, a collector of Pez dispensers, wanted to find a way to interact and trade with other Pez collectors using the Internet. So they combined their sweet tooth with their penchant for collectibles and formed an on-line trading venue--the groundwork for what was to become eBay.com, an on-line, auction-style market place where people could buy and sell just about anything directly with other consumers. EBay has since created a very efficient one-to-one trading marketplace on the Web.

This new marketplace was quickly discovered by millions of Internet users and collectors, and eBay has subsequently become the top e-commerce site on the Web. Jupiter Communications estimates that eBay currently commands 90% of the consumer-to-consumer auction business being conducted on the Internet.

EBay began 2000 as the Web's No. 1 shopping site, according to Media Metrix, a firm that measures Internet usage. According to Media Metrix, eBay's average daily reach (percent of all Internet users) topped 6.5%, beating the No. 2 site by 58%. The number of unique visitors to the eBay site set a new record of 1.78 million on the week ending Jan. 9.

"Our unique community of passionate buyers and sellers continue to take eBay to new heights," said Meg Whitman, eBay.com's president and ceo, in a statement. "Also, more new items were posted on eBay in the first 10 days of January than the largest rival has been able to muster in six months, showing once again that eBay is the best place to trade practically anything on Earth."

EBay is also different from the majority of online retailers in that it is profitable. For the year ended Dec. 31, 1999, eBay generated net revenues of $224.7 million, a 161% increase from net revenues of $86.1 million in fiscal 1998. Net income for 1999 was $10.8 million, or 8 cents per share on a diluted basis.

EBay's net income before non-cash charges related to stock-based compensation and acquisition expenses was $19.4 million, or 14 cents per diluted share, compared with $12.8 million or 11 cents per diluted share during fiscal 1998.

EBay has more than 10 million registered users, and there are more than four million items currently listed for sale. More than 400,000 items are added daily over more than 4,300 categories. Merchandise categories include antiques; automotive; books, movies and music; coins and stamps; collectibles; computers; dolls and figures; jewelry and gemstones; photos and electronics; pottery and glass; sports memorabilia; and toys.

EBay's company mission states: "We help people trade practically anything on earth." The company's mission statement also states that "eBay was founded with the belief that people are honest and trustworthy."

These days eBay's day-to-day operations are overseen by Meg Whitman, although founder Omidyar remains chairman. A graduate of Princeton and Harvard Business School, Whitman came to eBay with an extensive background and had several high-profile executive positions prior to joining eBay.com.

As general manager for Hasbro Inc.'s Preschool division, she was in charge of the Playskool and Mr. Potato Head brands. As president and ceo of Florists Transworld Delivery, she launched FTD's Internet strategy.

Whitman has also served as president of Stride Rite and as senior vp of marketing for Disney's consumer products division. She began her career as a brand assistant for Procter & Gamble.

With her extensive background in marketing and brand management, Whitman understands the power of alliances.

In February, eBay inked a four-year agreement with one of Whitman's former employers, Disney, to provide auction service to the company's Internet business Go.com.

"Disney and eBay are widely regarded as pioneers and marketing leaders in their respective businesses," said Whitman when the alliance was announced. "This relationship is a first for us as we unite our efforts to create a powerful online trading destination, supported by Disney's unrivaled consumer marketing expertise."

Under the agreement, eBay will become the online trading service across all of Disney's Internet properties. The agreement also calls for eBay and Disney to develop and market on-line trading experiences in a co-branded person-to-person site and new merchant-to-consumer sites, a first for eBay. The companies will develop and promote this co-branded trading site for the GO Network at eBay.GO.com.

The companies are also planning to collaborate on the development of several merchant-to-consumer sites in an auction format for Disney.com, ESPN.com and ABC.com. The sites will sell unique, exclusive and authenticated products, props and memorabilia from throughout the Disney empire including Walt Disney Studios, Disneyland, Walt Disney World, ESPN and ABC.