Ebay Business Analysis Essay Example

company that allows individuals to securely, easily, and quickly send and receive payments online. Merchants accept Paypal all over the world. In 2004, eBay launched its Business & Industrial category, breaking into the industrial surplus business. They also acquired Skype, the world’s fastest growing Internet communication business, in October 2005. Skype allows people everywhere to make unlimited voice and video communication for free between the users of their software. This software is available in 27 different languages and is used worldwide.

Shopping. com is another company that eBay acquired in August 2005. Shopping. com is one of the fastest growing shopping destinations on the Internet with sites in the United States, the United Kingdom, France, Germany and Australia. Rent.

com, which was acquired by eBay in February 2005, is an online apartment listing service. With over 20,000 properties listed, consumers can check availability, rental rates, see virtual tours, and find roommates. eBay is in a unique situation as being one the first organizations in their market.Through the use of acquisitions and positioning itself as a worldwide power, eBay is poised to lead the industry in their sector for some time to come. SWOT ANALYSIS CHART FOR EBAY INC. StrengthsWeaknessesOpportunitiesThreats Competes on a worldwide levelFraudAbility to reach full potential of the companyCompetitors Superior customer serviceDeclining sales Growth potentialBuyer/Seller decline High stock priceControversy over their privacy policyCustomer adaptability Negative publicity COMPETITOR (COMPETITIVE) ANALYSIS Amazon.

com and Overstock. com are among two of eBay’s fiercest competitors.Amazon. com, Inc.

is an American e-commerce company based in Seattle, Washington. It was one of the first major companies to sell goods over the Internet and was one of the iconic stocks of

the late 1990s dot-com era. After the dot-com era, Amazon faced skepticism about its business model, but made its first annual profit in 2003. Founded by Jeff Bezos in 1994, and launched in 1995, Amazon. com began as an online bookstore, though it soon diversified its product lines, adding DVDs, music CDs, computer software, video games, electronics, apparel, furniture, food, toys and more.

They have established separate websites in Canada, the United Kingdom, Germany, Austria, France, China, and Japan. When Amazon wrote their business plan they did not expect to turn a profit for four to five years. This strategy was effective. Amazon grew at a steady pace in the late 1990s while many other Internet companies were growing at an extremely fast pace.

Amazon's slow growth caused a number of its stockholders to complain, saying that the company was not reaching profitability fast enough.When the Dot-com era ended many e-companies went out of business, amazingly Amazon persevered and finally turned its first profit in the fourth quarter of 2002, a meager $5 million. They have remained profitable ever since. Their net income was $35. 3 million in 2003, $588.

5 million in 2004, $359 million in 2005, and $190 million in 2006 (Amazon. com). Unfortunately, the firm's cumulative profits remain negative. The past losses they took when their company first began still has them at a $2. 03 billion deficit. Their revenue has continued to grow thanks to their product diversification and their international presence: $3.

billion in 2002, $5. 3 billion in 2003, $6. 9 billion in 2004, $8. 5 billion in 2005, and $10.

7 billion in 2006 (Amazon. com). Below you will

find Amazon’s financial results for its first quarter ending March 31, 2007 as they are stated on their website: ·Operating cash flow was $726 million for the trailing twelve months, compared with $724 million for the trailing twelve months ended March 31, 2006. Free cash flow was $521 million for the trailing twelve months; an increase of 4% compared with $501 million for the trailing twelve months ended March 31, 2006. Common shares outstanding plus shares underlying stock-based awards outstanding totaled 430 million on March 31, 2007, compared with 438 million a year ago. During the quarter, the Company repurchased 6 million shares for $248 million.

·Net sales increased 32% to $3. 02 billion in the first quarter, compared with $2. 28 billion in first quarter 2006. Excluding the $84 million favorable impact from year-over-year changes in foreign exchange rates throughout the quarter, net sales grew 29% compared with first quarter 2006. Operating income increased 38% to $145 million in the first quarter, compared with $106 million in first quarter 2006.

·Net income increased 115% to $111 million in the first quarter, or $0. 26 per diluted share, compared with net income of $51 million, or $0. 12 per diluted share in first quarter 2006. First quarter 2007 effective tax rate was 23% compared with an effective tax rate of 47% in first quarter 2006.

Amazon introduced the Amazon Prime, a membership program, to the public in February 2005 for a flat membership fee of $79 per year. Members get unlimited, express two-day shipping for free, with no minimum purchase requirement on over a million eligible items sold by Amazon. com”(Amazon. com). “Members can order

as late as 6:30 p.

m. ET and still get their order the next day for only $3. 99 per item, and they can share the benefits of Amazon Prime with up to four family members living in their household”(Amazon. com). Jeff Bezos, founder and CEO of Amazon stated "We're pleased with our overall strong growth and especially with the number of people joining Amazon Prime”(Amazon. om).

"Prime continues to grow as a percentage of overall units shipped, and we're very grateful to our Amazon Prime members" (Amazon. com). Though Amazon. com is a direct competitor with eBay, they still have a long way to go to surpass them.

Amazon has had many complaints from their customers about how unfriendly and dysfunctional their website is to some users, how they have certain links on their web pages but those links do not exist, and that you cannot email them or call them. These issues may be something Amazon. om needs to address inorder to stay in competition with eBay because eBay has superior customer service and they are working toward fixing problems that the customers are complaining about. Overstock.

com is an online E-commerce marketplace, in which Internet users purchase surplus, returned, and new merchandise. Overstock. com was founded in 1997 under the name D2 (Discounts Direct) and changed its name to Overstock. com in 1999. A lot of Overstock. com merchandise is sold on behalf of third parties participating in Overstock's Partner Program .

Overstock's Partner Program began in 2000 and has over 700 partners.The remainder is purchased by or manufactured specifically for Overstock. com. The company also manages the inventory supply for other

retailers, which enables small retailers to purchase stock at below-wholesale prices. Overstock. com also functions as a marketplace for new merchandise at cut-rate prices.

In addition to its direct retail sales, Overstock. com has also offered online auctions on its website since September 24, 2004. The auction services include several features intended to enhance security, social networking and convenience. It has also hosted charity auctions to benefit various causes. For the fiscal year 2006, Overstock suffered a 6% decrease in overall sales and lost over $100 million on less than $800 million in sales” (Overstock. com).

Overstock’s main rivals are eBay and Amazon. com. As you can see above, Overstock's revenues, are far behind eBay and Amazon. They will have to do a lot of improving to their website before they can even really compete with Amazon or eBay. FINANCIAL ANALYSIS OF EBAY INC.

eBay Inc. financial results for its first quarter ending March 31, 2007 as reported on their website are as follows: ·eBay reported record consolidated Q1-07 net revenues of $1. 7 billion, representing a growth rate of 27% year over year. GAAP operating income was $468 million, an increase of 45% year over year, and represented 26. 5% of net revenues. Non-GAAP operating income in Q1-07 was $593 million, representing a 33.

6% operating margin and a 29% year-over-year increase. ·GAAP net income in Q1-07 increased 52% year over year to $377 million, or $0. 27 earnings per diluted share. Non-GAAP net income increased 34% year over year to $460 million, or $0. 33 earnings per diluted share.

GAAP and non-GAAP earnings per diluted share increased 59% and 39% year over year,

respectively. The company purchased approximately 10 million shares of its common stock at a total cost of approximately $333 million during the quarter and may purchase up to an additional $2. 0 billion of common stock through January 2009 under its stock repurchase program. “This first quarter of 2007 was a very strong one for the company,” said eBay Inc. President and Chief Executive Officer, Meg Whitman.

“The strength of our core businesses, as well as the significant traction we’re beginning to see across our newer businesses, helped us deliver great results across the board. ”The business model of eBay is brilliant and simple. They facilitate a service of enabling transactions between millions of users. They also have no inventory.

eBay does not have to consider production, packaging, and shipping of the goods sold. There is no need for a large number of employees at achieve their organizational goals. The main source of costs for eBay is technical. They perform tasks as maintenance of servers and networks. This is the marketplace Internet business model being used to much of its potential. Revenue is generated in both business to consumer and business to business transactions.

The auction and transaction revenue will continue to rise as the number of users rises. REFERENCES Unknown Author. 2007. Amazon.

com Announces First Quarter Sales Surpass $3 Billion, up 32% Year over Year -- Operating Profit Grows 38% -- Raises Financial Guidance. Retrieved on June 26, 2007 from www. amazon. com.

Unknown Author. 2007. eBay Inc. Announces First Quarter 2007 Financial Results. Retrieved on June 26, 2007 from www. eBay.

com. Unknown Author. 2007. Quarterly Report which Provides A Continuing View of

a Company's Financial Position. Retrieved on June 26, 2007 from www.

overstock. com.