eBay 1999 Annual Report Download - page 8

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The principal reasons for eBay’s success are as follows:
Largest Online Trading Forum. Unlike other commerce trading forums, eBay has aggregated a critical
mass of buyers, sellers and items listed for sale. As a result, eBay has become the largest online personal trading
forum. As of December 31, 1999, eBay had over 10 million registered users, offered more than 3,000 product
categories and listed more than 3.0 million items for sale, many of which were unique or otherwise hard to find.
Compelling Trading Environment. eBay has created a distinctive trading environment by utilizing an
entertaining pricing format, establishing procedural rules and promoting community values that are designed to
facilitate trade and communications between buyers and sellers. The trading environment’s efficiency is
illustrated by the limited need for eBay to intervene or play a significant role in the trading process. The auction
pricing format creates a sense of urgency among buyers to bid for goods because of the uncertain future
availability of unique items on the website. Similarly, by accepting multiple bids at increasing prices, the auction
pricing format provides sellers a more efficient means of obtaining a maximum price for their products.
Trust and Safety Programs. The Company has developed a number of programs designed to make users
more comfortable with dealing with an unknown trading partner over the Web. The Company’s Feedback Forum
encourages every eBay user to provide comments and feedback on other eBay users with whom they interact
and offers user profiles that provide feedback ratings and incorporate these comments. In addition, eBay’s
expanded SafeHarboreprogram provides guidelines for trading, helps provide information to resolve user
disputes, responds to reports of misuse of the eBay service and, if necessary, warns or suspends users who violate
the terms of the Company’s user agreement. The Company’s ongoing trust and safety initiatives, including user
verification, credit card requirements for sellers, insurance, integrated escrow, authentication and new means to
help keep previously suspended users from re-registering on eBay, are all intended to bolster eBay’s reputation
as a safe place to trade. The Company has also developed an extensive set of rules and guidelines designed to
educate users and help implement eBay’s policy of prohibiting the sale of illegal or pirated items.
Cost-Effective, Convenient Trading. eBay allows its buyers and sellers to bypass traditionally expensive,
regionally fragmented intermediaries and transact business on a seven-day-a-week basis. Because sellers bypass
costly intermediaries, they have lower selling costs and an increased likelihood of finding buyers willing to pay
the target price. Listing an item on eBay requires sellers to generally pay a nominal placement fee ranging from
$0.25 to $2.00 and an additional success fee from 5% to 1.25% of the transaction value if the sale is concluded
successfully. eBay charges different fees for certain categories of items, including autos and real estate. As a
result, sellers can sell relatively inexpensive items which had previously been prohibitively expensive to list
through most traditional trading forums. By allowing sellers to conveniently reach a broad range of buyers, eBay
also addresses the time-consuming, logistical inconvenience of individual selling. Buyers have access to a broad
selection of items and avoid the need to pay expensive markups or commissions to intermediaries. Buyers are
not charged for trading on eBay. The critical mass of items listed on eBay provides a mutual benefit for buyers
and sellers allowing both to effectively determine an appropriate price for an item.
Strong Community Affinity. The Company believes that fostering direct interaction between buyers and
sellers with similar interests has enabled it to create a loyal, active community of users. eBay has introduced a
variety of features and services designed to strengthen this sense of community among eBay users. The Company
facilitates communications between buyers and sellers by offering chat rooms, bulletin boards, threaded
discussion boards, customer support assistance from eBay personnel or other eBay users and by providing
‘‘About Me’’ user pages. These community features encourage consumer loyalty and repeat usage.
Intuitive User Experience. The eBay service is a fully automated, topically arranged, intuitive and easy-to-
use online service that is available on a seven-day-a-week basis. Within minutes of completing a simple online
form, a seller can list items for sale on the service, and buyers can submit bids for items quickly and easily.
Buyers can easily search the millions of items listed by category or specific item. During the course of the
transaction, bidders are notified by email of the status of their bids on a daily basis and are notified immediately
if they are outbid. Sellers and successful bidders are automatically notified when an transaction is completed. To
assist users further, the Company offers email customer support staffed on a seven-day-a-week basis.
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