2145 Hamilton Avenue
San Jose, CA 95125
www.ebay.com
NASDAQ National Market Ticker: EBAY
Report prepared by Group A:
Martin Longoria
Samantha Hoock
Maryana Kusmiy
Todd Cavanaugh
Michael Restivo
Table of Contents
1. Introduction
1
2. History
2
3. Organization of the Firm
4
4. Mission of the Firm
7
5. History Summary
10
6. Environmental Forces
11
7. Five Forces Analysis
12
8. Major Resources, Capabilities, Competencies, and Value Chain
18
9. Governance and Incentives
21
10. Financial Analysis
24
11. SWOT Analysis
29
12. Narrative Description of StubHub Acquisition
30
13. StubHub Acquisition Analysis
31
14. Works Cited
37
Group A – eBay 1
1. Introduction
Founded by Pierre Omidyar in 1995, eBay created a powerful platform for the
sale of goods and services by a passionate community of individuals and businesses.
Millions of items across thousands of categories are sold through eBay on a daily basis.
EBay is an online marketplace that enables trade on a local, national and global basis
with customized sites in markets around the world.
Currently eBay has around 94 million registered users, making it the leading
online auction community on the Internet (Bus Wire). It offers a wide range of products,
from collectibles to clothing to yachts. It has also added various other online platforms as
it grew, like Rent.com and Shopping.com. Along with the ownership of 60 smaller,
location-specific marketplaces in the US, eBay has expanded internationally and gained a
foothold in Europe, Latin America, and China through a series of acquisitions and
ventures (Datamonitor).
To understand eBay’s future outlook and its position in the online marketplace
industry, there will be a comprehensive analysis of eBay. There is a breakdown of eBay’s
environment by examining significant economic, social, political, legal, and demographic
forces. Also, a Porter’s Five Forces Analysis and a discussion of eBay’s major resources,
capabilities, competencies, and the value chain occurs. EBay’s corporate governance and
incentives are scrutinized along with some key financial indicators. A SWOT (Strength,
Weakness, Opportunities, and Threats) grid summarizes these findings.
Recently, eBay acquired StubHub, the leading online marketplace for the resale of
event tickets. EBay made an offer for StubHub to attempt to bolster eBay’s struggling
events ticket segment. An analysis of this strategic acquisition closes the report.
Group A – eBay 2
2. History
EBay was founded on September 3, 1995 by computer programmer Pierre
Omidyar under the name “AuctionWeb.” Originally, the site had belonged to Omidyar’s
consulting firm, Echo Bay Technology Group. The domain name Echobay.com was
already taken, forcing Omidyar to use his second choice, eBay.com (Wikipedia).
AuctionWeb officially became eBay in late 1997 and hosted nearly 800,000 visits each
day (Hoovers).
Although the company now has 8,100 employees, eBay hired its first employee in
1996, and Jeff Skoll was hired as the company’s first president later in the same year
(Wikipedia). In November 1996, eBay entered into its first third-party licensing deal
with a company called Electronic Travel Auction, which allowed them to use
SmartMarket Technology to sell plane tickets and other travel products. Margaret
Whitman replaced Omidyar as CEO in early 1998, and later that year eBay made its
blockbuster debut as a public company. Meanwhile, the company gained wide
recognition by launching a national advertising campaign and inking alliance deals with
America Online and WebTV (SiliconIran).
Beginning in 1999, eBay expanded its presence in the online auctions industry
with a series of acquisitions that expanded their scale and operations. Most notably in
1999, eBay acquired Alando (online auctions in Germany) and Billpoint (person-toperson credit card technology). EBay later sold Billpoint after acquiring PayPal, now
their most popular form of customer-to-customer payment (Wikipedia). The company
also made one of its first investments in an outside company with the purchase of 6% of
TradeOut.com, an online seller of corporate surplus materials. Soon after, the company
Group A – eBay 3
acquired an upscale auction house, Butterfield & Butterfield. The company also formed a
joint venture with Australia-based e-corp, formerly known as PBL online.
EBay found it necessary to largely focus on expanding globally, as evidenced by
their expansion into Japan in 2000, creating “eBay Japan.” In that same year eBay took
an equity stake in Autotrader.com and acquired Half.com (Hoovers). Furthering their
international expansion in 2001, eBay launched sites in France, Ireland, New Zealand,
and Switzerland (Hoovers). EBay and EachNet, a leading e-commerce company in China
founded in 1999, have been working together since March 2002 when the two companies
formed a strategic relationship. In June 2003, eBay increased its investment in China by
acquiring EachNet (Shareholder.com). With eBay’s global resources and continued best
practice sharing, eBay EachNet has become one of the major online marketplaces in
China.
EBay EachNet is known for the global e-commerce knowledge and large and
active trading community in China. TOM Online has the knowledge of the local market,
as well as an active wireless user base of more than 75 million. The joint venture will
allow the two companies to combine their strengths to build a new China marketplace
that will bring enhanced online and mobile opportunities to buyers and sellers in China.
EBay will have a 49% stake in the joint venture, and TOM Online will have a
51% stake. The financial investment will include a $40 million cash contribution from
eBay and $20 million in financing from TOM Online. In addition, eBay will contribute to
its EachNet subsidiary, while TOM Online will contribute with local management
expertise, technology, and brand (Shareholder.com).
Group A – eBay 4
China had an Internet population of 123 million web users as of June 2006, with
growth of 19% over the last year, and the country has more than 400 million mobile
users. The China e-commerce market is experiencing explosive growth and could rise to
¥46 billion in value next year, from ¥5.6 billion last year. This new venture will increase
eBay’s ability to tap into the potential of new online commerce trends in China
(Shareholder.com). This will allow eBay to further expand its customer base and increase
the shareholders’ value.
Convenience and added features became paramount to eBay in 2002 with the
opening of eBay stores. These virtual store fronts opened up e-commerce opportunities
for its sellers, giving them access to over 200 million consumers worldwide. Two years
later in 2004, the Business and Industrial category was launched, which aided eBay in
breaking in to the industrial surplus business. In June 2006, eBay opened its eBay
Express site. EBay Express is designed to work like a standard internet shopping site to
consumers with U.S. addresses. In the same month, eBay added an eBay Community,
Wiki, and eBay Blogs to its community content, which includes discussion boards,
groups, answer center, chat rooms, reviews, and buying guides (Wikipedia).
EBay has moved forward in building many different aspects of its company both
domestically and internationally. In April 2006, eBay invested $2 million in the Meetup
social networking site. Also, in April they acquired Tradera.com, Sweden’s leading
online auction-style marketplace, for $48 million (Wikipedia). Two months later, in June,
eBay agreed to a joint venture with PChome Online to form a co-branded website. This
joint venture will bring new online trading opportunities to buyers and sellers in Taiwan
(eBay.com). In August, eBay announced international cooperation with Google but have
Group A – eBay 5
not disclosed financial details regarding their cooperation. Most recently, eBay acquired
online ticket marketplace, StubHub, for what will amount to approximately $310 million.
This acquisition will expand eBay’s presence in the online tickets segment (Wikipedia).
According to the company and other expert projections, there are currently about
157 million unique users to eBay’s services around the globe (SELF SEO). Even with
such a large number of users, eBay assures that each one is delivered the most fair and
friendly treatment that they seek and deserve.
3. Organization of the firm
EBay has successfully built an online person-to-person trading community on the
Internet. Buyers and sellers are brought together in an automated process where sellers
are permitted to list items for sale, buyers to bid auction-style on items of interest, and all
eBay users to browse through listed items. There is no physical eBay store, although the
corporate headquarters are in San Jose, CA. This business model allows the company to
not have to carry any inventory.
There are three primary parts of eBay’s business: eBay Marketplaces, Payments,
and Communications. EBay Marketplaces includes the main traditional auction platform,
as well as other acquisitions like Rent.com, Shopping.com, Half.com, and most recently
StubHub. The Payments business is built around its successful PayPal system. PayPal
allows people and businesses to send payments electronically using email accounts.
EBay’s Communication business consists of the Skype platform which it purchased in
October 2005 (Reuters). Skype enables voice-over-Internet Protocol (VoIP) where users
Group A – eBay 6
can use the internet to communicate rather than traditional phone lines. It also makes free
video communication possible (“The eBay Company”).
Through its main web interface, eBay has streamlined and globalized person-toperson trading, which has conventionally been accomplished through channels like
garage sales, collectibles shows, and flea markets (eBay.com). As eBay’s services have
evolved, its applicability has expanded to broader categories of items, as well as a larger
user base. For example, eBay is now the nation’s largest dealer of cars, with over $1
billion in sales of cars and car parts (Hof). With its expanded product base, its
competition has also broadened; this now includes distributors, liquidators, retailers,
import and export companies, catalog and mail order companies, and virtually all online
and offline commerce participants.
Some of eBay’s current services include:
•
PayPal – an online bill payment service
•
Half.com – a fixed-price trading service
•
eBay International – country specific sites in Austria, Australia, Canada,
France, Germany, Ireland, Italy, Japan, Korea, New Zealand, Switzerland, and
the UK
•
eBay Motors – a marketplace for automotive products and services
•
eBay Stores – a customizable marketplace service for sellers
•
eBay Professional Services – a small business marketplace
•
eBay Local Trading
•
eBay Premier – specialty and luxury goods marketplace
•
eBay Live Auctions – live, real-time online bidding on items being sold by
‘real world’ auction houses
Group A – eBay 7
Browsing and bidding on auctions is free of charge, but sellers are charged in
several ways. First, when an item is listed on eBay, a nonrefundable Insertion Fee is
charged, which ranges between $0.30 and $3.30 depending on the seller’s opening price
of the item. Second, a fee is charged for additional listing options to promote the item,
such as highlighted or bold listing. Finally, a Final Value fee is charged at the end of the
seller’s auction. This fee generally ranges from 1.25% to 5% of the final sale price (“The
History of eBay”).
EBay notifies the buyer and seller via e-mail at the end of the auction if a bid
exceeds the seller’s minimum price, and the seller and buyer finish the transaction
independently of eBay. The binding contract of the auction is between the winning bidder
and the seller only. Any discrepancies or rare cases of fraud can be dealt with using
eBay’s resolution center. This system has worked well; the rate of fraud remains below
0.01%, nine times below credit card fraud (Hof).
EBay is not a vertically integrated company; rather, it provides a place and
method for people and businesses to buy and sell. Part of the allure of the company is that
because it offers such a diversified range of goods and allows for the sale of used goods,
it can thrive either when the economy is booming or shrinking.
4. Mission and Vision
EBay’s mission statement is, "To provide a global trading platform where
practically anyone can trade practically anything" (“What is eBay?”). By virtually any
measure, it is succeeding at its mission. It commands more than 80% if the online person-
Group A – eBay 8
to-person online market (Hof). In about one decade, eBay has become an online
phenomenon with markets and influence around the world.
EBay expounds on how it will accomplish this. “We will continue to enhance the
online trading experiences of all -- collectors, hobbyists, dealers, small business, unique
item seekers, bargain hunters, opportunistic sellers, and browsers. The growth of the
eBay community comes from meeting and exceeding the expectations of these special
people” (Global Information Infrastructure Commission).
EBay does not have a specific vision statement asserting where the company is
headed, but in many ways its slogan of “The World’s Online Marketplace” fulfills that
role. It signifies that the company wants to do whatever it can to make it the number one
place where people will shop online. This matches well with the company’s recent
actions and international expansion. EBay is putting itself in a place where it can be the
premiere online marketplace in the biggest and fastest-growing markets. CEO Meg
Whitman shared her personal vision for the company: “I want my legacy to be that we
have built a global online trading platform that empowers all kinds of users to be
successful doing what they love” (Konrad).
EBay prides itself in strong community values, encouraging “open and honest
communication among all its members.” They operate on the following five fundamental
values:
•
We believe people are basically good.
•
We believe everyone has something to contribute.
•
We believe that an honest open environment can bring out the best in people.
•
We recognize and respect everyone as a unique individual.
•
We encourage you to treat others the way you want to be treated.
Group A – eBay 9
EBay outlines some strong financial goals and objectives. Figure 1 shows the
objectives for the quarter ending March 31, 2007, while Figure 2 shows the yearly goals.
Dollar amounts are in millions, except for EPS.
Figure 1: Financial goals for quarter ending March 31, 2007
GAAP
Non-GAAP
Net revenues
$1,670-$1,720
$1,670-$1,720
Diluted EPS
$0.21-$0.23
$0.28-$0.30
Figure 2: Financial goals for year ending December 31, 2007
GAAP
Non-GAAP
Net revenues
$7,050-7,300
$7,050-7,300
Operating margin
26%
33%
Diluted EPS
$.99-1.03
$1.25-1.29
Effective tax rate
27%-27.5%
28%-28.5%
The projected financial growth of eBay ties into the mission statement. The
growth shows that eBay is having more people trading with each other as compared to
the previous year. The growth also shows that the definitions of “practically anyone” and
“practically anything” are constantly broadening.
One of the major goals of the company right now is international expansion.
Because they want to focus on long-term growth, they feel it is important to gain market
share across the globe. In order to accomplish this, they are making investments in the
infrastructure abroad. The two businesses being expanded internationally are the
Marketplaces program and the PayPal business (“Company Profile”).
Another of the more recent goals was to begin a socially responsible division
called corporate philanthropy and the developing world. Founder Pierre Omidyar said
Group A – eBay 10
that his desire was to create an honest, efficient market where anyone could succeed.
Accompanying that objective is another trying to make the power of the internet available
to everyday people (Schopen). By lowering barriers to trade, artisans in developing
nations can sell hand-made goods directly and cheaply to an enormous customer base by
eliminating the middlemen. This fulfills Omidyar’s desire to create “global economic
democracy” (Hof).
Some of the other major goals for the company include increasing the fun and
excitement of the auction business, simplifying sites for buyers with improved ease-ofuse and voice quality, and extending their leadership position in online marketplaces.
All of the goals relate with the firm’s mission to provide a platform where anyone
can trade just about anything. International expansion is working towards becoming the
“World’s Online Marketplace.” Even the goal of social responsibility is helping normal
people use the power of the internet for development. EBay will continue to strive
towards its mission to be the leading online trading platform around the world.
5. History Summary
Since eBay was founded in 1995, the company has grown immensely. They plan
to maintain this trend as seen in their 2007 goal of net revenues over $7 billion. EBay
employs over 8,000 people, which is a long ways from one employee in 1996. They have
grown through a series of acquisitions and mergers with companies like PayPal and
StubHub and by perfecting their core business: online auctions. EBay has made it easy
for people all over the world to trade with each other without ever setting foot in the same
nation. Their challenging goals and objectives hope to continue the explosive growth
Group A – eBay 11
eBay has experienced. EBay is a promising company that is expected to continue to
make waves in the new electronic world.
6. Environmental Forces
EBay is such a popular household name that it’s hard to believe the internet
auction site is only slightly over 10-years-old. Although a clear leader in the industry,
eBay faces mounting competition from online powerhouses such as Amazon.com and
smaller competitors like Overstock.com.
EBay, which boasts 180 million registered users worldwide, has expanded its
Internet auction service through acquisitions, joint ventures, and site launches to operate
local sites in some two dozen countries. To sustain its impressive sales growth, the
internet auction leader is expanding in the world’s two most populous nations: China and
India.
China's 100 million internet users and rapidly developing economy are a huge
lure for eBay. But in China, the US auction site has bumped up against startup
Alibaba.com which runs three online marketplaces that pitch Chinese-made goods to the
global market. Founded in 1999, Alibaba’s Web sites boast more than 10 million
registered users and are run by China's internet guru Jack Ma. In 2005, internet portal
Yahoo paid $1 billion and handed its China unit over to Ma to run in return for a 40%
stake in his company. In late 2006, eBay shifted its China expansion strategy when it
entered a joint venture with Tom Online, a prominent online game provider. As part of
the partnership, eBay integrated its eBay Eachnet subsidiary into the venture with Tom
Online owning 51% and eBay, 49%.
Group A – eBay 12
With eBay, Alibaba, and other rivals bidding for customers in a global turf war,
internet auction companies are attempting to grow their businesses by improving their
products and reaching out to more buyers and sellers. To facilitate transactions in
Cyberspace, eBay paid about $2.6 billion for Luxembourg-based Skype Technologies in
2005. EBay is counting on Skype’s internet phone service to help improve customer
service and facilitate transactions—much like its electronic payment service PayPal has
done for financial transactions. PayPal, which eBay bought in 2002, processes more than
1.3 million transactions a day, including about two-thirds of all online auction
transactions. In 2007, eBay significantly added to its online ticket selling operations with
the acquisition of StubHub, which it acquired for $310 million.
Another online marketplace and direct eBay competitors is uBid, Inc. The
Chicago-based company runs online auctions for business sellers of refurbished and
closeout merchandise, mostly computers and electronic goods, but also jewelry,
collectibles, apparel, travel services, and more.
While not an auction site per se, Priceline.com allows its users to name their own
price for airline tickets, hotel rooms, rental cars, and more. Together, Priceline.com and
eBay offer a travel booking service that is featured on eBay's site.
Also bidding for a slice of the consumer-to-consumer online auction market are
internet heavyweights Amazon.com and Yahoo, as well as smaller competitors such as
Overstock.com.
7. Porter’s Five Forces Analysis
i. Force # 1: Risk of New Entrants – eBay’s Classification = High
Group A – eBay 13
The online auction industry has a high risk of new entrants. New entrants can
hurt the industry’s profits since rivalry drives down prices with increased competition.
This industry is easy to enter because not much capital is required to start an online
auction site. Many Americans have the basic computer skills to start a website. To some
degree, the industry is open to anyone in the world with a computer. Another point is the
items that are put up for auction can be any item imaginable. There are no real switching
costs because eBay, along with its competitors, do not charge customers a fee to browse
an auction or exit the auction. This is good for new entrants because buyers (customers)
can easily use the new competitor’s websites to buy products without penalties.
Due to the industry’s growth phase, there are few governmental policies in play
and new entrants do not have regulations to hinder entry into the industry. Although
there are many ways of entry, new entrants could be discouraged to enter the industry
because of the high level of competition with well known competitors like eBay,
Amazon, Google, and others. This reason alone, however, may not keep new entrants out
of this growing industry.
ii. Force #2: Rivalry Among Established Firms – eBay’s Classification = High
There are many competitors in the online auction industry. There are a few large
companies such as Amazon, Google, and Yahoo, as well as many small firms competing
within the online auction industry. Amazon, Google, and Yahoo have had high revenues
and high revenue growth. In 2006, eBay’s net income was $1.13 billion, Amazon’s net
income was $190 million, and Google’s net income was $3.08 billion (“Competitors”).
Currently eBay, Amazon, Yahoo, and Google are the companies with the most market
Group A – eBay 14
share. There is increased competition for market share among all four companies. Other
small companies such as ExchangeBlvd.com, Inc., have a considerably smaller market
share than the larger firms.
Online auctions have no fees for buyers which mean that there are no switching
costs for customers. Competition increases with no switching costs because customers
have the tendency to broaden their selection of products by using several auction sites at
a time. There is not much product differentiation because suppliers are selling already
established products to buyers. Competition increases when there is less product
differentiation. The market is therefore global because the more competitors there are to
choose from, the more competition increases. As discussed earlier, it is easy to enter the
online auction industry due to the lack of barriers for entry which allows increased
competition.
EBay has some unique aspects most of the other auction companies do not have.
One aspect is eBay puts buyers and sellers together like the competition, but in eBay’s
case the sellers are normal, everyday people that list almost any product imaginable up
for auction. Another aspect in why eBay is unique is the incredible breadth of products
sold. Buyers have the opportunity at a wide selection of products that they can choose
from at different prices. Another point of difference is eBay’s own payment system. This
makes the customer experience with eBay easy, fast, and convenient. EBay can lower
competition somewhat because of these differences, but rivalry is still high in eBay’s
industry.
iii. Force #3: Bargaining Power of Buyers – eBay’s Classification = Medium
Group A – eBay 15
There are many competitors in eBay’s industry which increases buyers power
because they can buy from many different auctions. Products are undifferentiated and
easy to substitute because most products bought and sold on eBay are generic products.
Buyers comprise the bulk of the industry sales. The buyers make up the whole industry.
Buyers can buy from eBay or easily buy form eBay’s rivals, which increases buyer
power. Once again, there are low switching costs so the customer can buy from many
competitors, increasing buyer power.
Buyers are usually individuals looking for one or two products at a time which
makes buyers’ bargaining power weak. This decreases buyers’ power because one
individual buying only a few items does not affect a large company’s business. There are
so many eBay customers that losing one customer will not hurt eBay’s business.
Individual customers buy in such small quantities that one customer not buying a certain
product from eBay does not touch eBay’s net income or any other financial numbers.
iv. Force #4: Bargaining Power of Suppliers – eBay’s Classification = Low
EBay has a low bargaining power of suppliers. EBay’s suppliers are individuals
who put their processions up for auction. They can set a minimum price; however, they
have no control on what the final price will be. There are many suppliers in the industry
driving suppliers’ bargaining power down. Suppliers can be small businesses with no
real brand power which lowers eBay’s suppliers’ bargaining power. There are no costs to
switch to a different supplier for eBay, which lowers bargaining power of suppliers.
There are many supplier options for eBay and its customers as well.
Group A – eBay 16
iv. Force #5: Threat of Substitute Products – eBay’s Classification = Medium
Substitute products for eBay are those from traditional retail stores because they
often sell the same products. However, eBay saves customers time and money by
ordering from home. Other substitute is search engines and price comparison websites
because they are moving into online retailing and auctions (“In a League By Itself”).
Ordinary auctions where there is an auctioneer and real people shouting out bids could
also be considered a substitute (“In a League By Itself”). Buying retail at online retail
stores are also substitutes for eBay and e-tailing (“In a League By Itself”). There are
many substitutes for eBay; however, eBay has succeeded because of the way it integrates
its prospective sellers and buyers.
Group A – eBay 17
Key Success Factors
1.
Growing industry with an annual growth rate of 19%
2.
Unique Services eBay offers such as PayPal
3.
EBay’s guarantees and warranties
4.
Variety of products
5.
International expansion
Figure 3: Porter’s Five Forces Analysis for eBay
Force
Classification
Threat of Entry
H
Rivalry Among
Established
Competitors
H
Bargaining Power
of Buyers
M
Bargaining Power
of Suppliers
L
Threat of
Substitutes
M
Reasons
• Low Capital Requirements
• Little or No Switching Costs
• Very Few Government Policies
• A Few Very Large Companies
• Little if No Switching Costs
• Not Much Product Differentiation
• Global Market
Reasons for Increased Bargaining Power
• Fierce Competition
• Undifferentiated Products
• Low Switching Costs
Reasons for Decreased Bargaining Power
• Buyers are Small
• Buyers are Large in Number
• Suppliers are Individuals and They Do Not
Have Much Control Over Price
• Ease of Switching Suppliers
• Many Different Suppliers
Reasons for Threat
• Search Engines and Price Comparison
Websites Moving into Online Retailing and
Auctions
• Traditional Auctions
• Online Retailing
• E-tailing
Reasons for No Threat
• EBay’s Unique Features
Group A – eBay 18
8. Major Resources, Capabilities, Competencies, and Value Chain
As mentioned before, eBay operates in three primary business segments: the
marketplaces segment, which provides the infrastructure to enable online commerce in a
variety of auction platforms, the payments segment, which consists of PayPal and enables
individuals or businesses to send and receive payments online, and the communications
segment, which consists of Skype and enables voice-over Internet protocol (VoIP) calls
between Skype users, and also provides Skype users connectivity to traditional fixed-line
and mobile telephones. However, the two technological platforms that facilitate eBay’s
operations are the Payment and Communication segments (Reuters).
EBay has broadened its business to become a mainstream shopping destination by
expanding its inventory and purchasing a technology platform. PayPal is one of eBay’s
major resources that have enhanced features of functionality such as pricing, purchasing,
and payment options for eBay and its users. It is a wholly owned subsidiary of eBay
which has been a vital resource and asset to the company. PayPal has been an important
element of eBay’s massive growth by penetrating into a global market. It is an ecommerce business that allows payments and money transfers to be made through the
internet and serves as an electronic alternative to traditional paper methods such as
checks and money orders (allexperts.com).
One of eBay’s core competencies is the security it offers because of their lowest
fraud rates in the catalog and mail order industry. Of PayPal’s $27 billion in transactions
in 2005, only 0.27% was reported as fraudulent. When fraud does occur, PayPal has a
good record of settling disputes which has developed trust among its users (Rogal, 51).
PayPal supports payments in U.S. dollars, Canadian dollars, Australian dollars, Euros,
Group A – eBay 19
British pounds, Japanese Yen and Chinese Renminbi. PayPal now serves globally a total
of 103 countries (ebscohost.com).
Adding to eBay’s technological platform is a software company by the name of
Skype, who has also become a vital resource to the company. The company was acquired
by eBay in October 2005, and it offers Voice over Internet Protocol (VoIP). Available in
27 languages, it is the world’s fastest growing internet communication offering, which
has allowed world wide communications between users of its software to make unlimited
voice and video communication for free (ebay.com). “Voice is the most natural way to
communicate, and working with PayPal and eBay, we cannot think of a more powerful
platform to deliver,” said Skype’s co-founder Nikolas Zennstrom” (Datamonitor). By
using Skype, it allows eBay users to speak to one another instantly with a click-to-talk
voice capability instead of sending e-mails to each other and waiting for a response.
Customers will be able to directly contact the seller of an item with inquiries and will
invariably speed up the e-commerce process between buyers and sellers.
EBay Inc., whose PayPal Inc. is already a strong competitor in person-to-person
payments, is looking to its Skype Internet telephone service as a way to expand its
international money-transfer volume. It is expected to add the PayPal service to Skype’s
software sometime this year (EBSCOhost). The addition of PayPal to the Skype software
could be very attractive in terms of gaining new customers for all three companies.
EBay, PayPal, and Skype have the ability to pursue new market opportunities and capture
future growth.
Currently there are no other internet auction sites that possess a similar resource
that offers an application allowing VoIP telephone calls among buyers and sellers online.
Group A – eBay 20
Although VoIP is rare, other internet auctions companies will eventually start using the
platform. Implementing a similar platform would require a company to invest
substantially into research and development. In the meantime, eBay could benefit from a
sustained competitive advantage within the industry. However, if other competitors
implement this technology platform in their firms, eBay will also have first mover
advantage if it continues exploiting its resources like it is known to do.
Despite being a for-profit venture, eBay has not been solely focused on
transactions and profits, but it has also paid special attention to its users. Their reputation
has given them significant customer loyalty and valuable word-of-mouth marketing. It
has actively promoted user interaction and relationships among its users (EBSCOhost).
EBay’s user feedback serves as the foundation for the ratings of its buyers and sellers.
Originally, users were attracted to eBay because it offered a way to purchase products
that were difficult to find through other online platforms. Its would-be buyers would then
attract a larger number of sellers, which would then lead to more potential sellers and
additional buyers (EBSCOhost).
EBay has created value by continuously developing state-of-the-art tools that
increase the productivity of network members and encourages potential members to join
the ecosystem (specialtypub). EBay’s well known brand and large, active user base has
been a competitive advantage for them. Another key factor that has added value to the
company is eBay’s business model. Unlike many of its competitors, it is not a retailer and
does not have expenses related to back-end functions such as order processing,
fulfillment, and shipping (EBSCOhost). This chain of activities eliminates middlemen
and lowers barriers to buying and selling. Most importantly, however, it has absolutely
Group A – eBay 21
no inventory costs and minimal associated risk. As a result is has significantly high
returns and margins, and free cash flow that allows it to reinvest in its existing operations
and pursue new growth initiatives (EBSCOhost).
9. Governance and Incentives
Like any Fortune 500 company, eBay has adopted various policies and guidelines
for corporate governance and incentive systems to serve the best interests of the company
and its stockholders. EBay’s board of directors is made up of eleven individuals.
Currently, nine of the eleven directors are independent, leaving two insiders. Founder
Pierre Omidyar serves as Chairman of the Board, so CEO duality is not present (Board).
Instead, President and CEO Meg Whitman serves only as a director. There is also a Lead
Independent Director who chairs closed meetings without the inside directors, meetings
in the absence of the chairman, and the annual board self-assessment. Thomas Tierney is
currently the Lead Independent Director (SEC).
The directors are elected to three-year terms. At the end of every regularly
scheduled board meeting, the outside directors have the opportunity to meet without
management or inside directors. Each year, the board performs a self-assessment where
directors are asked to provide feedback on the performance of the other directors. The
Lead Independent Director follows up on any comments as he deems appropriate. Each
director is recommended to serve on a maximum of four company boards, and less if a
member of the Audit Committee (Governance).
Board members are compensated with a $50,000 retainer each year, as well as
stock options of $150,000. Independent directors also receive $2,000 for each board
Group A – eBay 22
meeting and $1,000 for each committee meeting. In order to keep their interests aligned
with the company, all directors are expected to keep at least $150,000 worth of eBay’s
common stock within three years of joining the board.
The board presently has five committees. The three principal committees of the
board are the Audit Committee, Compensation Committee, and Corporate Governance
and Nominating Committee. Only independent directors can participate on these
committees. The other two committees are the Non-Officer Option Committee and the
Strategic Investment, Acquisition, and Disposition Committee. Each committee has a
written charter outlining its duties. A member of each committee reports on any
significant matters at every board meeting. Each committee also performs an annual selfassessment to evaluate its effectiveness (Governance).
EBay is currently tracked by about 30 analysts at different firms. Institutions
currently make up 66.60% of the stock ownership. The three biggest institutional
investors are Capital Research & Management Co, Legg Mason Fund Advisors, and
Fidelity Management & Research.
Inside investors who own at least 5% stock currently own about 20% of the stock.
These include founder Pierre Omidyar (14.5%) and the first employee, Jeffrey Skoll
(6%). They are the only two individual investors, inside or outside, who own a 5% stake
in the company. The only outside investor with at least a 5% stake in the company is
Capital Research & Management Co. (6%) (MSN Money).
Figure 4, taken from eBay’s DEF 14A statement, shows the compensation
arrangements for the executive staff. The major components are salaries, bonuses, and
stock options. Bonuses are determined by eBay’s financial performance and individual
Group A – eBay 23
performances towards strategic objectives. With the exception of founder Pierre Omidyar
(14.5%) and CEO Meg Whitman (2.3%), none of the other mangers or directors holds
even 1% of the total stock of the company.
Figure 4: Summary Compensation Table
Long-Term and
Other Compensation
Annual Compensation
Number of Securities
Name and
Fiscal
2005 Principal Positions
Year
Margaret C. Whitman
2005
404,917
550,000
President and
2004
994,052
1,553,480
358,735
1,200,000
3,639
Chief Executive Officer
2003
843,823
1,159,132
377,496
2,200,000
3,639
Maynard G. Webb, Jr.
2005
625,008
799,580
268,309
300,000
1,246
Chief Operating Officer
2004
620,203
1,880,279
35,755
650,000
1,297
2003
582,007
1,266,601
—
1,100,000
1,297
John J. Donahoe
2005
568,269
1,217,546
1,080
1,000,000
2,621
President, eBay Business
Unit
2004
—
—
—
—
—
2003
—
—
—
—
—
Jeffrey D. Jordan
2005
510,747
722,245
25,074
185,000
2,527
President, PayPal
2004
494,284
934,973
2,065
440,000
2,516
2003
439,345
858,793
—
600,000
1,016
Rajiv Dutta
2005
416,302
588,089
104,423
385,000
2,497
Senior Vice President
and
Chief Financial Officer
2004
392,337
368,699
1,440
330,000
2,279
2003
341,794
275,606
—
500,000
2,279
Salary(1)
$
995,016
Bonus(2)
$
1,697,651
$
Other Annual
Underlying Options
All Other
Compensation(3)
Options (#)(4)
Compensation(5)
$
Figure 5 shows the percentage of shares owned by executives and the directors.
There are currently no activist investors seizing control of the company or instituting
dramatic changes.
3,483
Group A – eBay 24
Figure 5: Security Ownership of Select Executives and Directors
Shares Beneficially Owned(1)
Name of Beneficial Owner
Number
Pierre M. Omidyar(2)
Jeffrey S. Skoll(3)
FMR Corp(4)
Margaret C. Whitman(5)
Maynard G. Webb, Jr.(6)
John J. Donahoe(7)
Jeffrey D. Jordan(8)
Rajiv Dutta(9)
Fred D. Anderson(10)
Edward W. Barnholt(10)
Philippe Bourguignon(10)
Scott D. Cook(11)
William C. Ford(12)
Robert C. Kagle(13)
Dawn G. Lepore(14)
202,323,408
83,024,912
70,819,310
33,027,600
1,380,416
292,459
1,028,359
1,918,492
20,375
0
182,125
1,807,723
125,225
3,777,711
401,625
14.4
5.9
5
2.3
*
*
*
*
*
*
*
*
*
*
*
19,375
52,125
*
*
251,866,316
17.6
Richard T. Schlosberg, III(15)
Thomas J. Tierney(16)
All directors and executive officers as
a group (20 persons)(17)
Percent
%
10. Financial Analysis
i. Financial Variables
Figure 6: Selected financial information
Period Ending:
Financial Variable
31-Dec-06
31-Dec-05
31-Dec-04
Net Income
1,125,639
1,082,043
778,223
Total Assets
13,494,011
11,788,986
7,991,051
5,969,741
4,552,401
3,271,309
494,695
328,191
240,647
0
0
124,272
52,360,000
55,460,000
48,710,000
Total Revenue
Research & Development
Long Term Debt
Market Value
Stock Price
$
30.07
$
43.22
http://finance.yahoo.com/q?s=ebay
*all in thousands except stock price
$
58.17
Group A – eBay 25
With revenues totaling almost $6 billion in 2006, eBay has reported very
encouraging financial variables and trends from 2004-2006. EBay, for the past three
years, has steadily increased its net income from $778.2 million in 2004 to over $1.1
billion in 2006. The increase in profits can be attributed to the growing popularity of their
business and because eBay has been free of debt for the past two years. However, eBay’s
stock has been losing value over the past years despite the rise in net income. The stock
was at its all-time high at the end of 2004, reaching its peak at $58.88 per share on
December 30th of that year. Also, because the price of eBay stock has been decreasing,
so has its market value, which, at the end of 2006, totaled $52.36 billion. EBay has been
increasing their research and development over the past three years as shown in the chart.
In 2006, eBay spent close to $500 million on R& D. Total assets have also been on the
rise since 2004, totaling almost $13.5 billion in 2006.
ii. Summary Statistics
A closer look and evaluation of some of these financial variables, including stock
price and net income, revealed some interesting patterns and trends. The mean stock price
from December 2004 to December 2006 was $36.53, and a standard deviation of $6.61.
The range of these prices was $33.97, with the highest closing price in this time frame
being $58.17, and the lowest being $24.20.
The mean net income from 2004-2006 was $995,301,667, with a standard
deviation of $189,255,154. The range was $347,416,000, with the highest net income in
this time frame of $1.2 billion, coming in 2006, and the lowest, $778 million, coming in
2004.
Group A – eBay 26
iii. Key Financial Ratios
Figure 7: Selected financial ratios
http://finance.yahoo.com/q/co?s=EBAY
EBAY
AMZN
GOOG
UBHI.OB
Industry
Market Cap:
42.08B
15.72B
138.61B
22.08M
339.57M
Qtrly Rev Growth (yoy):
29.40%
33.90%
67.00%
-22.70%
6.70%
5.97B
10.71B
10.60B
72.85M
577.03M
Gross Margin (ttm):
79.50%
22.93%
60.33%
13.67%
39.53%
Oper Margins (ttm):
24.02%
3.63%
33.86%
-12.26%
2.99%
1.13B
190.00M
3.08B
-11.13M
3.96M
EPS (ttm):
0.79
0.448
9.942
-0.698
0.45
P/E (ttm):
38.91
84.64
44.83
N/A
28
1.21
2.64
0.98
N/A
1.19
Revenue (ttm):
Net Income (ttm):
PEG (5 yr expected):
The table above shows a direct competitor comparison of various key financial
ratios. From left to right, the comparisons are made between eBay (EBAY), Amazon
(AMZN), Google (GOOD), UBid.com (UBHI.OB), and the industry averages. In terms
of market capitalization, eBay is well above the average in this industry (Catalog and
Mail Order Houses), making it a large-cap company, but is only about one-third the size
of one of its main competitor, Google, which has a market cap of $138.61 billion.
Relative to its main competitors in the catalog and mail order industry, eBay has seen
slower revenue growth, but is still well above the industry average. It is experiencing
quarterly revenue growth of 29.4%. The main advantage of eBay, based on these ratios, is
their gross margin.
The profit margin indicates the rate of profit being earned from sales and other
revenues. EBay has shown an impressive gross profit margin of 79.5 percent. So, for
every dollar in revenues that eBay generates, 79.5 cents is pure profit. Compare this to
Group A – eBay 27
Amazon’s 22.93 percent and Google’s 60.33 percent and it will be clear that this is in fact
eBay’s competitive advantage over its rival firms. This is also a major reason why eBay
has seen increasing profits in each of the past three years.
Earnings per share, or EPS, is a measure that translates aggregate corporate profits
into profits on a per-share level, and is a measure of the amount of earnings available to
stockholders. EPS is calculated by subtracting preferred dividends from the net profit
after taxes, and then dividing that by the number of common shares outstanding. EBay
has an EPS of $.79, while Google has an EPS of $9.94, more than 12 times that of eBay.
Although it is above the industry average, eBay’s EPS is still much lower than that of its
major competitor, Google, and could possibly be attributed to eBay’s increase on
research and development costs over the previous three years. An increase in research
and development costs lead to a smaller net income, thus a smaller EPS.
An extension of the EPS ratio is the P/E ratio, or the price/earnings ratio. This
measure is used to determine how the market is pricing a company’s common stock by
relating the EPS to the market price of the stock. It is measured by dividing the market
price of common stock by the EPS. P/E ratios are widely quoted in the financial press and
are an important part of many stock valuation models. An investor would like to find
stock with rising P/E ratios because this is usually a signal of higher future stock prices
and better returns to shareholders. Sometimes, however, P/E ratios can become too high
relative to the market or the stocks’ past performances. A P/E ratio that gets too high may
be a sign that the stock is being overvalued in the market. To accurately assess the level
of a company’s P/E ratio, you would need to compare it to that company’s rate of growth
in earnings, a measure called the PEG ratio.
Group A – eBay 28
The PEG ratio compares the P/E ratio to the 3 to 5 year rate of growth in earnings.
It is calculated by dividing the P/E ratio by the 3-5 year growth rate in earnings. A PEG
ratio of 1.0 seems to be reasonable and suggests that the P/E is not out of line with the
firms’ earnings growth. A high PEG ratio means that the stock’s P/E has outpaced its
growth in earnings and means that the stock if fully valued and does not show much
growth and earnings potential. In the case of eBay, the PEG ratio is 1.21, which suggests
that the P/E ratio is in line with their earnings growth. Google’s PEG ratio of .98 is very
attractive to investors, who typically look for PEG ratios equal to or less than one.
Amazon, however, shows a PEG ratio of 2.64 and may suggest that Amazon’s stock is
overvalued in the market.
iv. Analysts’ Earnings Predictions
Figure 8: Financial Predictions
Earnings Estimates
Current Qtr
Mar-07
Next Qtr
Jun-07
Current Year
Dec-07
Next Year
Dec-08
Avg. Estimate
0.30
0.31
1.28
1.51
No. of Analysts
23
22
25
26
Low Estimate
0.26
0.29
1.24
1.32
High Estimate
0.31
0.32
1.34
1.67
Year Ago EPS
0.24
0.24
http://finance.yahoo.com/q/ae?s=EBAY
1.05
1.28
According to finance.yahoo.com, there are currently 30 analysts predicting eBay’s
EPS at the end of 2007. The average estimate is $1.28/share, and the estimates range
from $1.24-$1.34. The EPS in 2007 is predicted to be higher than it was at the end of
2006, which was $1.05/share. In 2008, the EPS is expected to be $1.51/share. These
Group A – eBay 29
analysts see greater earnings per share outstanding for eBay in the future, which would
follow current trends of rising profits and high margins.
11. SWOT Analysis Grid
Strengths
• Leading global brand for online auctions • Recognizable brand name • Over 250 alliances • Partnerships with international companies • No inventory held by company • No need for traditional sales force • First to the market • Wide variety of categories • High returns can be reinvested into the company • Publically traded Strength and Opportunity Strategies
• Global expansion • Remain simplistic Opportunities
• Acquisitions of many businesses such as Skype and PayPal • Continued international expansion such as China and India • Increasing use of the Internet which increases opportunities in current markets Threats
Strengths and Threat Strategies
• Illegal practices • Global expansion • Increasing number of • Security protocols online auctions and online stores • Rapid growth of Amazon.com and Google Checkout • About one-­‐third of internet users are already registered on eBay Weaknesses
• Inability to measure illegal activity • Technological malfunctions Weaknesses and Opportunity Strategies
• Strategic alliance with couriers • Systems for product verification • Diversify into “new” product markets Weaknesses and Threat Strategies
• Alliance with couriers • Shut down eBay Group A – eBay 30
12. Narrative Description of StubHub Acquisition
EBay came into existence at a time where the number of internet users around the
world was increasing significantly. Since then, eBay has made several strategic moves to
expand its scale of operations by simultaneously enhancing its technology platform and
acquiring companies to expand into new markets. Much of eBay’s success has come
through these synergetic acquisitions, and eBay continues to venture into attractive and
developing markets. Its most recent major acquisition was StubHub in February 2007.
EBay had previously attempted to acquire StubHub in 2002 for $20 million, but the
tentative agreement fell apart at the last minute over price (reuters.com).
StubHub is self-dubbed “the fan’s ticket marketplace,” enabling customers to buy
and sell tickets at a fair market value to a vast selection of sporting, concert, theater and
other live entertainment events—even those that are sold out (eBay.com). It operates an
online market for reselling tickets to major events, creating an electronic secondary
market. StubHub’s business soared 13,000% from 2005-2006 to over $400 million in
gross ticket sales in 2006 (reuters.com).
In 2006, buyers paid more than $400 million for tickets sold on its site, generating
more than $100 million in revenue. Approximately $10 million of that was net profit.
(StubHub.com). In 2006, StubHub had 2.1 million unique visitors and generated 22.3
million page views; in comparison, eBay’s ticket section had 309,000 unique visitors and
875,000 page views. EBay has been known for its great generic-auction marketplace;
however, its event ticket marketplace was failing as the premiere online auction ticket
site.
Group A – eBay 31
StubHub’s buying experience is exclusively specialized for buying and selling
tickets. It is easy for a prospective buyer to search tickets for a specific date, artist, team,
or location. It also provides seat maps for most events. StubHub handles the fulfillment
for both the buyer and seller through FedEx and ensures that tickets get there before they
spoil. Unlike eBay, StubHub has an insightful approach to build critical alliances in their
ticket market place quickly. For example, StubHub has partnered with over 30
professional and college teams to offer their season tickets. StubHub and the teams have
recognized that this partnership brings revenue to both sides, regardless if season ticket
holders might not attend a game during the season. Secondary sales of tickets through
StubHub could still give teams revenue through the sale of concessions and memorabilia
that otherwise would have been lost.
StubHub has become so popular because it is playing off the same network effect
that made eBay successful. Buyers flock to where the sellers are to get the widest
selection, while sellers flock to where the buyers are to reach the widest audience
(Munarriz). “StubHub is a perfect complement to eBay’s tickets business and both can
strengthen business and provide fans with more choice and better service,” said Bill
Cobb, president of the eBay’s North American marketplace (eBay.com). EBay
immediately recognized its weakness in its event ticket marketplace and therefore
acquired StubHub to better specialize in a lucrative market.
13. StubHub Acquisition Analysis
i. Type of Strategy
Group A – eBay 32
EBay acquired StubHub, the leading online marketplace for the resale of event
tickets, on February 13, 2007. EBay chose an acquisition strategy to enter the online
ticket marketplace. This is a corporate-level strategy because eBay is deciding what
businesses to be in and how the addition of StubHub would benefit the whole company.
StubHub adds value to eBay because the acquisition allows for differentiation from other
online markets. By adding StubHub to eBay’s business, they can specializing in selling
tickets online which is not offered to such an extent by eBay’s online marketplace rivals.
The acquisition of StubHub is also a business-level strategy. A business-level
strategy develops and sustains a competitive advantage for goods and services that are
produced. StubHub has expertise in selling tickets through the internet which can give
eBay a competitive advantage over its rivals. EBay anticipated changes in demand for
tickets on the online market. EBay noticed StubHub’s increased sales and they noticed
the potential growth of the ticket market, so they proposed the acquisition.
EBay uses a combination of cost-leadership and differentiation strategies. They
bring buyers and sellers together to exchange products at market prices. Providing
virtually any product imaginable at the lowest price available is eBay’s business. EBay
does not have to pass high costs down to their customers because they have very low
overhead themselves. The differentiation strategy is implemented through the acquisition
with StubHub. EBay now has an experienced division with competencies in online
marketplace ticket selling, which most of eBay’s competitors lack.
EBay also uses a technological strategy to improve their business. A
technological strategy is the task of building, maintaining, and exploiting a company's
technological assets (Kotelnikov). EBay is based around the use of computers, and all of
Group A – eBay 33
the new technologies that go along with having a business based around the internet.
EBay has to keep the website updated with all the newest technologies and easy to
navigate so customers all over the world can use the website. The technology must be
compatible with all of the customers’ computers. With the acquisition of StubHub, eBay
is keeping ahead of their competitors by having an expert ticket selling company use their
technological capabilities. That is a key component of using a technological strategy—
predicting and preparing for the opportunities and challenges that new technologies offer
(Kotelnikov).
ii. Anticipated Costs and Benefits
The acquisition of StubHub by eBay was designed to provide growth for the
company. EBay has lost nearly half of its ticket segment market value over the past two
years and has been under pressure from investors to expand into other electronic
commerce markets (boston.com). On the other hand, Stubhub.com, had sold $400 million
worth of tickets in 2006, earning a $10 million profit (techcrunch.com). It would only
makes sense to strengthen a portion of the online marketplace that was lagging for eBay
and acquire a company that was doing very well in that market. The goal of this move
was for eBay to bolster its position in the online ticket re-selling industry or “e-scalping.”
The obvious benefit of this would be long term growth and an increase in revenues and
profits. Anticipated cost of this acquisition was, of course, a hefty dollar amount of
approximately $285 million.
iii. Issues of Implementation
Group A – eBay 34
After eBay and StubHub agreed to the $310 million acquisition, both companies
still had to await the US antitrust authority’s approval. The Federal Trade Commission
finished its investigation and approved of the acquisition on February 8, 2007. The
transaction was completed five days later on February 13.
A link to StubHub was added to the eBay homepage around that time, and viceversa. There are still over 50,000 tickets on sale on the eBay website. StubHub is just
another avenue of eBay for people to buy peer-to-peer tickets. EBay, which used to be
StubHub’s biggest competitor, has left StubHub’s commission structure alone. The
commissions charged are 15% to the seller and 10% to the buyer plus shipping charges.
There are a number of regulations and laws about the resale of event tickets, and
even more are pending. Some of these have caused issues of implementation. For
example, the New England Patriots, a professional football team, sued StubHub accusing
it of violating Massachusetts’ ticket resale laws. These types of legal issues will increase
for eBay with StubHub’s $400 million of gross ticket sales.
Overall, eBay has mostly left StubHub alone to continue its normal operations.
Besides the occasional links back and forth between eBay and StubHub, the two
companies appear to operate the same as before the acquisition. Implementation, as far as
business analysts can determine, has been smooth and problem-free as it compliments
eBay’s ticket business.
iv. Effects of the Acquisition
EBay announced its first quarter earnings for 2007 on April 18, with net income
at $377 million (an increase of 52% from one year ago), from revenues of $1.77 billion
Group A – eBay 35
(finance.yahoo.com). EBay finalized its acquisition of StubHub approximately 2 months
ago in early February. It has been reported that approximately $100 million in revenues
has been attributed to the acquisition (notablecalls.com). Because the strategy of
acquiring StubHub is so recent, the effects of the acquisition are not yet very clear. It is
clear, however, that eBay has bolstered its position in the e-scalping industry, with some
analysts approximating their market share to be around 40%.
Many investors did not initially approve of eBay’s acquisition. EBay shares
closed down $0.45, or 1.51% at $29.30 on Nasdaq the Wednesday following reports
eBay was ready to buy StubHub for a figure in the "low $300 millions."
One cost that has been realized by eBay was the amount paid for StubHub. EBay
agreed to pay $285 million plus whatever was on the books of StubHub at the time,
which amounted to approximately $25 million, for a total sale price of $310 million.
In its forward-looking statements, eBay acknowledged that the acquisition would
involve risks and uncertainties, and actual results could differ materially from those
predicted. Factors that could cause or contribute to such differences included the reaction
of the users of StubHub's services, the future growth of StubHub's services, the reaction
of competitors to the transaction, and the possibility that integration following the
transaction may be more difficult than expected.
v. Overall Evaluation
EBay’s strategy of acquiring StubHub was a sound idea. EBay’s ticket sales were
struggling, so they purchased StubHub to enhance their revenues in ticket sales. While
the lasting effect StubHub will have on ticket revenues for eBay is not yet apparent, all
Group A – eBay 36
current forecasts look favorable. There is a general consensus StubHub will be a great
asset to eBay in the future. The acquisition fit with several of eBay’s strategies; it is
fulfilling a corporate-level strategy, a business-level strategy, and a technological
strategy. On top of this, both StubHub and eBay seem to have corporate cultures that
mesh well together. EBay did a nice job carefully integrating the new ticket company.
In retrospect, the acquisition should have taken place in 2002 when eBay could
have purchased StubHub for substantially less than the $310 million dollars they
purchased for it in February. Since the acquisition, Ticketmaster is suing eBay’s
subsidiary StubHub for allegedly fraudulently obtaining premium tickets to sell online
(Keating). The lawsuit may be a frivolous case because Ticketmaster is worried it will
lose market share. EBay has been sued several times due to StubHub, but eBay seems
optimistic. Any other problems are not yet apparent as the acquisition is still very recent.
Group A – eBay 37
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Group A – eBay 38
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Group A – eBay 39
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