Those who have a reasonable knowledge of all things e-commerce would be familiar with eBay’s success story. Originally called AuctionWeb, the online shopping and auction website’s name was changed to eBay in late 1997. The company’s founder Pierre Omidyar who is worth an estimated $9.23 billion was inducted into the billion-dollar club barely three years after its launch, a strong indication of how far eBay has come. Let’s take a look at eBay’s net worth, income streams, and how it grew to become a household name in online shopping.
How Does eBay Make Its Money?
For a company that provides an easy digital platform for users to resell unwanted stuff, what they do is based on an incredibly simple service – a big garage sale. eBay was launched in 1995 with the primary aim of serving as an auction site where interested buyers could bid on items listed by sellers.
When Pierre Omidyar started the company, he came with a unique strategy that left market regulation in the hands of buyers and sellers by setting up a forum where those using it could rate themselves. Omidyar’s inferred trust in people apparently worked as eBay could boast of no less than 200,000 monthly auctions, about two years after. However, the shopping marketplace has since deviated slightly from its original strategy in conformity with digital trends from other online retail giants such as Amazon. The following are the ways the multinational e-commerce corporation makes its money.
Today, eBay’s mode of operation is now far fetched from its initial auction-only model. Nearly 90% of eBay’s sales are made via the “Buy It Now” function on its site, thanks to PayPal. The massive online marketplace acquired PayPal as its main payments processor for $1.5 billion in 2002. The fees generated by the online payment company account for more than a third of eBay’s revenue.
However, after 12 years, eBay which has become one of the largest and most successful e-commerce platforms decided to make Paypal an independent company. In line with keeping up with competitors like Alibaba and Amazon, this was a move meant to connect more buyers and sellers across the world by broadening eBay’s payment options for users. Moreover, the benefits of the separation were not onesided. PayPal was growing faster than eBay at the time, hence the breakup availed the online payment company the liberty to seek out other lucrative opportunities.
When the two companies split in 2015, eBay accounted for more than 50 percent of PayPal’s profits and over 30 percent of its revenue. Therefore, it wasn’t a surprise when they also announced that they’ll continue working closely until 2020. Unlike what is obtainable today, when the eBay-PayPal agreement comes to end in 2020, PayPal will no longer process card payments for eBay but will remain a payment option for shoppers on the site.
In a bid to take more control over its user experience across the world, eBay replaced PayPal with Ayden. The massive online marketplace signed a longterm deal with the Amsterdam-based payments company to become the primary payments processor for its sites. With its sole focus on providing back-end payments services, some of Ayden’s client base include global brands such as Spotify, Netflix, and Uber.
After PayPal, the heart and soul of eBay is its marketplace. It is clearly another revenue stream for the company. Simply put, sellers are charged for transaction fees and they are charged a specific amount after listing their first 50 items every month for free. However, the user charges vary in relation to item categories. It is also needful to point out that 10% of every listing sales’ total amount goes to eBay.
eBay Enterprise which is the company’s conventional subsidiary that specializes in creating online shopping sites for their brands is another money-spinner. With its range of client-friendly services, the division accounts for about 6% of eBay’s total revenue.
What’s eBay Net Worth In 2019?
Over the years, the massive online marketplace has developed and acquired several online marketplaces including Classifieds and StubHub. In addition to its founder who owns 5% of eBay and 6% of Paypal’s shares, eBay’s growth has made many of its largest shareholders very wealthy.
However, it is worthy to note that 90% of the company shares are held by mutual funds and other institutional shareholders. With a current share price pegged around $40, eBay’s net worth (market value) is estimated at $42 billion while PayPal is valued at $102 billion.