Internet Marketing Case Study: Ebay Thrives in the Global Marketplace
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Introduction
In 1995 Pierre Omidyar, a “French-born software engineer” (Chaffey, Ellis-Chadwick, Mayer, & Johnston, p. 39), was having dinner one night with his girlfriend, a passionate Pez collector. During their meal, Omidyars girlfriend mentioned “the lack of fellow [Pez] collectors in the San Francisco Bay area and he suggested using the Internet to find trading partners” (Biography.com). To aid her in her search, Omidyar “created a simple prototype on his personal web page, and launched an online service called Auction Web (Achievement.org, 2010). The first item sold on the site was not a Pez dispenser, but a broken laser pointer. “Omidyar was astonished that anyone would pay for the device in its broken state, but the buyer assured him he was deliberately collecting broken laser pointers” (Achievement.org, 2010). Similar surprises followed as this business exploded and its users began to register trade goods of an unimaginable range.
Over the next year, the Auction Web business expanded rapidly through word of mouth advertising. Starting with collectable items, the site quickly expanded into a vast range of merchandise, including furniture, electronics, home appliances, vehicles, and even airline tickets. During its second year, 1996, Auction Web hosted 250,000 auctions. In the first month of 1997, it hosted 2 million and the middle of that year, it was hosting nearly 800,000 auctions a day (Achievement.org, 2010). In 1997, Auction Web became known as eBay (Chaffey, Ellis-Chadwick, Mayer, & Johnston, p. 39).
How Digital Media and Strategic Managerial Decisions have Supported eBays Growth
Digital media and the Internet are the building blocks to success for online retailers or auction sites like eBay. Digital media refers to “communications that are facilitated through content and interactive services delivered by different technology platforms including the Internet, web, mobile phone, interactive TV, IPTV (Internet Protocol Television), and digital signage” (Chaffey, Ellis-Chadwick, Mayer, & Johnston, p. 675).
Digital media is comprised of 6 characteristics. The first aspect is a “one-to-one or many-to-many communication model” (Chaffey, Ellis-Chadwick, Mayer, & Johnston, p. 36). What this means is that the Internet allows multiple users to contribute and receive information. The second characteristic is focused on “individualized marketing or mass customization and a pull model for web marketing” (Chaffey, Ellis-Chadwick, Mayer, & Johnston, p. 36). In other words, due to advances in the technology to monitor preferences, personalization in marketing becomes possible. The pull model “occurs through targeted search engine marketing” which allows for lower wastage (Chaffey, Ellis-Chadwick, Mayer, & Johnston, p. 36) . The third aspect of digital media is dialogue. This characteristic indicates that the internet is an interactive platform that facilitates “feedback and participation through social networks and forums” (Chaffey, Ellis-Chadwick, Mayer, & Johnston, p. 36). The fourth segment is communication, where the customer becomes more involved in brand characteristics and adding value to the brand. The fifth aspect involves demand-side thinking and the customer as a partner, rather than a target. What this means is that “customer pull becomes more important” as they have “more input into products and services required” (Chaffey, Ellis-Chadwick, Mayer, & Johnston, p. 36). This is due to the availability of customer satisfaction surveys and product ratings. The final characteristic of digital media is communities. In this aspect, groups of like-minded consumers are formed, rather than segmented.
Digital media has supported the growth of eBay in several ways. Of the characteristics, mentioned in the above paragraph, eBay has utilized the one-to-one or many to many communication model as they have provided their users with “access to broad markets” (Chaffey, Ellis-Chadwick, Mayer, & Johnston, p. 40). They have also made use of the pull model for web marketing which can be seen in search engines (i.e. Google, Yahoo, Bing, etc.). When a customer is looking for a product, they can type a keyword into their preferred search engine and it will generate “a list of results that it considers most relevant” (Ginn, 2006). Frequently, eBay listings will appear in this list. eBay has utilized demand-side thinking, making the customer a partner, and dialogue though their Detailed Seller Ratings (DSRs). The DSR “enables sellers to be reviewed in four areas: (1) item as described, (2) communication, (3) delivery time, and (4) postage and packaging charges” (Chaffey, Ellis-Chadwick, Mayer, & Johnston, p. 40). eBay also offers a feedback system for the sellers to judge their buyers based on response and payment. This feedback system greatly improves the shopping/selling experience of eBay users because it allows for both buyers and sellers to rate each other for honesty and reliability.
In order for a company to be successful in Internet marketing, they “need to develop a planned, structured approach” (Chaffey, Ellis-Chadwick, Mayer, & Johnston, p. 25). eBays growth in the online auction industry has been greatly supported by the strategic managerial decision of their management team. When eBay was initially launched, it functioned as a portal for the purchase and sale of miscellaneous items. As time went on, the company not only diversified the categories of products for sale, but it expanded into “three major businesses” (Chaffey, Ellis-Chadwick, Mayer, & Johnston, p. 40).
The first segment of the eBay industry is the Marketplace. This sector of its company, which accounted for “70 percent of net revenues in 2007”, operates on a service which “enables sellers to list items for sale on an auction or fixed-price basis giving buyers to opportunity topurchase items of interest” (Chaffey, Ellis-Chadwick, Mayer, & Johnston, p. 40). As the core facet of the company, “the Marketplace platforms include an average of 100 million products for sale each day”. By charging a listing fee for sellers and taking a small percentage of the sale, the company earns their profit simply by setting up a place for buyers and sellers to meet.
The second element of the eBay industry is PayPal, which was acquired in 2003. This service provides its users with a means of exchanging funds via the Internet. ¬¬¬¬PayPal allows users to make secure payments online using credit cards or bank transfers. In 2007, this facet of the eBay company