Explain the Revenue model of an online marketplace eBay

 

eBay is an online marketplace that offers consumer-to-consumer and business-to-consumer vending. The platform was founded in 1995 by Pierre Omidyar. It began by selling collectables but has since grown into a pioneer e-marketplace, a classified service, and an online ticket vendor. eBay uses the approach of the first-mover advantage and has gradually reinvented to remain relevant and cement its place as one of the largest online marketplaces.

The revenue model of eBay comprises revenue from eBay marketplace, subsidiaries, branding solutions, and advertising business. Its revenue model is further explained below.

1.eBay Marketplace

The platform has digitized people-to-people trading which earlier operated at markets, garage sales, etc. eBay allows buying and selling products online. The trading can either be in form of an auction or a fixed price. The buyer auction approach allows the buyers to bid for a single product, while the seller auction allows different sellers to bid their fixed price for a single product and the buyer selects the best available offer. Other features present on the platform include SafeHarbor Program, eBay Top Rated Seller Program, Feedback Program, Verified Rights Owner Program, eBay Money Back Guarantee, and loyalty programs. Buy It Now is the simplest way to trade on eBay and it uses three approaches. In the Auction-style listings, the buyer can either bid in the auction or purchase it directly. In the Reserve price auctions, the option only becomes available once the reserve price is met. In the Buy it now without bidding, the customers buy products for the given price.

2.Insertion Fee

Insertion fee is charged on every seller on eBay for listing their article on the platform. The fee is usually charged per listing and varies based on the category of the listed item. Every seller is however issued with 50 free listings per month. When the free listings are depleted, eBay charges a fee for every product listing from the sellers. A 5 cents fixed price is charged on listing books, movies, DVDs, music and video games.

3.Final Value Fee

A commission is charged on every sale made by the seller on eBay. The commission is referred to as the final value fee and ranges from 3.5% to 10% depending on the product category.

4.Advanced Listing Upgrade Fees

eBay avails a platform to promote, highlight, and relist the product on the platform. The features are available for both the fixed price and auction-style approaches with particular predetermined charges.

5.Close5

The Close5 business and revenue model is equivalent to Letgo's and Craigslist's model where the company earns revenue through promoted posts. Close5 is a subsidiary of eBay.

6.StubHub

StubHub is an online ticket exchange enterprise which allows for selling and buying of theatre, sports, concerts and other live entertainment event tickets. It is the largest secondary-market ticket marketplace in USA and across the globe. There are no fees charged for listing the tickets, but a 15% charge is placed on the tickets sold, while the buyers are charged 10% of the fees.

7.Kijiji or eBay Classifieds

The platform was launched in 2005 as an online classified advertising for posting local ads. It is mainly active in Canada, Hongkong, Italy and Taiwan. Here, revenue is generated by highlighting an ad, so that it comes with an urgent sign to alert the buyers on the need to purchase it as fast as possible.