eBay, Inc. and Amazon.com (A) · eBay, Inc. and Amazon.com (A) ... Home Depot—to offer goods through fixed-price storefronts on the company’s platform.14 At the time, pricing

9-712-405

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Professor Ramon Casadesus-Masanell and Anant Thaker (MBA 2011) prepared this case. This case was developed from published sources. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management. Copyright © 2012 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu/educators. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School.

R A M O N C A S A D E S U S - M A S A N E L L

A N A N T T H A K E R

eBay, Inc. and Amazon.com (A)

It’s a collision in the making with an impact that could ripple far beyond which pioneer will lead the E-commerce revolution—and which will follow.

— BusinessWeek, May 19991

More than a decade after BusinessWeek devoted its cover story to “eBay vs. Amazon,”—a competitive battle it labeled “a defining moment for e-commerce,”—Amazon had established itself as

the market leader.2 At the end of 2010, the company’s share price had grown at a compound annual growth rate (CAGR) of 37% since 2001—more than six times eBay’s 6% growth over the same period (see Exhibit 1). Over the past five years in particular, its revenue, operating income, and net income had, on average, grown at robust rates of 32%, 27%, and 26%, respectively (see Exhibit 2 for Amazon’s summary financial data). On the other hand, eBay had grown these indicators at rates of 15%, 14%, and 21%. Notably, its core Marketplaces business grew its revenue at a CAGR of 10% per year from 2005 to 2010 (see Exhibit 3 for eBay’s summary financial data).

EBay had not always lagged behind its competitor. In 1999, at the time of the BusinessWeek story, eBay offered more than two million items for auction daily, expected its annual gross merchandise volume (GMV) to quadruple to nearly $3 billion, and maintained 3.8 million registered users, which had grown 75% from the prior year.3 Amazon, meanwhile, touted itself for offering “Earth’s biggest selection” at 16 million items for sale, expected annual sales to more than double to $1.4 billion, and boasted 8.4 million cumulative customer accounts—up 250% versus the prior year.4 As BusinessWeek summarized:

Indeed, the budding behemoths present a fundamental choice for consumers in the Internet Age: Will most people gravitate toward fixed prices at the likes of Amazon’s clean, well-lighted superstore, with its familiar brand-name retail sheen? Or will the masses take a shine to dynamic pricing, the fluid give-and-take on eBay’s friendly, funky swap meet cybercharged

into a global bazaar?5

The companies, it seems, did not opt to wait for consumers to make a choice. A few months before the publication of the BusinessWeek article—and one day after eBay announced plans to make a $1.1 billion secondary stock offering—Amazon launched its own auction site to much fanfare, clearly

designed as an assault on eBay’s business model.6 Soon afterward, in 2000, eBay expanded beyond its

For the exclusive use of L. Yu

This document is authorized for use only by Leibin Yu in Strategy Spring 2014 taught by Plavin-Masterman from December 2013 to May 2014.

712-405 eBay, Inc. and Amazon.com (A)

2

core auctions business, introducing fixed-price trading with the acquisition of retail site Half.com and adding a “Buy-It-Now” feature to its traditional business, thereby enabling buyers to instantly win an

auction at a seller’s pre-established price.7 A year later, eBay appeared to have the momentum, as its share of online auction spending rose from 58% percent in 2000 to 64% in 2001, while Amazon’s share fell from 3% to just 2%.8 While Amazon quietly scaled back its struggling auction business, eBay’s

fixed-price initiatives were contributing more than 19% of its GMV by the end of the year.9 At the end of 2001, eBay’s shares had risen 749% since its IPO in September 1998, while Amazon’s shares were down 36% over the same period (see Exhibit 4).

As the company entered 2011, eBay had to determine which strategy it should pursue to regain the upper hand. Should it maintain its groundbreaking platform business model and attract more buyers and sellers by, for example, cutting prices on fees or improving its search capabilities? Alternatively, should eBay transform its model and expand into areas such as services for its sellers, even including fulfillment and marketing? EBay’s decision would set the tone for its battle with Amazon into the next decade.

eBay’s Business Model

Auctions Marketplace

Pierre Omidyar launched eBay in 1995, with the aim of “[giving] the power of the market back to

individuals, not just large corporations.”10 The company’s stated goal was to “pioneer new communities around the world built on commerce, sustained by trust and inspired by opportunity.” EBay’s primary offerings were online marketplaces for the sale of goods and services, supplemented by other e-commerce platforms and online payment solutions.11 In 2011, eBay operated three primary business segments—Marketplaces, Payments, and Communications—with the core Marketplaces business and PayPal fees earned on eBay sites constituting the majority of company’s overall revenue.

At its core, eBay offered a marketplace that connects buyers and sellers. With a stated goal of facilitating communities—not selling them products—the company primarily generated revenue from sellers through fees for listing items and commission fees payable on completed transactions. (See Exhibit 5 for a basic fee schedule of selling on eBay in 1999.) For example, if a seller listed an item in auction format for a starting price of $0.99, he or she would be charged an insertion fee of $0.25 up front. If the auction then sold for a final value of $100, the seller would pay a commission of $3.13. Overall, eBay would earn total of $3.38, and the seller would net $96.62.

eBay’s cost of goods sold primarily consisted of website operations, payment processing, and customer support. In addition, by restricting its operations to the maintenance of a marketplace, eBay was able to scale rapidly into other markets outside the U.S. As of 2011, the company had localized websites in 24 countries, as well partnerships and investments in an additional 15 markets.12 EBay’s global scalability also enabled greater cross-border trade throughout the company’s platform, as sellers in international markets such as China were able to efficiently source products and offer them on eBay’s most active websites in the U.S., the United Kingdom, and Germany.

Launched as a pure auction marketplace, eBay’s bread–and–butter business in its early years was the “collectibles” category, ultimately expanding into more than 50,000 product categories ranging from automobiles, to toys, to sporting goods. Unique and used products came to epitomize the kinds of goods customers sought on eBay.



eBay, Inc. and Amazon.com (A) 712-405

3

Expanding into Fixed-Price Sales

In 2000, eBay grew beyond its core auctions business and introduced fixed-price trading with the acquisition of retail site Half.com and the addition of a “Buy-It-Now” feature in its traditional

business, thereby enabling buyers to instantly win an auction at a seller’s pre-established price.13 Unlike auctions, fixed-price selling was more commonly associated with commodity products in which low prices tended to prevail.

In 2001, eBay launched eBay Stores, which allowed sellers—including large retailers such as The

Home Depot—to offer goods through fixed-price storefronts on the company’s platform.14 At the time, pricing for sellers included both a monthly subscription fee of $9.95 and listing fee of $.05 per

item, with final value fees ranging from 1.25% to 5%.15

Improving the Buyer and Seller Experience

In 1996, six months after the company’s founding, Omidyar launched the Feedback Forum with a letter to the eBay community of several hundred members, writing:

Most people are honest. And they mean well. Some people go out of their way to make things right. I've heard great stories about the honesty of people here. But some people are dishonest. Or deceptive. This is true here, in the newsgroups, in the classifieds, and right next door. It's a fact of life. But here, those people can't hide. We'll drive them away. Protect others from them. This grand hope depends on your active participation. Become a registered user. Use our feedback forum. Give praise where it is due; make complaints where appropriate.16

The Feedback Forum was a rating system that allowed buyers and sellers to grade each transaction as “positive,” “negative,” or “neutral” and offer a brief comment on the experience. The

ratings became a permanent aspect of a member’s profile.17 Through 2001, eBay's rate of fraud remained below 0.01%, and the company insured auctions via a fraud protection program that

reimbursed buyers up to a certain amount for items either not received or not as described.18

As eBay grew and evolved, the company focused on offering more efficient and effective payment methods for buyers and sellers. In 1999, when nearly all of the auctions on eBay were conducted with paper checks or money orders, the company bought Billpoint, which allowed person-to-person credit card payments over the Internet.19 EBay was slow to integrate the service, however, and did not fully

launch it until nearly a year later.20 Meanwhile, PayPal, a rival of Billpoint, had been the first mover in person-to-person payments. By 2002, PayPal handled more than 70% of electronic payments exchanged between eBay users—which then accounted for roughly 40% of all transactions—compared to less than 30% for Billpoint.21 In July 2002, acknowledging that the “the community [had]

voted,” eBay acquired PayPal for nearly $1.5 billion in stock.22 By 2011, PayPal maintained over 100 million active accounts and handled nearly 85% of eBay’s GMV. In 2008, eBay paid $920 million in cash and options for Bill Me Later, an 8-year-old company with 4 million users that allowed people to buy items on the Internet and then sent them a bill within 30 days, at which point they could either pay the bill outright or take out a loan.23

EBay offered several other services for buyers and sellers, ranging from its “Best Match” search algorithm that incorporated seller ratings and shipping fees into its sorting of listings, to pre- and post- trade tools that made the buying and selling process safer and more efficient. (See Exhibit 6 for a detailed overview of eBay’s key services for buyers and sellers.)




4

Amazon's Business Model

The Retail Model

Jeff Bezos founded Amazon in 1994, naming the company after the longest river in the Western

Hemisphere and coining a simple motto for its books business: “If it's in print, it's in stock.”24 Launched online in 1995 as “Earth’s Biggest Bookstore,” its initial selection of 1 million titles increased to 2.5 million within a few years.25 In 1998, the company entered the music and video business, extending the retail capabilities it had developed for books. Within two years, the company had launched toys, electronics, and tools (among other categories) and expanded into the U.K.,

Germany, and Japan.26 The company’s stated goal was to “be Earth's most customer-centric company for three primary customer sets: consumers, sellers, and developers,” the latter of which Amazon serves though its Web Services offering—though the retail business aimed at consumers and sellers made up nearly all of Amazon’s revenue.27

In 1997, in his first letter to shareholders, Bezos committed Amazon to offering “low prices across our entire product range.”28 Analysts estimated that Amazon was price competitive with traditional

retail behemoths such as Wal-Mart.29 From 1998 to 2000, as the company was facing aggressive competition from companies such as Barnes and Noble, Bezos implored his team to “get big fast,” and Amazon rapidly launched new product lines and features.30 For this expansion, Amazon invested aggressively in its supply chain and distribution network, which improved the company’s capabilities in categories where it could not rely on third-party distributors as it did with books—

where a single supplier filled nearly 60% of Amazon’s orders.31 In 1999, the company spent $1.6 billion on capital expenditures and built five U.S. distribution and warehouse facilities as well as customer service centers. Bezos labeled it “the fastest expansion of distribution capacity in peacetime history.”32 In addition, Amazon spent heavily on “Technology and Content,” which included its technology infrastructure and expansion of product categories and fulfillment costs. These investments helped Amazon achieve an impressive cash flow cycle of 27 days between the time it received payment and had to pay suppliers.

Enhancing Customer Convenience

Since the company’s launch, Amazon allowed users to post and read product reviews, averaging scores on a five-star scale. Even for best-selling products, only a small portion of Amazon’s audience opted to writes reviews; for example, while Harry Potter and the Deathly Hallows had over 3,500 reviews, the company sold more than 40 million copies worldwide.33 Nevertheless, Amazon helped the best of these reviews float to the top without investing in a large-scale editorial team simply by asking consumers, “Was this review helpful to you?” and prioritizing those deemed most helpful. Having found that many of its shoppers sought out negative reviews to try to “talk them out of” buying a product, Amazon implemented a feature making it easier to see more negative reviews

together.34 In addition to being a favorite customer feature, the review system was a boon to Amazon’s top line: one analyst estimated that promoting the most helpful reviews increased sales in those categories by 20%, as one in five customers decided to complete the purchase because of the

strength of reviews.35 Similarly, Amazon maintained a recommendation engine for its customers, which it claimed was responsible for generating 35% of product sales. As the company described:

We determine your interests by examining the items you've purchased, items you've told us you own, and items you've rated. We then compare your activity on our site with that of other customers. Using this comparison, we are able to recommend other items that may interest you. These recommended items will appear in several areas throughout our store.36




5

In January 2002, upon announcing its first quarterly profit, Amazon introduced a free shipping policy on orders of $99 or more, lowering the threshold to $25 later in the year.37 In 2005, Amazon launched “Prime,” a program which gave members free, unlimited two-day shipping for an annual

fee of $79.38 One analyst estimated that, as of 2009, there were over 2 million members of Prime, growing at nearly 25% per year. Each million-member increase added nearly 3% to Amazon’s

revenues as members spent 130% more than non-Prime customers.39

Expanding into a Platform

In 1999, Amazon took its first steps toward expanding beyond its retail model into a platform for e-commence. In March, the company launched its auctions business, which was similar in many respects to eBay’s offering, but also guaranteed purchases up to $250 in the event of fraud. This auction business provided access to Amazon’s customer service representatives, and automatically cross-merchandized auctions across related existing product pages.40 Bezos said Amazon would use

“existing customers to provide a ready audience for sellers.”41 From 2000 to 2001, while traffic to Amazon Auctions grew 99% to over 5 million unique visitors, eBay’s base nearly doubled as well, reaching more than 28 million.42

In September 1999, the company launched zShops, an online supermall that offered small- and medium-sized merchants the ability to operate storefronts within Amazon’s site for a monthly fee

and per-sale commissions.43 Amazon visitors would see a zShops label across the top of the page that would take them to a directory organized by product categories, and merchants could pay extra to have their names and logos featured more prominently. (See Exhibit 7 for a basic fee schedule for Amazon Auctions and zShops compared to eBay.) In 1999, Amazon’s revenue from Auctions,

zShops, and other services-related offerings totaled only $13 million, or less than 1% of revenue.44

In January 2000, Bezos and other senior managers decided to adopt a “single-store” strategy in which third-party merchants would be allowed to sell their products alongside Amazon’s own goods

in the primary “product-detail” pages.45 For example, a product page for a particular book or DVD would include options to buy the product from Amazon shipped from its distribution centers or from third-party sellers. Bezos said “the idea of the single store was to give [marketplace sellers] a level of access equal to our own—listing their goods right alongside ours.”46 He reorganized the company to support this strategy by making general managers for category stores responsible for income statements reflecting the operations of both Amazon and third-party sellers.47

In 2006, Amazon launched a service known as Fulfillment by Amazon (FBA), which allowed third-party sellers to use Amazon’s vast distribution and warehousing network to ship and store

their products.48 As Bezos noted in 2007: “We have this beautiful, elegant, high-I.Q. part of our business that we have been working hard on for many years. We’ve gotten good at it. Why not make

money off it another way?”49

By 2011, Amazon offered a full suite of services to attract merchants to its platform: its WebStore service helped merchants build and operate a direct-to-customer business across multiple channels, its Checkout service offered merchants a complete payments solution, and companies could advertise on Amazon product pages. (See Exhibit 8 for a basic fee schedule for Amazon Auctions and zShops.) If, for example, a third-party individual seller sold an item in the consumer electronics category for $100 that weighed 1 pound, he or she would pay a $0.99 closing fee, an 8% referral fee ($8.00), and a variable fee of $0.45 plus $0.05 per pound ($0.50), yielding $9.49 in fees. This would be offset by a shipping credit of $4.49 plus $0.50 per pound ($4.99), so in the end the seller would earn $95.50 while Amazon would earn $4.50. The seller could also opt to have the item fulfilled by Amazon using FBA




6

(see Exhibit 9 for a basic fee schedule for Fulfillment by Amazon). In this case, the seller would receive no shipping credit, and he or she would pay $2.40 in fees, leaving the seller $88.11 while Amazon earned $11.89.

Looking Ahead

As eBay entered 2011, the company had to decide on a strategy for countering Amazon’s rapid rise in e-commerce. (See Exhibit 10 for summary data on retail and e-commerce in the U.S.) Two key options stood out:

Maintain Existing Business Model

Despite its sluggish growth more recently, eBay sustained a large ecosystem of users within its current platform. With a base of 95 million active users and 4.5 billion listings, the company could opt to improve and fine-tune the foundation of its core auctions and fixed-price business rather than undertake a risky, and potentially costly, transformation. For example, the company could endeavor to attract more buyers to the site by elevating trust standards with an improved feedback system and enhancing the user experience with optimized search and navigation. In addition, eBay could incentivize seller activity by lowering listings or final-value fees, which could expand product selection and attract more buyers to the site (see Exhibit 11 for eBay’s fee schedule in 2011).

Expand Business Model

EBay could also significantly expand its core marketplace platform. For example, to attract buyers, the company could shift the focus away from the PC onto mobile devices with an emphasis on local inventory. In local marketplaces, eBay would certainly face stiff competition from Craigslist, a free classifieds site with listings including goods, jobs, and housing—services maintaining nearly 52 million U.S. unique visitors as of 2010, half of which it shared with eBay.50 EBay’s attempt to compete directly with Craigslist with its own classifieds website, Kijiji, had not been successful, but the company could instead leverage its existing platform tools such as PayPal (a feedback system) and fraud protection to improve the classifieds marketplace. The company could also partner with local brick-and-mortar retailers and use its platform to connect users to this inventory, earning fees primarily on a lead generation rather than commission. In addition, to target seller growth—the company could foray into merchant services, following the lead of Amazon and GSI Commerce—one of the market leaders in providing technology, fulfillment, customer care, and interactive marketing services. Finally, eBay could consider an even more radical move: should the company shift from its platform model into an owned-inventory business model similar to Amazon?




7

Exhibit 1 Amazon (AMZN) and eBay (EBAY) stock performance, 1/2/02 – 12/31/10

Source: Bloomberg LP, accessed January 2012.

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AMZN EBAY

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10

Exhibit 4 Amazon (AMZN) and eBay (EBAY) stock performance, 9/4/98–12/31/01

Source: Bloomberg LP, accessed January 2012.

Exhibit 5 Fee Schedule for eBay, 1999

Source: eBay, “eBay Help: Seller Guide,“ eBay website, http://web.archive.org/web/20000301100021/http://pages.ebay.com/help/sellerguide/selling-fees.html, accessed December 2010.

(200%)

0%

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800%

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1,600%

Sep-98 Feb-99 Jul-99 Dec-99 May-00 Oct-00 Mar-01 Aug-01

Shar

e P

rice

Ret

urn

(sin

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98)

AMZN EBAY

(36%)

+749%

eBay Auctions

Listing Fee

Starting price $0.01-$9.99 $0.25

Starting price$10-$24.99 $0.50

Starting price $25-$49.99 $1.00

Starting price $50 or more $2.00


Final Value Fee

Sale price $0.01-$25.00 5%

Sale price $25.00-$1,000 $1.25 plus 2.5% of amount > $25

Sale price > $1,000 $25.63 + 1.25% of amount > $1,000




11

Exhibit 6 eBay’s Key Services for Buyers and Sellers

Feedback Forum: Our Feedback Forum encourages users to provide feedback ratings and comments on other users

with whom they trade. Users’ profiles, which include these feedback ratings and comments, can be viewed by any of

our other users. Every registered user has a feedback profile that may contain compliments, criticisms and/or other

comments by users who have conducted business with that user.

…

SafeHarbor Program: We also offer the SafeHarbor program, which provides guidelines for trading and user dispute

resolution. Our SafeHarbor staff investigates users’ complaints of possible misuse of eBay platforms and takes

appropriate action…

Verified Rights Owner (VeRO) Program: Our VeRO Program lets intellectual property rights owners request the

removal of listings that offer items or contain materials that they claim infringe on their rights. This program helps to

protect community members from purchasing items that may be counterfeit or otherwise unauthorized.

Customer Support: We devote significant resources to providing personalized, accurate and timely support services to

our community of users. Buyers and sellers can contact us through a variety of means, including email, online text chat

and telephone.

…

Value-Added Tools and Services: eBay users have access to a variety of “pre-trade” and “post-trade” tools and services

to enhance their user experience and to make trading faster, easier and safer for them…These tools and services

include:

Turbo Lister, eBay Blackthorne, ProStores, Selling Manager and Selling Manager Pro, each of which helps to

automate the selling process;

Shipping Calculator, which makes it easier for buyers and sellers to calculate shipping costs;

Shipping Labels, which allows sellers to print certain postage and labels;

eBay To Go, which allows users to embed item listings in their own Internet websites; and

PayPal, which facilitates the online exchange of funds.

…

PowerSeller program: PowerSellers are eBay’s top sellers who have consistently sustained a high volume of monthly

sales and who have a high level of positive feedback and consistently high DSRs. Members of the PowerSeller program

get a range of special benefits, including pricing discounts, prioritized customer support, promotional offers…

eBay Top-rated Seller program: In 2009, we introduced our eBay Top-rated Seller (eTRS) program in key

countries…Members of the eTRS program qualify for the same benefits as the PowerSeller program, as well as a

prominent badge in search results, higher discounts, and increased search exposure.

Top Buyer program: Our top buyers benefit from having a special phone number to call if they have an unsatisfactory

user experience in connection with a transaction on our websites…

Coupons and Buyer Rewards: Coupons were given to targeted buyers throughout 2008 and 2009 to drive our GMV

growth. Beginning in 2009, we also began offering, on a limited basis, a buyer rewards program in the U.S. to

incentivize our buyers to remain loyal by offering “eBay Bucks” certificates on qualifying eBay.com purchases…

eBay Buyer Protection: eBay Buyer Protection covers items purchased on eBay.com in the U.S. and the U.K. through an

eligible payment method and protects most buyers with respect to items that are not received or not as described in the

listing

Best Match: …“Best Match” is designed to enable buyers to find the items they are looking for more quickly and easily,

incentivize sellers to provide better deals, free or inexpensive shipping and excellent customer service, and increase the

frequency of positive buying experiences from sellers with high rates of buyer satisfaction.

Source: eBay, December 31, 2009 Form 10-K, via EDGAR, accessed December 2010.




12

Exhibit 7 Fee Schedule for Amazon Auctions and zShops, 1999

Source: Jim Seymour, “Amazon's zShops: Big Idea?“ The Street, September 29, 1999 http://www.thestreet.com/story/788773/amazons-zshops-big-idea.html, accessed December 2010.

Amazon zShops

Listing Fee $9.99 per month for up to 3,000 items

Final Value Fee

Sale price $0.01-$25.00 5%


Sale price > $1,000 $25.63 + 1.25% of amount > $1,000

Amazon Auctions

Listing Fee $0.10

Final Value Fee same as zShops




13

Exhibit 8 Fee Schedule for Third-Party Selling on Amazon, 2011

Source: Amazon, “Selling on Amazon,“ Amazon website, http://www.amazonservices.com/content/sell-on-amazon.htm?id=hm1#pricing, accessed May 2011.

Fee Type Professional Individual

Monthly subscription fee $39.99 N/A

Per-item closing feereferral + variable

closing fee

$0.99 + referral +

variable closing fee

Product Type Shipping Credit(1)

Referral Fee(2)

Variable Fee

Amazon Kindle $4.49 + $0.50/lb. 15.0% $0.45 + $0.05/lb.

Automotive Parts and Accessories $4.49 + $0.50/lb. 12.0% $0.45 + $0.05/lb.

Baby Products (excluding baby apparel) $4.49 + $0.50/lb. 15.0% $0.45 + $0.05/lb.

Books $3.99 15.0% $1.35

Camera and Photo $4.49 + $0.50/lb. 8.0% $0.45 + $0.05/lb.

Cell Phone Accessories $4.49 + $0.50/lb. 15.0% $0.45 + $0.05/lb.

Consumer Electronics $4.49 + $0.50/lb. 8.0% $0.45 + $0.05/lb.

Home & Garden (including Pet Supplies) $4.49 + $0.50/lb. 15.0% $0.45 + $0.05/lb.

Kindle Accessories $4.49 + $0.50/lb. 25.0% $0.45 + $0.05/lb.

Music $2.98 15.0% $0.80

Musical Instruments $4.49 + $0.50/lb. 12.0% $0.45 + $0.05/lb.

Office Products $4.49 + $0.50/lb. 15.0% $0.45 + $0.05/lb.

Personal Computers $4.49 + $0.50/lb. 6.0% $0.45 + $0.05/lb.

Software & Computer Games $3.99 15.0% $1.35

Sporting Goods $4.49 + $0.50/lb. 15.0% $0.45 + $0.05/lb.

Tires & Wheels $4.49 + $0.50/lb. 10.0% $0.45 + $0.05/lb.

Tools & Home Improvement $4.49 + $0.50/lb. 12.0% $0.45 + $0.05/lb.

Toys $4.49 + $0.50/lb. 15.0% $0.45 + $0.05/lb.

Video & DVD $2.98 15.0% $0.80

Video Games $3.99 15.0% $1.35

Video Game Consoles $4.49 + $0.50/lb. 8.0% $1.35

Watches $4.49 + $0.50/lb. 15.0% $0.45 + $0.05/lb.

Unlocked Cell Phones $4.49 + $0.50/lb. 8.0% $0.45 + $0.05/lb.

Any Other Products $4.49 + $0.50/lb. 15.0% $0.45 + $0.05/lb.




14

Exhibit 9 Fee Schedule for Fulfillment by Amazon service, 2011

Source: Amazon, “Selling on Amazon,“ Amazon website, http://www.amazonservices.com/content/sell-on-amazon.htm?id=hm1#pricing, accessed May 2011.

Exhibit 10 U.S. Retail Sales: Total and E-commerce

(1): Adjusted for eBay by subtracting eBay U.S. transaction revenue and adding eBay U.S. GMV.

Source: Company 10Ks, U.S. Department of Commerce, Morgan Stanley, Goldman Sachs.

Unit Price

<$25 $25-$299.99 $300 or more

Standard Size Media

Order Handling (per order) $0.00 $0.00 $0.00

Pick & Pack (per unit) $0.60 $1.00 $0.00

Weight Handling (per lb.) $0.40 $0.40 $0.00

Standard Size Non-Media




Media/Non-Media Oversize




Special Handling (large-screen TVs) $50.00 $50.00 $50.00

U.S. Retail Sales ($B)(1)

Year Total E-commerce

2010 $3,893 $172

2009 $3,646 $151

2008 $3,955 $152

2007 $4,022 $151

2006 $3,903 $131

2005 $3,714 $113

2004 $3,491 $97

2003 $3,292 $83

2002 $3,160 $70

2001 $3,090 $57

2000 $3,008 $51




15

Exhibit 11 Fee Schedule for eBay, 2011

Source: eBay, “Fees for selling on eBay “, eBay website, http://pages.ebay.com/help/sell/fees.html, accessed May 2011.

Auction-style format listing

Listing Fee (free for 50 listings per month)

Starting price $0.01-$0.99 $0.10


Starting price$10-$24.99 $0.50




Final Value Fee 9.0% with a maximum charge of $100

PayPal Fee

Sale Price $0-$3,000 2.9% + $0.30

Sale Price $3,000.01-$10,000 2.5% + $0.30

Sale Price $10,000.01-$100,000 2.2% + $0.30

Sale Price > $100,000 1.9% + $0.30

Fixed-price format listing

Listing Fee (free for 50 listings per month)

Buy It Now price $0.99 or more $0.50

Final Value Fee

Electronics

Sale price $0.99-$50 8.0%

Sale price $50.01-$1,000 $4 plus 5.0% of amount > $50

Sale price > $1,000 $54 plus 2.0% of amount > $1,000

Clothing, Shoes and Accessories

Sale price $0.99-$50 12.0%



Books, DVDs & Movies, Music, Video Games

Sale price $0.99-$50 15.0%


Sale price > $1,000 $57.50 plus 2.0% of amount > $1,000

All other categories

Sale price $0.99-$50 12.0%



PayPal Fee same as Auction-style format




16

Endnotes

1 Robert D. Hof and Linda Himelstein, “eBay vs. Amazon.com,” BusinessWeek, May 31, 1999, http://www.businessweek.com/1999/99_22/b3631002.htm, accessed December 2010.

2 Ibid.

3 Ibid; “eBay Inc. Announces First Quarter 1999 Financial Results,” eBay press release, April 26, 1999, http://investor.ebay.com/releasedetail.cfm?ReleaseID=15257, accessed December 2010.

4 Ibid; “Amazon.com Announces Financial Results for First Quarter 1999,” Amazon press release, April 28, 1999, http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-newsArticle&ID=502940&highlight=, accessed December 2010.

5 Robert D. Hof and Linda Himelstein, “eBay vs. Amazon.com,” BusinessWeek, May 31, 1999, http://www.businessweek.com/1999/99_22/b3631002.htm, accessed December 2010.

6 Ibid; “Amazon.com Launches Online Auction Site,” Amazon press release, March 30, 1999, http://phx.corporate-ir.net/phoenix.zhtml?c=97664&p=irol-newsArticle&ID=232870&highlight=, accessed December 2010.

7 Troy Wolverton, “eBay fees going up at month's end,” CNET News, January 17, 2002, http://news.cnet.com/2100-1017-817188.html.

8 Troy Wolverton, “Auctions getting lost in Amazon's jungle,” CNET News, June 31, 2002, http://news.cnet.com/Auctions-getting-lost-in-Amazons-jungle/2009-1017_3-270723.html#ixzz19XP4P1O4, accessed December 2010.

9 Ibid; “eBay Announces Fourth Quarter and Year End 2001 Financial Results,” eBay press release, January 15, 2002, http://investor.ebay.com/releasedetail.cfm?ReleaseID=69550, accessed December 2010.

10 Robert D. Hof, “The People’s Company,” BusinessWeek, December 3, 2001, http://www.businessweek.com/magazine/content/01_49/b3760601.htm, accessed December 2010.

11 eBay, December 31, 2009 Form 10-K, via EDGAR, accessed December 2010.

12 Ibid.

13 Noel Wilson, “eBay buying Half.com in stock deal,” CNET News, June 13, 2000, http://news.cnet.com/2100-1017-241859.html, accessed December 2010; Margaret Kane, “’Buy It Now’ clicks with eBay sellers,” CNET News, August 8, 2002, http://news.cnet.com/Buy-It-Now-clicks-with-eBay-sellers/2110-1017_3-948946.html, accessed December 2010.

14 “Company Moves to Expand Buying and Selling Experience for its Users,” eBay press release, June 11, 2001, http://files.shareholder.com/downloads/ebay/490035463x0x40218/4ba145c8-60fa-4b0b-ab14-48906763d276/EBAY_News_2001_6_11_General.pdf, accessed December 2010.

15 Ibid.

16 eBay, “Founder’s Letter,” eBay website, http://pages.ebay.com/services/forum/feedback-foundersnote.html, accessed December 2010.

17 Robert D. Hof, “The People’s Company,” BusinessWeek, December 3, 2001, http://www.businessweek.com/magazine/content/01_49/b3760601.htm, accessed December 2010.

18 Ibid.

19 Sergio Non, “eBay buys Billpoint, Kruse,” CNET News, May 18, 1999, http://news.cnet.com/eBay-buys-Billpoint,-Kruse/2100-12_3-258449.html, accessed December 2010.




17

20 Troy Wolverton, “Billpoint failure a lesson for eBay?” CNET News, July 8, 2002, http://news.cnet.com/2100-1017-942231.html, accessed December 2010.

21 Ibid.

22 eBay, Inc., July 8, 2002 Form 425, http://www.sec.gov/Archives/edgar/data/1065088/000089161802003170/f82835he425.htm, accessed December 2010.

23 Brad Stone, “EBay Trims Its Work Force and Makes Acquisitions,” New York Times, October 6, 2008, http://www.nytimes.com/2008/10/07/technology/07ebay.html, accessed December 2010.

24 Elizabeth Perez, “Store On Internet Is Open Book—Amazon.Com Boasts More Than 1 Million Titles On Web,” September 19, 1995, http://community.seattletimes.nwsource.com/archive/?date=19950919&slug=2142506, accessed December 2010.

25 Ibid; Anthony Bianco, “Virtual Bookstores Start to Get Real,” BusinessWeek, October 27, 1997, http://www.businessweek.com/archives/1997/b3550148.arc.htm, accessed December 2010.

26 Amazon.com, “Timeline and History,” Amazon.com website, http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-corporateTimeline, accessed December 2010.

27 Amazon, December 31, 2009 Form 10-K, via EDGAR, accessed December 2010.

28 Amazon, 1997 Annual Report, http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjAyOHxDaGlsZElEPS0xfFR5cGU9Mw==&t=1, accessed December 2010.

29 Mark Mahaney, “AMZN: Updating the Long Thesis,” Citi Investment Research, March 13, 2008, p. 2, www.citi.com, accessed December 2010.

30 Greg Linden, “Early Amazon: Get big fast,” January 25, 2006, post on blog “Geeking with Greg,” http://glinden.blogspot.com/2006/01/early-amazon-get-big-fast.html, accessed December 2010.

31 Doreen Carvajal, “Bookstore Goliaths Fax to the Finish,” New York Times, November 9, 1998, http://www.nytimes.com/1998/11/09/business/media-talk-bookstore-goliaths-fax-to-the-finish.html, accessed December 2010.

32 Saul Hansell, “Amazon's Risky Christmas,” New York Times, November 28, 1998, http://www.nytimes.com/1999/11/28/business/amazon-s-risky-christmas.html, accessed December 2010.

33 “Kindle beats Harry Potter to become Amazon's best-selling product,” The Guardian, December 29, 2010, http://www.guardian.co.uk/technology/2010/dec/29/amazon-kindle-outsells-harry-potter, accessed December 2010; Amazon, “Harry Potter and the Deathly Hallows,” Amazon product website, http://www.amazon.com/Harry-Potter-Deathly-Hallows-Book/dp/0545139708/ref=sr_1_1?s=books&ie=UTF8&qid=1293832529&sr=1-1, accessed December 2010.

34 Jared M. Spool, “The Magic Behind Amazon's 2.7 Billion Dollar Question,” March 17, 2009, post on blog “User Interface Engineering,” http://www.uie.com/articles/magicbehindamazon/, accessed December 2010.

35 Ibid.

36 Amazon, “Help: Recommendations,” Amazon company website, http://www.amazon.com/gp/help/customer/display.html?ie=UTF8&nodeId=13316081, accessed December 2010.

37 Saul Hansell, “A Surprise From Amazon: Its First Profit,” New York Times, January 23, 2002, http://www.nytimes.com/2002/01/23/business/technology-a-surprise-from-amazon-its-first-profit.html,




18

accessed December 2010; “Amazon.com Announces 33% Sales Growth Fueled By Lower Prices; Raises Financial Guidance; Free Super Saver Shipping On Orders Over $25 To Continue At Least Through The Holidays,” Amazon.com press release, October 24, 2002, http://media.corporate-ir.net/media_files/nsd/amzn/news/q3-02/AMZNPressReleaseQ302.pdf, accessed December 2010.

38 “Amazon.com Announces Record Free Cash Flow Fueled by Lower Prices and Free Shipping; Introduces New Express Shipping Program—Amazon Prime,” Amazon.com press release, February 2, 2002, http://media.corporate-ir.net/media_files/irol/97/97664/news/Release_Q4_04.pdf, accessed December 2010.

39 “How big is Amazon Prime?” May 14, 2009, post on blog “channeladvisor,” http://www.amazonstrategies.com/2009/05/how-big-is-amazon-prime.html, accessed December 2010.

40 Saul Hansell, “Next Trick for Amazon.com: Auctions,“ New York Times, March 30, 1999, http://www.nytimes.com/1999/03/30/business/the-next-trick-for-amazoncom-auctions.html, accessed December 2010.

41 Ibid.

42 Mary Meeker and Mark Mahaney, “eBay Inc.: Accelerating Momentum,” Morgan Stanely, April 20, 2001, p.5, accessed December 2010; Mary Meeker and Mark Mahaney, “eBay Inc.: CQ1:02: Core Revenue Strength, Operating Leverage,” Morgan Stanley, April 19, 2002, p. 8, accessed December 2010.

43 John Frederick Moore, “Amazon adds merchants,” Money, September 29, 1999, http://money.cnn.com/1999/09/29/technology/amazon/, accessed December 2010.

44 Amazon.com, December 31, 1999 Form 10-K, via EDGAR, accessed December 2010.

45 Steve Leschly et al., “Amazon.com – 2002,” HBS No. 9-803-098 (Boston: Harvard Business School Publishing, 2003), p. 8.

46 Ibid.

47 Ibid.

48 “Amazon Launches New Services to Help Small and Medium-Sized Businesses Enhance Their Customer Offerings by Accessing Amazon's Order Fulfillment, Customer Service, and Website Functionality,“ Amazon.com press release, September 19, 2006, http://phx.corporate-ir.net/phoenix.zhtml?c=176060&p=irol-newsArticle&ID=906818&highlight=, accessed December 2010.

49 Brad Stone, “Sold on eBay, Shipped by Amazon.com,” April 27, 2007, http://www.nytimes.com/2007/04/27/technology/27amazon.html, accessed December 2010.

50 “comScore Media Metrix Ranks Top 50 U.S. Web Properties for December 2010,“ comScore press release, January 24, 2011, http://www.comscore.com/Press_Events/Press_Releases/2011/1/comScore_Media_Metrix_Ranks_Top_50_U.S._Web_Properties_for_December_2010, accessed January 2011.



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eBay, Inc. and Amazon.com (A) · eBay, Inc. and Amazon.com (A) ... Home Depot—to offer goods through fixed-price storefronts on the company’s platform.14 At the time, pricing