eBay Growth Strategy – Launch and Grow Case Study Marketing
EBay was founded in 1995 to conduct the kind of business traditionally seen in venues like garage sales and flea markets but in an online environment accessible 24-hours a day. It was, in short, a dream for junk lovers the world over.
Now the site is a multi-billion dollar international business with a presence in 30 countries. But what was the eBay growth strategy?
The arguably worthless item was posted as a test of the system, but received a winning bid of $14.83. When eBay founder Pierre Omidyar contacted the winner and asked if he knew the laser pointer didn’t work, he received a succinct reply, “I’m a collector of broken laser pointers.”
This rummage sale ethos alone was enough to make eBay profitable from year one. The site was quirky, and fun, and carried a high level of stickiness. Users loved to brose the auctions, a sales model that engaged their competitive juices and led them to bid on the listed items no matter how improbable they might be.
From the beginning, eBay achieved market fit in a well-defined niche and did quite well until a three-year period during the tenure of then CEO Meg Whitman. During that time the company’s stock price dropped 50% and its market value declined by $30 billion.
Most critics agree that two actions in particular damaged the highly successful company during these years, the purchase of Internet telephone service Skype in September 2005 for $3.1 billion and a failed attempt to enter the China market.
Whitman retired from the company in 2008 and was succeeded by Jack Donahoe who was faced with re-growing an already successful, but then floundering company. One of the primary fundamentals of growth hacking is constant reassessment and redesign, which is exactly what Donahoe did.
He saw Skype as a distraction that brought no added value to the company, so he sold a 70% stake in the service to a private equity firm for $2.75 billion. This was the first step in re-honing eBay’s commitment to the person-to-person sales that were its core vision in the beginning.
The effort began to pay off, as reflected in eBay’s year-over-year growth figures:
- 2010 – 4.91%
- 2011 – 27.25%
- 2012 – 20.77%
- 2013 – 14.03%
The site has, however, continued to diverge from the original auction model since 2010 when fixed-price “Buy It Now” sales accounted for 59% of sales in the second quarter of the year. While this is a departure from the original eBay vision, the alteration reflects a major concern in the seller community that negatively affects their profit potential.
An auction can either yield high returns or allow a valuable item to disappointingly sell for very little money. If free-shipping is also offered on the item, the seller is then in a position to lose money and operate in the red.
Although a “Buy It Now” sale takes longer, there’s a higher chance of making a good sale, which encourages more listings – the lifeblood of the eBay concept.
Mobile retailing is also a powerful driver for sales. There have been more than 90 million downloads of the eBay mobile app, which, in tandem with payment via PayPal, has revolutionized how people shop. This is a natural outgrowth of the widespread adoption of smartphones, a trend further buoyed by the tablet computer phenomenon.
PayPal is an example of one of many strategic acquisitions eBay has made over the years that has buoyed the site’s core functionality while helping to shut out competitors.
EBay bought PayPal in 2002 for what then seemed like an outrageous $1.5 billion, but now looks like a bargain with the new emphasis on mobile commerce. Shoppers can browse for items and pay for them on their phones or tablets with just a few clicks, desktop no computer or laptop required.
Along these same lines, eBay bought the mobile payment company Braintree in September 2013 for $800 million. The company’s Venmo app enables instant money wires to friend’s bank accounts from smartphones. EBay plans to merge that technology with PayPal to create even more seamless mobile payments.
These targeted acquisitions that edge eBay closer and closer to real market fit are a much better use of corporate resources and have successfully pulled eBay back from decline to its current position as the Internet’s premier selling site.