eBay has announced a revenue target of $3 billion by 2005.
The market opportunity for the eBay business is evident. The company predicts that by 2005 the global market for its services could reach the $2 trillion mark, up from its current value of $1.6 trillion. Significantly, eBay generates high gross margins from its auctions, with a target of mid-80%, and also charges a fee to all sellers using the site.
In order to meet its own challenging growth targets (50% year on year growth), eBay is committed to a global expansion program. It plans to establish a presence in 10 international markets by the end of 2001 and to have extended that coverage to include 25 markets by 2005. While this is a tall order, eBay enjoys its status as the category-leading auction service in its core US market. The exportation of its tried and tested technology and site design, together with the strength of its cyber-brand will undoubtedly ease the entry into these new markets.
eBay’s past success and its expertise should help it to succeed. It is one of the few Internet-only brands to have already reached profitability. Revenues of $224.7 million for 1999, a 160% increase over the previous year, highlight the ever-increasing popularity of its services.
One of the key strengths of its current business model is the diversity already on offer, including cars, computers, toys and sports goods. However, the company remains conscious of the need to further diversify its product offering to meet the complete needs of its consumer audience. The acquisition of half.com, a trading site for second-hand goods, supports this commitment and adds weight to the company’s determination to dominate this section of the eCommerce space.
The real battle will take place in the lucrative Europe market, where eBay will face strong competition from QXL.com. QXL already has around 1.3 million registered users across 12 European countries. But the timing appears right for eBay’s conquest, with France and Italy the likely first targets. QXL is currently engaged in its mergers with Ricardo and Bidlet, and this perhaps leaves the door open for eBay to acquire another leading auction service as a launch pad to its own expansion strategy.
